As of 2025-12-12, Today’s GI regime is Growth Acceleration × Inflation Reacceleration.
Financial conditions are tight, the yield curve is flat, and credit conditions show spread compression.
- The GI regime suggests a continuation of growth acceleration with inflation reacceleration, consistent with past trends.
- Financial conditions remain tight, with a slight movement towards tighter conditions compared to last week.
- The yield curve is flat, with a slight steepening observed from the previous week.
- Credit conditions indicate spread compression, with a z-score below the long-run mean and a low percentile.
- The most notable shift is the slight steepening of the yield curve, indicating a change in market expectations.
Growth × Inflation (GI)
The current Growth Acceleration × Inflation Reacceleration regime indicates a period where both economic growth and inflation are picking up pace. The year-over-year growth in industrial production is at 1.75%, with a three-month change showing an increase, suggesting a robust growth environment. Inflation, as measured by the CPI, is at 3.03% year-over-year, with a slight increase over the past three months, indicating persistent inflationary pressures. This regime remains unchanged from the previous week, maintaining its trajectory.
Financial Conditions (F)
Financial conditions are currently labeled as tight, reflecting a restrictive environment compared to typical levels over the past decade. The federal funds rate stands at 4.09%, with the two-year yield at 3.52%, both indicating a high-interest-rate environment. Compared to last week, the financial conditions score has moved slightly tighter, suggesting a marginal increase in financial constraints.
Yield Curve (R)
The yield curve is currently flat, with a spread of 0.37 percentage points between the 10-year and 3-month yields. This flatness suggests a neutral stance in market expectations regarding future economic activity. Compared to last week, the yield curve has steepened slightly, moving from a spread of 0.32 percentage points. This change may reflect shifting market perceptions about future growth and inflation dynamics.
Credit (C)
Credit conditions are characterized by spread compression, with a high-yield spread level at 2.91%. The z-score of -1.03 indicates that spreads are significantly below the long-run average, and the 5.96 percentile suggests that current spreads are among the lowest observed in the past decade. Compared to last week, there has been further compression, as indicated by a lower z-score and a higher percentile.
Uncertainty and How to Verify Going Forward
This report outlines conditional tendencies rather than forecasts. Key metrics to track include the GI label and its core values, the financial-conditions score, the yield-curve spread, and the high-yield spread level and percentile. Monitoring these indicators over the coming months will provide insights into potential shifts in economic conditions. Readers should remain vigilant and consider these metrics as part of a broader analysis, acknowledging that this report does not constitute investment advice or predictions.
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