Weekly economic commentary: G10 central banks ease monetary policy further

Summary

United States: Housing market troubles to continue

• Residential construction and existing home sales were muted in January, illustrating continued stress on the housing market amid elevated mortgage rates. Despite the pressure on interest-rate-sensitive sectors, underlying consumer demand is robust and has helped the labor market stand on firm footing.

• Next week: New Home Sales (Wed.), Durable Goods (Thurs.), Personal Income & Spending (Fri.)

International: G10 central banks ease monetary policy further

• The Reserve Bank of Australia began its easing cycle this week with a 25 bps rate cut. However, that appeared to be a tentative first easing step, given a still-tight labor market and as the central bank raised its medium-term inflation forecast. The Reserve Bank of New Zealand cut rates 50 bps this week but should slow the pace of rate cuts going forward, while elevated core inflation from Canada now means we expect the Bank of Canada to hold rates steady in March.

• Next week: India GDP (Fri.), Canada GDP (Fri.)

Credit market insights: Household debt balances continue to climb

• Total household debt increased by $93B in Q4 of last year to a new high of $18.04T. All categories of debt rose over the quarter, with credit card balances increasing the most, rising $45B to $1.21T. Though households continue to borrow, household debt has increased at a slower rate in recent quarters, suggesting consumers may be feeling the pinch of higher rates.

Topic of the week: Republicans approach a budget reconciliation milestone

• Passing a budget reconciliation bill is critical to enacting Republicans' policy objectives for taxes and spending, and the next couple of weeks will mark an important first step in Congressional Republicans' efforts on this front. In this section, we discuss how the early innings of this process are shaping up.

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