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 Growth Acceleration × Inflation Reacceleration regime has historically tended to indicate robust economic activity with rising price pressures.
- 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 show spread compression, with a high-yield spread in the lower 6th percentile, indicating relatively favorable credit conditions.
- The most notable shift is the slight steepening of the yield curve, suggesting a change in market expectations.
Growth × Inflation (GI)
The current regime of Growth Acceleration × Inflation Reacceleration suggests a period where economic growth is picking up alongside rising inflationary pressures. The year-over-year growth in industrial production stands at 1.75%, with a three-month change indicating further acceleration. Inflation, as measured by the CPI, is at 3.03% year-over-year, with a slight increase over the past three months. This regime remains unchanged from the previous week, indicating a consistent economic environment.
Financial Conditions (F)
Financial conditions are currently labeled as tight, which suggests that borrowing costs and financial market conditions are more restrictive compared to historical norms over the past decade. The federal funds rate is at 4.09%, and the two-year yield is at 3.52%. Compared to last week, the financial conditions score has moved slightly tighter, reflecting a marginal increase in the restrictiveness of financial conditions.
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 market expectation of stable future interest rates. 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 expectations regarding future economic growth and inflation, although such interpretations should be made cautiously.
Credit (C)
Credit conditions are characterized by spread compression, with the high-yield spread at 2.91%. The z-score of -1.03 indicates that the spread is below the long-run average, and the percentile rank of approximately 6% places it in the lower range of the past decade. Compared to last week, there has been further compression, as indicated by a lower z-score and a higher percentile rank, suggesting improved credit conditions.
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 note that this analysis does not constitute investment advice, and they should consider their own circumstances when making financial decisions.
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