Rick Rieder Profile picture
@BlackRock CIO of Global Fixed Income | Emory and Wharton Alum | Go Orioles! Lead PM for BINC, BSIIX, MALOX, MAWIX Content intended for a U.S. audience
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Jun 13 4 tweets 3 min read
Why is the savings rate so low today? Debunking a common myth on ‘Excess Savings’…

There are several widely circulated ‘Excess Savings’ models that show the U.S. Consumer having spent down the above-normal savings accumulated during the pandemic. These models, which are ultimately only illustrative in nature, implicitly assume the natural Savings Rate is ~8% or higher. We believe those assumptions are far too conservative and fail to acknowledge the elevated levels of household wealth today. In fact, we would say that as compared to arguing all Excess Savings are depleted (orange line below) it is more reasonable to argue there has been no depletion of Excess Savings at all (purple line below). Of course, as with most things, the right answer is probably somewhere between the extremes and we believe it is best to look at a range of outcomes.

1/4Image How could it be that Excess Savings have not been depleted at all? While many things can influence the Savings Rate (especially anything that affects consumer psychology in a big way), the primary driver in the U.S. over the past 40 years has been wealth (as measured by Net Worth/Disposable Income). It is intuitive that as households experience higher wealth, they feel less need to save. This relationship was crystal clear from 1985 – 2010. The post-GFC period saw a psychological shift towards higher savings, but the relationship returned once the economy finally recovered in 2018. For anyone wondering why the savings rate is so low today, look no further than the new highs in Net Worth/Disposable Income.

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May 23 13 tweets 6 min read
To elaborate on my interview last week on @BloombergTV, as well as my response to @elonmusk, a thread.

Restrictive policy rates have succeeded in slowing the rate-sensitive segments of the U.S. economy (including goods inflation), but a >5% Fed Funds rate is not doing much to slow the insensitive, services-oriented segments. In fact, given the unique historical context, we believe >5% cash rates are doing unnecessary damage to certain cohorts today and may even be supporting services inflation.

1/13Image The @sffed visualized this very well in a recent analysis… the components of inflation that are “most responsive” to rates have completely normalized! It is the “least responsive” components that are responsible for the sticky inflation we are experiencing today... there is not much Fed policy rates can do about that.

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Apr 10 15 tweets 3 min read
Today’s much anticipated #CPI report provided greater detail on the current #inflation picture, and importantly, on what the @federalreserve is most focused upon these days, and unfortunately, it’s hard to see it as anything other than a #setback. Recently, it has become clear that the #Fed is taking on a patient stance with regard to #inflation coming down, but today's report was further evidence that it may take even longer for inflation to finally reach the Fed’s 2% target level.
Mar 13 15 tweets 3 min read
Yesterday’s #CPI data was highly anticipated by #markets, and particularly whether the elevated shelter #inflation from last month’s data ended up being a quirky aberration within service level inflation that is still quite a distance from the Fed’s 2% intermediate-term target. Image What compounded this quandary last month was a very strange divergence between the Owner Equivalent Rent (#OER) calculation and that for general #Rent.
Jun 14, 2023 15 tweets 9 min read
As was widely expected, the @federalreserve today halted the most aggressive policy rate #HikingCycle since 1980, leaving the Fed Funds range unchanged at 5.0% to 5.25%, a level that appears clear to us to be finally having an impact on the #economy. We think today’s actions represent a “Hawkish skip,” which implies that #policy makers are seeking more #data before potentially hiking rates again in July, or September.
Jun 13, 2023 16 tweets 9 min read
Today’s #CPI report for May showed another very firm depiction of where #inflation currently resides in the U.S., with #coreCPI (excluding volatile food and energy components) printing at 0.44% month-over-month and 5.33% year-over-year. Meanwhile, #headlineCPI data printed 0.12% month-over-month and came in just above 4% year-over-year, with declines in #energy components and some food prices being offset by gains in #shelter and used cars and trucks.
Jun 2, 2023 14 tweets 9 min read
We’ve seen the pace of #payroll gains decelerate to roughly the monthly trend pace from the last expansion; consensus has been waiting for this moment and expected a 195,000 job gain in May, but the data printed considerably stronger at 339,000 #jobs gained. The three-month moving average of #nonfarm payrolls sits at 283,000, down from 334,000 jobs at the start of the year, but what the #LaborMarket imbalance needs is more supply and more slack.
May 10, 2023 17 tweets 9 min read
Today’s #CPI report continues to depict #inflation that is just too high for most people’s good, especially the @federalreserve’s. In fact, the report showed that #inflation remains remarkably sticky, which doesn’t correspond to virtually any practical thinker’s timeline of when it might be expected to start to come down further.
Mar 14, 2023 16 tweets 9 min read
A week ago, after hearing #ChairPowell’s testimony before Congress, all eyes were set to be on today’s #inflation data, which presumably would help market participants better understand the #FOMC’s policy reaction at its March 22nd meeting. What a difference a week makes these days! Of course, all eyes are still on today’s data, but now there are many other things we need to consider (such as #FinancialStability concerns), when judging the reaction function of the @federalreserve.
Mar 10, 2023 17 tweets 9 min read
Today’s #JobsReport was very solid, but like is often the case in the movies, it’s very hard for the sequel (today’s report) to match such an unexpected hit (January’s revised 504,000 jobs gained). Still, a nonfarm #payroll gain of 311,000 jobs is quite good and having 815,000 jobs created so far this year after the #economy has already created 12 million #jobs over the past two years is pretty amazing in its own right.
Mar 8, 2023 9 tweets 6 min read
In testimony before #Congress yesterday, @federalreserve #ChairPowell unsurprisingly displayed resolve that the central bank’s fight to return inflation closer to its 2% target is unfinished and that the historical record suggests that relenting too soon would be a mistake. Chair #Powell signaled more rate hikes and a higher terminal rate than previous #Fed projections, and an openness to adjust the pace of rate hikes depending on the totality of the data.
Feb 14, 2023 11 tweets 6 min read
In the big picture, today’s #CPI data displays continued slow progress toward a lower y-o-y rate of #inflation, having come down from a cycle peak of 8.9% in June 2022 to the 6.4% reading today, at the headline level, which is the lowest 12-month inflation gain since Oct 2021. That is clearly encouraging, and in a lot better place than we had become used to in the Fall, which was at the center of the disappointment for the @federalreserve. However, like bridges during periods of traffic, progress can come with some slowing along the way.
Jan 6, 2023 16 tweets 11 min read
Today’s #JobsReport was a clear indication that #LaborMarket dynamics are softening. For example, the 3-mo. moving average of nonfarm #payroll growth sits at 247k jobs, after a higher-than-expected print of 223k jobs for Dec, in contrast to 2022’s average mo. #job gain of 375k. We have witnessed a marked deterioration in temporary help services in recent months, and a slowing in #wage growth in December, which both highlight the relative slowdown in the labor #market overall, even as the #services sector remains quite buoyant.
Dec 13, 2022 14 tweets 8 min read
The November #CPI report is notable in part due to the fact that it displays the second consecutive month of more moderate price pressures, providing some signal that the underlying trend of #inflation is decelerating. Turning to the data, #coreCPI (excluding volatile food and #energy components) came in at 0.2% month-over-month and rose 6.0% year-over-year.
Nov 4, 2022 16 tweets 10 min read
Earlier this week the @federalreserve raised #policy rates at an extraordinary 75 basis point increment (its fourth time doing so this year), in an attempt to moderate excessively high levels of #inflation. Still, if the central bankers were hoping to see signs of slowing in the persistently solid #LaborMarkets, as an indicator that policies were slowing growth and in turn #inflation, they may be somewhat disheartened by today’s data.
Nov 2, 2022 15 tweets 9 min read
The @federalreserve’s #FOMC has now moved in 75 basis point increments four times this year to get to a sought-after #policy destination very quickly. Yet, the destination seems to have moved further away with each subsequent elevated #inflation print, and with #employment in the country remaining very tight.
Sep 21, 2022 13 tweets 9 min read
Today’s @federalreserve’s Federal Open Market Committee (#FOMC) meeting witnessed another historic 75 bps increase to policy rate levels (to a range of 3.0% to 3.25%) in an effort for the #CentralBank to manage its number one priority: fighting persistently high #inflation. The #Fed, including in today’s meeting statement and in the Chair’s press conference, has been clearer than arguably any central bank in identifying its current goal and moving #InterestRates and #liquidity provision to achieve it.
Sep 2, 2022 12 tweets 8 min read
Today’s #JobsReport revealed an #economy that is producing #jobs at a slower pace than it has over the prior several months. That said, a historic number of jobs have been created in this recovery since the fall of 2020, so a slowing in the pace of #growth isn’t unexpected.
Aug 26, 2022 11 tweets 8 min read
In his @federalreserve #JacksonHole speech #ChairPowell stated emphatically that the #FOMC’s “overarching focus right now is to bring inflation back down to our 2 percent goal. Price stability is the responsibility of the Federal Reserve and serves as the bedrock of our economy.” In other words, we take his statement today to mean that the #Fed won’t be easily swayed into reversing rate #hikes next year, and will stay with the elevated Funds rate for a long time.
Aug 24, 2022 12 tweets 7 min read
As we approach the @federalreserve’s monetary policy conference at #JacksonHole this week, a question we’ve been asking ourselves is whether the abundance of survey-based, and goods-oriented, #economic data may be overstating the weakness in the #economy as a whole? Without question, many broad-based surveys, including those focused on #ConsumerConfidence and small #business optimism, are painting a very bleak picture of the #economic trajectory. Image
Aug 10, 2022 15 tweets 9 min read
The headline #inflation data today moderated a bit on the back of falling #gasoline prices, but it’s still running at a worryingly high rate. Over time, we think the slowdown in #economic growth, the continuation of the @federalreserve’s assertive #HikingCycle and the possibility of resolution with several persistent supply chain issues should influence broad #inflation lower.