Economic Survey Report 1H23 FINAL

Setting the Scene
US Economic Survey: Mid-Year 2023

Forecasts from the SIFMA Economist Roundtable
Assessing the Economic Landscape and Monetary Policy
June 2023
Key Takeaways
• The Economy:
o 2023 real GDP growth estimate +0.5%, vs. +0.9% 2022 (median forecast, 4Q/4Q)
o 2023 unemployment rate estimate +4.1%, vs. +3.6% in 2022 (4Q average)
o 2023 inflation estimates
▪ CPI/Core CPI +3.0%/+3.8%
▪ PCE/Core PCE +3.1%/+3.5%
• Monetary Policy
o Fed Funds rate action at June FOMC meeting: Pause, 92.9% of respondents
o Peak Fed Funds rate estimate: 500-525 bps, 78.6% of respondents
o Timing of peak Fed Funds rate: 2Q23, 78.6% of respondents
o Timing of Fed pause: 2Q23, 91.7% of respondents
o Timing of Fed Funds rate cut: 1Q24, 71.4% of respondents
o Amount of Fed Funds rate cut: >100 bps, 76.9% of respondents
US Economic Survey: Mid-Year 2023 Page | 1

Setting the Scene
Contents
Setting the Scene ....................................................................................................................................................................................... 4
A Message from Our Chair ......................................................................................................................................................................... 4
Inflation: Status........................................................................................................................................................................................... 6
Inflation: Components .............................................................................................................................................................................. 11
Inflation: Supply Side ................................................................................................................................................................................ 12
Inflation: Demand Side ............................................................................................................................................................................. 14
Inflation: Labor Component ...................................................................................................................................................................... 21
Inflation: Differences in Data Sets ............................................................................................................................................................ 25
Economy: The Consumer ......................................................................................................................................................................... 29
Economy: Credit Tightening ..................................................................................................................................................................... 33
The Fed’s Policy Conundrum ................................................................................................................................................................... 34
Executive Summary ................................................................................................................................................................................. 36
Comparing the Current and Prior Surveys................................................................................................................................................ 36
Additional Survey Results Highlights: 1H23 (Current) .............................................................................................................................. 42
Additional Survey Results Highlights: 2H22 (Prior) .................................................................................................................................. 44
Economic Outlook .................................................................................................................................................................................... 45
GDP Growth Expectations........................................................................................................................................................................ 45
Risks to Economic Forecasts ................................................................................................................................................................... 48
Recession Expectations ........................................................................................................................................................................... 49
Employment and the Consumer ............................................................................................................................................................... 51
Monetary Policy ........................................................................................................................................................................................ 54
Fed Actions .............................................................................................................................................................................................. 54
Inflation Expectations ............................................................................................................................................................................... 65
Rate Estimates, Yield Curves, and Spreads............................................................................................................................................. 78
Historical Rates: 10 Year UST and 30 Year Mortgage ............................................................................................................................. 80
Macro Policy ............................................................................................................................................................................................. 88
Fiscal Stimulus ......................................................................................................................................................................................... 88
Tax Policy ................................................................................................................................................................................................. 93
Trade Policy ............................................................................................................................................................................................. 94
SIFMA Economist Roundtable Forecasts ................................................................................................................................................. 95
Economic Indicators – Annual .................................................................................................................................................................. 95
Economic Indicators – Quarterly .............................................................................................................................................................. 95
Interest Rates ........................................................................................................................................................................................... 95
Reference Guide: Economic Landscape .................................................................................................................................................. 96

Setting the Scene
GDP Breakout .......................................................................................................................................................................................... 96

Debt and Fed Balance Sheet ................................................................................................................................................................... 97
Employment Breakout .............................................................................................................................................................................. 98
Appendix: Terms to Know ........................................................................................................................................................................ 99
Appendix: About the SIFMA Economist Roundtable .............................................................................................................................. 101
Appendix: SIFMA Economist Roundtable Members ............................................................................................................................... 102
Authors ................................................................................................................................................................................................... 103

Setting the Scene
Setting the Scene
A Message from Our Chair

The Fed opted to raise rates for the tenth time in fifteen months an additional 25 bps to an upper bound of 5.25%.
While the policy announcement was widely anticipated, the unknown was the language in the statement potentially
offering guidance to future policy directives. The biggest, or most notable, change was around the need for future
policy adjustments. In March, the statement noted the Committee anticipates that “some additional policy firming
may be appropriate.” After the May meeting, that wording was replaced with "in determining the extent to which
additional policy firming may be appropriate." A small but important distinction, as the Fed now appears to be
unclear as to the extent of how much additional policy action will be needed – if any – to tame inflation, giving itself
additional wiggle room to pause, stop, or continue with rates and essentially offering little, if any, guidance for
market investors.
Acknowledging more recent volatility in the banking sector, particularly in the aftermath of SVB and more recently
First Republic’s failure and subsequent purchase by JP Morgan, the Committee remains acutely aware of market
metrics. “Tighter credit conditions,” are likely to weigh on economic activity, hiring, and inflation. Of course, the
extent of these effects is extremely uncertain. And above all, the Committee remains "highly attentive to inflation
risks.”
In other words, should tighter credit conditions do some of the Fed's work in terms of taming inflation, there may be
less of a need for further rates hikes. However, if tighter credit conditions do not do enough to tame inflation, the Fed
is willing to continue its fight with a further backup in rates. It will all depend on the evolution of the data, lagged
effects in monetary policy, and financial market developments, as it always has. The difference now, however, is
that the Committee appears less certain as to the direction and extent of policy adjustments needed to tame
inflation. As such, it may be increasingly willing to pause and assess, as opposed to an earlier plan of raising
rates while assessing.
Last month’s policy decision was unanimous. Yet, June is far from solidified. While the Fed is clearly not opposed to
raising rates further, the Committee is not yet convinced that they will need to take further action or how much
higher rates will need to rise. Of course, while some Committee members may be inclined to move to the sideline –
at least temporarily – and assess the full impact of an earlier 500 bps in tightening, a pause may be difficult to justify
particularly in the wake of a seemingly still strong economic performance.
Headline GDP rose 1.3% in the first quarter, down from a 2.6% pace in the fourth quarter. The weakness, however,
was concentrated in a drawdown of inventories with an arguably overly pessimistic downturn in production. Thus,
excluding inventories and trade, real final sales to domestic purchasers rose an impressive 3.3%, significantly more
than the 0.7% rise at the end of last year. And, going forward, should the consumer maintain this reduced yet still
positive pace of expenditures, either businesses will need to step up activity and spending adding significantly to Q2
GDP or with a shortfall of supply relative to demand, inflationary pressures may pick up – or at least lead to less
disinflationary pressures – over the coming months.
Meanwhile, the labor market remains persistently tight with the latest employment report showing a gain of 339,000
in May, the largest monthly gain since January. Additionally, as the U.S. labor market continues to put hundreds of
thousands of Americans back to work on a monthly basis, the unemployment rate broadly remains at a multi decade

Setting the Scene
low – although more recently rising from 3.4% to 3.7% – still keeping pressure on wages. Average hourly earnings
rose 0.3% in May and 4.3% over the past 12 months.
Of course, while the labor market clearly remains very tight, there are at least some indications that it is beginning to
come back into balance, including a reduction in the number of job vacancies dropping from a recent peak of 12.0
million in March of last year to 10.1 million in April. That being said, while off earlier peak levels of dislocation, by the
Fed’s own description, labor demand still substantially exceeds the supply of labor, maintaining pressure on wages
and more broadly inflation. This is a disconnect that will arguably keep the Fed’s hands somewhat tied in terms of
forcing further policy tightening and limiting the Committee’s ability to pause and wait – or hope – for a more organic
adjustment to tackle prices pressures.
All along the Fed has been focused on inflation. And with the nominal level of prices still elevated – consumer and
producer prices are more than double the Committee’s 2% target – coupled with a lack of meaningful downward
momentum – meaning an unimpressive pace of disinflation, well above earlier expectations – it is not yet clear if the
goal of price stability has or will be met. The Committee has indicated a willingness to move to the sidelines and still
may do so in June or July. However, the latest price data does not make the case for the Fed. Rather, any decision
to pause would be made in spite of the latest still elevated inflation data.
In fact, even in areas of emerging weakness like manufacturing and housing, inflation appears to be an ongoing
pressure point. The ISM Manufacturing Index, for example, has been trending in contractionary territory since
November, and the prices paid component surged four points in April alone, reaching a nine-month high.
Even in the housing market – arguably the hardest hit sector as the rising rates undermine affordability – price
pressures remain. Isolating shelter in the CPI, costs remained at a high of 8.2%, with core services excluding shelter
– a proxy for the wage price spiral – rising roughly 5%.
So, in fact, the Fed’s latest – and somewhat novel – adjustment to its policy guidance appears to be a bit tongue in
cheek. With the country largely bypassing the impact of default, and with relative calm restored to market metrics – if
maintained – and if the Fed remains committed to reinstating price stability, given the strength in the consumer and
broader economy, there appears to be more work to be done before policy reaches a "sufficiently restrictive" level.
However, the question remains will additional firming come from organic measures and/or earlier policy tightening
given the lagged effects?
Meanwhile, despite ample evidence the Fed may have more work to be done, the May FOMC statement and the
Fed Chair’s press conference comments – along with more recent two-sided commentary from various officials –
highlights a seemingly unsteady level of conviction to stay the course. Rather, the Fed is seen as opening the door
for a pause or at the very least casting doubt on the Committee’s resolve to entirely slay the inflation dragon.
At this point market expectations for a pause in June, while volatile, have increased as of late. The market has been
early to call an end of Fed action before, but this time the Fed appears increasingly willing to entertain the notion as
well. With that, we invite you to dive into the results from our SIFMA Economist Roundtable U.S. economic survey.
-- Dr. Lindsey Piegza, Ph.D., Chief Economist and Managing Director at Stifel Financial Corporation and
Chair of the SIFMA Economist Roundtable

Setting the Scene
Inflation: Status
Before we dive into the survey results, we wanted to set the scene on where we are in inflation, the economy, and
the Fed’s conundrum in setting monetary policy – interest rate hike, pause (or the new term, skip), or pivot. To
begin, we analyze the inflation situation – how we got here and the current status of inflation metrics. There are
many different factors which drove the increase in inflation, not all of which can be impacted by monetary policy to
bring levels back down to the Fed’s 2% target.
We recap the drivers of inflation:
• Fiscal spending1: >$7 trillion since March 2020

o COVID associated
o Administration policies
o Ukraine aid
• Other factors:
o Post-COVID economic reopening
o Supply chain disruptions (domestic issues, China’s zero COVID policy)
o Russia/Ukraine war (impact on commodity prices)
• Monetary policy (not depicted graphically): $4.2 trillion added to the Fed’s balance sheet since March 2020
o 0% interest rates
o Asset purchases/balance sheet expansion
Inflation (CPI, % Y/Y): How Did we Get Here? 8.9

9
Supply Chain
8 Disruptions (peak)
Economic
7 Reopening
Russia/Ukraine
6
COVID spending,
5 2021: $1.9T Ukraine Aid, $106B 5.0
Infrastructure Bill, (ongoing)
4 Nov 2021: $1.2T
3 2.5 COVID spending,
2020: $3.9T Aug 2022:
2
CHIPS Act, $83B
1 Inflation Reduction Act, $?
Student Loan Relief, ~$200B+
0
Jul20
Jul21
Jul22
Jan20
Jan21
Jan22
Jun22
Jan23
Feb20
Mar20
Apr20
Jun20
Feb21
Mar21
Apr21
Jun21
Feb22
Mar22
Apr22
Feb23
Mar23
Apr23
Aug20
Sep20
Nov20
Dec20
Aug21
Sep21
Nov21
Dec21
Aug22
Sep22
Nov22
Dec22
May20
Oct20
May21
Oct21
May22
Oct22
Source: FRED, IMF, SIFMA estimates
1
$3.9T COVID spending = Consolidated Appropriations Act of 2021; executive orders to address expiration of COVID reliefs; Paycheck Protection
Program and Health Care Enhancement Act; Coronavirus Aid, Relief and Economy Security Act (CARES Act); Coronavirus Preparedness & Response
Supplemental Appropriations Act and Families First Coronavirus Response Act. $1.9T COVID spending = American Rescue Plan. Inflation Reduction
Act (IRA) = touted to be net neutral on spending, but the actual cost remains undetermined. Student loan relief = A Federal Reserve Bank of New York
report estimated the cost to already be ~$200B since the start of COVID; the debt ceiling bill came with a condition that the student loan payment pause
end after August 30, and President Biden’s program remains with the Supreme Court.

Setting the Scene
On the monetary policy side, we have seen a massive expansion of the Fed’s balance sheet (BS) since the early
2000s:
1. After the global financial crisis (GFC), the BS grew 205%

2. There was another pop from the GFC to the mid-2010s, +103%
3. The BS grew 72% with the COVID funding, from the start of 2020 to mid-2020
4. Then the government kept spending, increasing the BS another 25%, from the COVID increase to the $9.0
trillion peak
The BS has come down from the peak as the Fed moved from QE into QT2, -6%. However, this still represents a
1,072% increase in the Fed’s BS since 2002.
Federal Reserve Balance Sheet Growth ($T) #4
10 9.0
#3
9
8 7.2 8.4
7 #2
6
4.5
5
#1
4 4.2
2.8
3 2.2 3.8
2
0.7
1
0 0.9
6/18/03
6/18/04
6/18/05
6/18/06
6/18/07
6/18/08
6/18/09
6/18/10
6/18/11
6/18/12
6/18/13
6/18/14
6/18/15
6/18/16
6/18/17
6/18/18
6/18/19
6/18/20
6/18/21
6/18/22
12/18/12
12/18/02
12/18/03
12/18/04
12/18/05
12/18/06
12/18/07
12/18/08
12/18/09
12/18/10
12/18/11
12/18/13
12/18/14
12/18/15
12/18/16
12/18/17
12/18/18
12/18/19
12/18/20
12/18/21
12/18/22
Source: FRED, SIFMA estimates
2
QE = quantitative easing, used to stimulate borrowing and spending when the economy is in a recession or experiencing slow growth. QT =
quantitative tightening, used to cool down the economy and prevent inflation from rising too much if inflation is high or the economy is overheating.

Setting the Scene
As the Fed kept printing money, we also saw a significant expansion in the M2 money supply3 since the early
2000s:
1. After the GFC, M2 grew 82%

2. Then, M2 increased another 41% from the GFC to the mid-2010s
3. From the start of 2020 to mid-2020, COVID funding caused a 19% increase in M2
4. As the government kept spending, M2 increased another 19%, from the COVID increase to the $21.7 trillion
peak
With the move to QT, M2 has come down from the peak, -5%. Yet, M2 is still up 343% since 2000.
M2 Money Supply Growth ($T) #4
22 #3 21.7
20 18.3 20.7
18
16 #2
14 15.4
12.0
#1
12
10 8.5
8
6 4.7
4
1/31/00
8/31/00
3/31/01
5/31/02
7/31/03
2/29/04
9/30/04
4/30/05
6/30/06
1/31/07
8/31/07
3/31/08
5/31/09
7/31/10
2/28/11
9/30/11
4/30/12
6/30/13
1/31/14
8/31/14
3/31/15
5/31/16
7/31/17
2/28/18
9/30/18
4/30/19
6/30/20
1/31/21
8/31/21
3/31/22
10/31/22
10/31/01
12/31/02
11/30/05
10/31/08
12/31/09
11/30/12
10/31/15
12/31/16
11/30/19
Source: Bloomberg, SIFMA estimates
3
Estimate of the total money supply including all cash people have on hand plus all of money deposited in checking accounts, savings accounts, and
other short-term saving vehicles (ex: certificates of deposit). Excludes retirement account balances and time deposits above $100,000.

Setting the Scene
Monetary policy. Fiscal spending. Economic reopening post COVID. Supply chain disruptions. A war. That was
already a lot for an economy to digest. Then we added on the regional bank turmoil and the debt ceiling debate
(now resolved). It is no wonder the economy and inflation are where they stand today. We highlight where we are
with inflation metrics (Y/Y change, as of April) and how this compares to peak levels. We also show the path back
down to the Fed’s target of around 2%. We pay close attention to the Personal Consumption Expenditures Price
Index (PCE), the preferred metric used by the Fed to set monetary policy.
o Consumer Price Index (CPI) +5.0%

o Prior month +5.0%
o Peak +8.9% in June 2022
o Path to 2% = -3.0 pps
o Core CPI +5.5%

o Prior month +5.6%
o Peak +6.6% in September 2022
o PCE +4.4%
o Prior month +4.2%
o Peak +7.0% in June 2022
o Core PCE +4.7%

o Prior month +4.6%
o Peak +5.4% in February and March 2022
Fed's Target Inflation (% Y/Y): The Path Back Down to 2%

8.9
9 CPI
8 Core CPI
7.0
6.6
7 PCE
6 Core PCE 5.5
5.0
5
5.4 4.7
4
4.4
3
2.0
2
1
0
Jan21
Jun21
Jul21
Jan22
Jun22
Jul22
Jan23
Mar21
Mar22
Mar23
Feb21
Feb22
Feb23
Aug21
Sep21
Nov21
Dec21
Aug22
Sep22
Nov22
Dec22
Apr21
May21
Oct21
Apr22
May22
Oct22
Apr23

Setting the Scene
On a M/M basis, there does not appear to be a discernable pattern. Looking at the last twelve months, directional
shifts for PCE – posting a monthly percent change that was higher/lower than that for the preceding month – were
higher five times, lower four times, and flat two times.
This lack of pattern has people wondering whether it means inflation is stickier than hoped or if it means just that,
i.e. no pattern.
M/M Changes in Inflation since June 2022 Peak PCE

1.2% CPI
1.0% Core CPI
1.0%
0.8%
0.6%
0.6% 0.6%
0.4%
0.3% 0.4%
0.4% 0.3%
0.3%
0.2%
0.2% 0.1%
0.2%
0.0%
-0.2% -0.1%
11/1/22
10/1/22
12/1/22
5/1/22
6/1/22
7/1/22
8/1/22
9/1/22
1/1/23
2/1/23
3/1/23
4/1/23

Setting the Scene
Inflation: Components
Part of what is complicating monetary policy decision making is that inflation has many moving pieces, with multiple
components building the inflation equation:
SUPPLY LABOR DEMAND
At peak inflation, all of the pieces were pushing on aggregate inflation rate. The same cannot be said today. We
asked our Economist Roundtable to rank which factor is having the biggest impact on the aggregate inflation rate:
• Demand side: 70% ranked this component #1, followed by 20% for #2 and 10% for #3
• Labor component: 40% ranked this component #2 or #3 each, with 20% for #1
• Supply side: 50% ranked this component #3, followed by 40% for #2, and 10% for #1
This compares to our December 2022 results of:
• Demand side: 90% ranked this component #1, followed by 10% for #3
• Labor component: 50% ranked this component #2 or #3 each (no #1s)
• Supply side: 50% ranked this component #3, followed by 40% for #2, and 10% for #1
Looking across surveys, demand remains the top factor, but with less conviction as the #1 spot. Labor has grown in
concern in economists’ minds.

Setting the Scene
Inflation: Supply Side

While supply chain disruptions were a major factor driving inflation in 2021, this is no longer the case. Remember
when we used to count ships in queue off the Ports of Los Angeles and Long Beach? This number is now well
below pre-COVID levels, -51.2% from 2020 through May 2023. The current level of 7.6 ships at the end of May is
-92.5% from the 107 peak.
Ports of Los Angeles/Long Beach: Ships in Queue
120 107.0
100
80
60
40
20
16.4 7.6
0
2/10/21
4/10/21
6/10/21
8/10/21
2/10/22
4/10/22
6/10/22
8/10/22
2/10/23
4/10/23
12/10/20
10/10/21
12/10/21
10/10/22
12/10/22
Source: BofA Global Research estimates

Note: 1-week moving average of at berth and outside of 40m (loitering)
Spot container freight rates are also below pre-COVID levels. The World Container Index shows rates 2.0% below
the start of 2019 levels and down 83.7% from the peak. Looking to the world’s largest container port for further
details, spot rates for the Shanghai export container transport market – while slightly elevated to the start of 2019,
+4.0% – are also down significantly from peak levels, -80.5%.
World Container Index: Spot Container Freight Rates Shanghai Containerized Freight Index: Export
12,000 6,000
Container Market
10,360.9 5,046.7
10,000 5,000
8,000 4,000
6,000 3,000
4,000 2,000
1,719.6 945.4 983.5
2,000 1,000
1,685.3
0 0
10/1/19
10/1/20
10/1/21
10/1/22
1/1/19
4/1/19
7/1/19
1/1/20
4/1/20
7/1/20
1/1/21
4/1/21
7/1/21
1/1/22
4/1/22
7/1/22
1/1/23
4/1/23
10/1/19
10/1/20
10/1/21
10/1/22
1/1/19
4/1/19
7/1/19
1/1/20
4/1/20
7/1/20
1/1/21
4/1/21
7/1/21
1/1/22
4/1/22
7/1/22
1/1/23
4/1/23

Note: The Drewry World Container Index reports actual spot container freight rates, calculated as USD per 40 foot container using a weighted average
of 8 shipping routes by volume. The Shanghai Shipping Exchange Containerized Freight Index (SCFI) reflects the spot rates of the Shanghai export
container transport market, including freight rates of 15 individual shipping routes and a composite index. Shanghai is the world’s largest container port.

Setting the Scene
That said, as we neared publication of this report, we experienced a workers strike at the Ports of Los Angeles and
Long Beach – which handle approximately 40% of containers coming into the U.S. – amid a stall in labor
negotiations. Similar work stoppages occurred across other west coast ports, such as Oakland and Seattle. This
comes at a time when alternate shipping routes to east coast ports – a decision shippers made during the height of
bottlenecks at west coast ports – may be in jeopardy, or at least delayed or limited. Over the last few weeks, news
emerged that severe drought coupled with El Niño – which typically brings drier than normal weather conditions – at
the Panama Canal forced shipping restrictions.
Additionally, the recent OPEC+4 meeting announced no changes to its planned oil production cuts for this year as
announced in April: around 1.16 million barrels per day (bpd), bringing the total volume of cuts to 3.66 million bpd,
roughly 3.7% of global demand. Further, Saudi Arabia announced an additional voluntary one-month 1 million bpd
cut starting in July which could be extended further, bringing its total voluntary declines to 1.5 million bpd. Some
analysts estimate this could put the price of Brent Crude Oil at $80-$90 for an extended period.
Perhaps we should stay tuned for more on the supply side component of inflation.
4
OPEC = Organization of the Petroleum Exporting Countries = Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria,
Saudi Arabia, United Arab Emirates, and Venezuela. OPEC+ = OPEC + allies led by Russia; control ~40% of the world's crude oil production and
thereby essentially control the price of oil

Setting the Scene
Inflation: Demand Side

Moving on to analyze the demand side of inflation, we begin by breaking down the components measured by the
Consumer Price Index (CPI; % of total index):
• Non-core components, food and energy, represent 20.4%

• Core components, excluding food and energy, represent 79.6%
o Services 58.3%
▪ Shelter 34.6%
▪ Medical 6.5%
▪ Transportation 5.9%
o Goods 21.3%
▪ Total transportation 7.6%; new vehicles 4.3%, used vehicles 2.6%
▪ Household 4.4%
▪ Apparel 2.6%
CPI Category Weightings

34.6%
35%
30% Core Components

25%
20%
15% Transportation
total = 7.6%
10% 8.7%
6.5% 5.9%
4.9% 4.3% 4.4% 4.8%
5% 3.1% 2.6% 2.6% 2.3% 1.5% 3.6% 3.3%
1.1% 0.9% 1.4% 0.7% 0.9% 0.8% 1.2%
0%
Other
Other
At home
Shelter
Transp: Other
Medical
Apparel
Medical
Educ/comms
Transportation
Recreation
Water/sewer/trash
Household
Household
Recreation
Educ/comms
Services
Away from home
Commodities
Alcohol
Transp: New vehicles
Transp: Used vehicles
Services (ex food & energy, 58.3%) Goods (ex food & energy, 21.3%) Food Energy
(13.5%) (6.9%)
Source: Bureau of Labor Statistics, SIFMA estimates

Setting the Scene
The focus of monetary policy is on the core components. After all, the Fed cannot control the price of oil, which is a
global market. The Fed can impact consumer demand for goods and services. All eyes have been on services,
which had continued on an upward trajectory while goods inflation declined. That said, services inflation ticked down
in April. Goods inflation has declined significantly from peaks. In fact, durable goods have been in a deflationary
cycle since December 2022. However, both durable and non-durable goods ticked up in April.
We highlight the following trends for these inflation components: (CPI Y/Y change, as of April)
o Services +6.8%
o Prior month +7.2%
o Peak +7.6% in January and February 2023, -0.8 pps from peak
o Goods – Durable5 -0.2%

o Prior month -1.0%
o Peak +18.8% in February 2022, -19.0 pps from peak
o Goods – Non Durable 3.2%

o Prior month +2.8%
o Peak +16.1% in June 2022, -12.9 pps from peak
Inflation (% Y/Y): Services vs. Goods Services

20 18.8 Goods - Durable
18 Goods - Non Durable
16.1
16
14
12
10
7.6
8 6.8
6
4
3.2
2
0 -0.2
-2
Jan21
Jun21
Jul21
Jan22
Jun22
Jul22
Jan23
Mar21
Nov21
Mar22
Mar23
Feb21
Dec21
Feb22
Nov22
Dec22
Feb23
Aug21
Sep21
Aug22
Sep22
Apr21
May21
Oct21
Apr22
May22
Oct22
Apr23
5
Durable goods – or hard goods (can be purchased or rented) – yield utility over time instead of being consumed in one use and have long periods
between successive purchases, i.e. last >3 years; ex: cars, home appliances, consumer electronics, furniture, sports equipment, and toys. Non-durable
goods – or soft goods or consumables (generally not rented) – tend to be consumed immediately in one use or have a lifespan of <3 years; ex:
cosmetics, cleaning products, food, fuel, beer, cigarettes, paper products, rubber, textiles, clothing, and footwear.

Setting the Scene
Next, we look at trends across inflation the four major components of CPI since the start of 2021:
• Food and services have upward trajectories; energy and goods have downward trajectories
• Food and services came down in April; energy and goods ticked up
• While services only peaked in February 2023, the others are down substantially from their peaks in 2022;
energy has been deflationary for the last two months
CPI (% Y/Y): Food CPI (% Y/Y): Energy

12 10.9 50
41.3
10 40
8 30
7.5
6 20
4 10
2 0
-4.9
0 -10
Jul21
Jul22
Aug21
Sep21
Aug22
Sep22
Jan21
Jun21
Jan22
Jun22
Jan23
Feb21
Mar21
Oct21
Feb22
Mar22
Oct22
Feb23
Mar23
Nov21
Dec21
Nov22
Dec22
May21
Apr22
May22
Apr21
Apr23
Jan21
Jun21
Jul21
Jan22
Jun22
Jul22
Jan23
Mar21
Mar22
Mar23
Feb21
Nov21
Dec21
Feb22
Nov22
Dec22
Feb23
Apr21
Aug21
Sep21
Aug22
Sep22
May21
Oct21
Apr22
May22
Oct22
Apr23
CPI (% Y/Y): Services CPI (% Y/Y): Goods

9 14
12.4
8 7.3
12
7 6.8
10
6
5 8
4 6
3
4
2
2 2.1
1
0 0
Nov21
Dec21
Nov22
Dec22
Jan21
Jun21
Jul21
Jan22
Jun22
Jul22
Jan23
Jul21
Jul22
Mar21
Mar22
Mar23
Feb21
Feb22
Feb23
Feb21
Feb22
Feb23
Aug21
Sep21
Aug22
Sep22
Apr21
Apr22
Jan21
Jun21
Jan22
Jun22
Jan23
May21
Oct21
May22
Oct22
Apr23
Mar21
Mar22
Mar23
Nov21
Dec21
Nov22
Dec22
Aug21
Sep21
Oct21
Aug22
Sep22
Oct22
Apr21
May21
Apr22
May22
Apr23

Setting the Scene
Services Segments
At 58.3% of the total inflation equation, the Fed needs services to come down in order to fully tackle inflation.
Importantly, at over a third of the total inflation equation, the Fed needs shelter to come down. Looking at trends
across the headline CPI categories in services inflation, we note the following since the start of 2021:
• All segments have upward trajectories for the full time period
• April versus peak level

o Down = medical -6.1 pps, household (operations) -4.9 pps, transportation -4.2 pps, other -0.4 pps,
and shelter and education -0.1 pps each
o Flat = recreation, water/sewer/waste
• April trend versus the prior month

o Decline = shelter, medical, transportation, education, and household
o Flat = water/sewer/waste
o Increase = recreation and other
CPI (% Y/Y): Services - Shelter CPI (% Y/Y): Services - Medical

9 8.2 7 6.5
8 8.1 6
7
5
6
4
5
3
4
2
3
2 1
0.4
1 0
Jan21
Jun21
Jul21
Jan22
Jun22
Jul22
Jan23
Mar21
Mar22
Mar23
Jan21
Jun21
Jul21
Jan22
Jun22
Jul22
Jan23
Feb21
Nov21
Dec21
Feb22
Nov22
Dec22
Feb23
Mar21
Mar22
Mar23
Aug21
Sep21
Aug22
Sep22
Apr21
Oct21
Apr22
Feb21
Feb22
Feb23
May21
May22
Oct22
Apr23
Aug21
Sep21
Nov21
Dec21
Aug22
Sep22
Nov22
Dec22
Apr21
May21
Oct21
Apr22
May22
Oct22
Apr23
CPI (% Y/Y): Services - Transportation CPI (% Y/Y): Services - Education
15.3 3.5
16 3.2
13 3.1
3.0
10 11.1
2.5
7
4 2.0
1
1.5
-2
-5 1.0
Jan21
Jun21
Jul21
Jan22
Jun22
Jul22
Jan23
Jan21
Jun21
Jul21
Jan22
Jun22
Jul22
Jan23
Mar21
Mar22
Mar23
Mar21
Mar22
Mar23
Feb21
Nov21
Dec21
Feb22
Nov22
Dec22
Feb23
Feb21
Nov21
Dec21
Feb22
Nov22
Aug21
Sep21
Aug22
Sep22
Aug21
Sep21
Aug22
Dec22
Feb23
Sep22
Apr21
May21
Oct21
Apr22
May22
Oct22
Apr23
Apr21
May21
Oct21
Apr22
May22
Oct22
Apr23

0
1
2
3
4
5
6
7
2
3
4
5
6
7
8
9
10
11
Jan21
Jan21
Feb21
Feb21
Mar21
Mar21
Apr21 Apr21
May21 May21
Jun21 Jun21
Jul21 Jul21
Aug21 Aug21
Sep21 Sep21
Oct21 Oct21
Nov21 Nov21
Dec21 Dec21
Jan22 Jan22

Feb22 Feb22
Mar22 Mar22
10.2
Apr22 Apr22
May22 May22
Jun22 Jun22
Jul22 Jul22

Aug22 Aug22
Sep22 Sep22
CPI (% Y/Y): Services - Recreation
CPI (% Y/Y): Services - Household

Oct22 Oct22
Nov22 Nov22
Dec22 Dec22
Jan23 Jan23
Feb23 Feb23
Mar23 Mar23
Apr23 Apr23
6.4
5.3
2
3
3
4
4
5
5
6
6
7
7
3.0
3.5
4.0
4.5
5.0
5.5
Jan21
Feb21 Jan21
Feb21
Mar21
Mar21
Apr21
Apr21
May21
May21
Jun21
Jun21
Jul21
Jul21
Aug21
Aug21
Sep21
Sep21
Oct21
Oct21
Nov21
Nov21
Dec21 Dec21
Jan22 Jan22
Feb22 Feb22
Mar22 Mar22
Apr22 Apr22
May22 May22
Jun22
6.7
Jun22
Jul22 Jul22
CPI (% Y/Y): Services - Other
Aug22 Aug22
Sep22 Sep22
Oct22 Oct22
Nov22
CPI (% Y/Y): Services - Water/Sewer/Waste
Nov22
Dec22 Dec22
Jan23 Jan23
Feb23 Feb23
Mar23 Mar23
Apr23 Apr23
6.3
5.4
Setting the Scene
Page | 18
Setting the Scene
Goods Segments
While smaller than services at 21.3% of the total inflation equation, the segments of inflation still matter to the overall
picture. We look at trends across the headline categories in goods inflation. Given the scrutiny transportation has
received, we break this category out into its subcategories to show those more nuanced trends as well. We note the
following since the start of 2021:
• All segments have upward trajectories for the full time period except for used vehicles and education, which
are both in deflationary territory
• April versus peak level – all segments are down from peak levels to varying degrees
o Down = transportation – used vehicles -51.5 pps, education -10.9 pps, transportation – other -9.5
pps, transportation – new vehicles -7.8 pps, household -6.1 pps, apparel -3.1 pps, recreation -1.8
pps, alcohol -1.2 pps, other -1.1 pps, and medical -0.1 pps
• April trend versus the prior month

o Decline = household, transportation – new vehicles, transportation – other, recreation, and other
o Increase = apparel, alcohol, transportation – used vehicles, medical, and education
CPI (% Y/Y): Goods - Transportation - New Vehicles CPI (% Y/Y): Goods - Transportation - Used Vehicles
14 13.2 50 44.9
12 40
10 30
8 20
6 10
5.4
4 0
-6.6
2 -10
0 -20
Jul21
Jul22
Aug21
Sep21
Aug22
Sep22
Jan21
Jun21
Jan22
Jun22
Jan23
Feb21
Mar21
Oct21
Feb22
Mar22
Oct22
Feb23
Mar23
Jan21
Jun21
Jul21
Jan22
Jun22
Jul22
Jan23
Nov21
Dec21
Nov22
Dec22
Mar21
Mar22
Mar23
May21
Apr22
May22
Feb21
Feb22
Apr21
Apr23
Feb23
Aug21
Sep21
Nov21
Dec21
Aug22
Sep22
Nov22
Dec22
Apr21
May21
Oct21
Apr22
May22
Oct22
Apr23
CPI (% Y/Y): Goods - Transportation - Other CPI (% Y/Y): Goods - Household

18 12 10.9
15.3
16
10
14
12 8
10
6
8
4.8
6 5.8 4
4
2
2
0 0
Mar22
Mar21
Mar23
Jan21
Jun21
Jul21
Jan22
Jun22
Jul22
Jan23
Jan21
Jun21
Jul21
Jan22
Jun22
Jul22
Jan23
Mar21
Mar22
Mar23
Feb21
Feb22
Feb21
Nov21
Dec21
Feb22
Nov22
Dec22
Feb23
Aug21
Sep21
Nov21
Dec21
Aug22
Feb23
Sep22
Nov22
Dec22
Aug21
Sep21
Aug22
Sep22
Apr23
Apr21
May21
Oct21
Apr22
May22
Oct22
Apr23
Apr21
May21
Oct21
Apr22
May22
Oct22

0
1
2
3
4
5
6
7
-4
-3
-2
-1
0
1
2
3
4
5
6
-6
-4
-2
0
2
4
6
8
Jan21 Jan21 Jan21
Feb21 Feb21 Feb21
Mar21 Mar21 Mar21
Apr21 Apr21 Apr21
May21 May21 May21
Jun21 Jun21 Jun21
Jul21 Jul21 Jul21
Aug21 Aug21 Aug21
Sep21 Sep21 Sep21
Oct21 Oct21 Oct21
Nov21 Nov21 Nov21
Dec21 Dec21 Dec21
Jan22 Jan22 Jan22

Feb22 Feb22 Feb22
Mar22 Mar22 Mar22
6.7
Apr22 Apr22 Apr22

May22 May22 May22
Jun22 Jun22 Jun22
Jul22 Jul22 Jul22

Aug22
CPI (% Y/Y): Goods - Alcohol

CPI (% Y/Y): Goods - Medical
CPI (% Y/Y): Goods - Apparel
Aug22 Aug22
4.1
Sep22 Sep22 Sep22
Oct22 Oct22 Oct22
Nov22 Nov22 Nov22
Dec22 Dec22 Dec22
Jan23 Jan23 Jan23
5.8
Feb23 Feb23 Feb23
Mar23 Mar23 Mar23
Apr23 Apr23 Apr23
4.6
4.0
3.6
0
1
2
3
4
5
6
7
8
9
-1
0
1
2
3
4
5
0
2
4
-8
-12
-10
-6
-4
-2
Jan21 Jan21
Feb21 Jan21
Feb21
Mar21 Feb21
Mar21
Mar21
Apr21 Apr21
Apr21
May21 May21
May21
Jun21 Jun21
Jun21
Jul21 Jul21
Jul21
Aug21 Aug21
Aug21
Sep21 Sep21
Sep21
2.6
Oct21 Oct21
Oct21
Nov21 Nov21
Nov21
Dec21 Dec21
Dec21
Jan22 Jan22 Jan22
Feb22 Feb22 Feb22
Mar22 Mar22
4.7
Mar22
Apr22 Apr22 Apr22
May22 May22 May22
Jun22 Jun22 Jun22
Jul22 Jul22 Jul22
CPI (% Y/Y): Goods - Other
Aug22 Aug22 Aug22

CPI (% Y/Y): Goods - Education
CPI (% Y/Y): Goods - Recreation
Sep22 Sep22
7.9
Sep22
Oct22 Oct22 Oct22
Nov22 Nov22 Nov22
Dec22 Dec22 Dec22
Jan23 Jan23 Jan23
Feb23 Feb23 Feb23
Mar23 Mar23 Mar23
Apr23 Apr23 Apr23
6.8
2.9
-8.3
Setting the Scene
Page | 20
Setting the Scene
Inflation: Labor Component
The final – and what some market participants might call stubborn – component of the inflation equation is the labor
market. We begin with the employment picture. Despite increasing in May, the unemployment rate6 remains at
historically low levels, sitting at 3.7%. This translates to 6.1 million unemployed people. While down 11.0 pps since
the COVID peak, it is still considered too low to assist in the Fed’s inflation fight.
Our Economist Roundtable estimated that a 4.0-4.5% level of unemployment is needed to meaningfully impact
inflation. Unfortunately, the earlier trend in 2023 was a flat or declining path rather than increasing: January 3.4%,
February 3.6%, March 3.5%, and April 3.4%. We did get an increase in May to 3.7%.
Unemployment Rate Still at Historically Low Level Despite May Increase to 3.7%
14.7
15
13
11
5
3.4
3 3.4 3.4 3.7
2.5
1
12/1/49
11/1/51
10/1/53
12/1/72
11/1/74
10/1/76
12/1/95
11/1/97
10/1/99
12/1/18
11/1/20
10/1/22
9/1/55
8/1/80
1/1/48
8/1/57
7/1/59
6/1/61
5/1/63
4/1/65
3/1/67
2/1/69
1/1/71
9/1/78
7/1/82
6/1/84
5/1/86
4/1/88
3/1/90
2/1/92
1/1/94
9/1/01
8/1/03
7/1/05
6/1/07
5/1/09
4/1/11
3/1/13
2/1/15
1/1/17
6
U3 unemployment rate, measuring the number of people who are jobless but actively seeking employment

Setting the Scene
Looking more closely at the trend since the COVID peak, the unemployment rate had declined, which was the intent
at the time. There was a large drop from April 2020 to later that fall, -7.8 pps, followed by another sizable drop by
the end of 2021, -3.0 pps. However, once it became clearer that inflation was embedded and the Fed began its
unprecedented rate hike path in 2022, the objective shifted to increasing the unemployment rate.
Unfortunately, the unemployment rate appeared to have plateaued. Then came the May report – the rate increased
to 3.7%. While viewed as a positive sign for a rate hike pause in June, some economists wonder if the increase is a
blip or a sign of the beginning of a consistent upward path.
Regardless, over the last twelve months, the rate has averaged 3.6% and appears stuck in the 3.4% to 3.7% range.
Unemployment: Moving Up from the Plateau, But Is It a Permanent Increase?

14.7
15 # Unemployed (M, RHS) UE Rate 25
13
20
11
9 15
6.9
7 10
5 3.9 3.7 3.7
5
3
1 0
1/1/20
3/1/20
5/1/20
7/1/20
9/1/20
1/1/21
3/1/21
5/1/21
7/1/21
9/1/21
1/1/22
3/1/22
5/1/22
7/1/22
9/1/22
1/1/23
3/1/23
5/1/23
11/1/20
11/1/21
11/1/22
Unemployment Levels: Stuck in a Range # Unemployed (M, RHS)

UE Rate
3.75 3.7 3.7 3.7 6.2
3.70 6.1
3.65 3.6 3.6 3.6 6.0
3.60
3.55 5.9
3.5 3.5 3.5 3.5
3.50 5.8
3.45 3.4 3.4 5.7
3.40
5.6
3.35
3.30 5.5
5.9 5.7 6.0 5.8 6.1 6.0 5.7 5.7 5.9 5.8 5.7 6.1
3.25 5.4
8/1/22
10/1/22
11/1/22
12/1/22
6/1/22
7/1/22
9/1/22
1/1/23
2/1/23
3/1/23
4/1/23
5/1/23

Setting the Scene
As to the labor force participation rate, before COVID began, we were at 63.3% to start 2020, +0.4 pps to the three-
year pre-COVID average of 62.9%. As of May, we were at 62.6%, -0.3 pps to the average. Over the last twelve
months, the rate had improved, increasing 0.4 pps from 62.2% in June 2022. There was no change in the rate from
April to May.
A lower than historical labor force participation rate and historically low unemployment rate have combined to keep
labor markets tight.
Labor Force Participation Rate Remains Below 3-Year Pre-COVID Avg of 62.9%
63.5 63.3
63.0
62.6
62.5
62.0
61.5
61.0
60.5
60.0
10/1/20
11/1/20
12/1/20
10/1/21
11/1/21
12/1/21
10/1/22
11/1/22
12/1/22
2/1/20
9/1/21
4/1/22
1/1/20
3/1/20
4/1/20
5/1/20
6/1/20
7/1/20
8/1/20
9/1/20
1/1/21
2/1/21
3/1/21
4/1/21
5/1/21
6/1/21
7/1/21
8/1/21
1/1/22
2/1/22
3/1/22
5/1/22
6/1/22
7/1/22
8/1/22
9/1/22
1/1/23
2/1/23
3/1/23
4/1/23
5/1/23
Labor Force Participation Rate Remains Below 3-Year Pre-COVID Avg of 62.9%
63.0
62.9
62.8
62.7 62.6
62.6
62.5
62.4
62.2
62.3
62.2
62.1
62.0
10/1/22
11/1/22
12/1/22
6/1/22
7/1/22
8/1/22
9/1/22
1/1/23
2/1/23
3/1/23
4/1/23
5/1/23

Setting the Scene
The other piece of the puzzle is that while the average hourly earnings growth has declined over the last twelve
months – the Y/Y growth rate was 5.0% or greater for ten out of twelve months in 2022 – it remains 1.3 pps above
the three-year pre-COVID average of 3.0%, at +4.3% in May. While still elevated, it does appear pressures have
eased somewhat.
Additionally, personal income growth continues its upward trajectory. At 5.4% Y/Y change in April, it is +0.4 pps
above the three-year pre-COVID average of 4.9%.
The consumer remains employed and financially strong, based on this data.
Average Hourly Earnings Growth (Y/Y %) Personal Income Growth (Y/Y %)

5.6 6.0
5.4
5.4 5.4
5.5
5.2
5.0 5.0
4.8 4.5
4.6
4.0 3.9
4.4 4.3
4.2 3.5
12/1/22
10/1/22
11/1/22
12/1/22
10/1/22
11/1/22
6/1/22
7/1/22
8/1/22
9/1/22
1/1/23
2/1/23
3/1/23
4/1/23
5/1/23
5/1/22
6/1/22
7/1/22
8/1/22
9/1/22
1/1/23
2/1/23
3/1/23
4/1/23

Setting the Scene
Inflation: Differences in Data Sets

We ended the last section using the phrase “based on this data”. For our final section on inflation, we look at
differences in data sets, with a focus on shelter. In the CPI, shelter represents 34.6% of the total inflation equation,
clearly important to driving down the aggregate inflation rate. According to CPI data, shelter was +8.1% Y/Y in April.
This was -0.1 pps from its March 2023 peak, but significantly elevated to the +1.6% level at the start of 2021, +6.5
pps. According to CPI data, shelter inflation has remained on a strong upward sloping trajectory, only ticking down in
April.
CPI (% Y/Y): Services - Shelter

9 8.2
8 8.1
1
Jan21
Jun21
Jan22
Jun22
Jul22
Jan23
Mar21
Jul21
Mar22
Mar23
Feb21
Nov21
Dec21
Feb22
Nov22
Dec22
Feb23
Aug21
Sep21
Aug22
Sep22
Apr21
May21
Oct21
Apr22
May22
Oct22
Apr23
However, some market participants have argued that the CPI – and PCE for that matter – data sets have a lag time
and are, therefore, not indicative of the current inflation environment. According to Zillow data, home prices and
rents have come down significantly from their peaks, differing from CPI data.

Setting the Scene
We begin by looking at average national home prices according to Zillow, highlighting the following:
• Average home price in April was $339,048.20, +3.3% Y/Y
o Peaked at +18.9% Y/Y in August 2021; April was -15.6 pps to the peak
o On a Y/Y basis, the growth rate has been coming down since May 2022; now below the start of 2020
level by 2.1 pps
• On a M/M basis, after going deflationary at the end of 2022, it had ticked up some but then stabilized
o March +0.4% M/M

o April +0.3% M/M
Average Home Price: Y/Y Change Average Home Price: M/M Change
20% 18.9% 2.5%
18% 2.0%
2.0%
16%
14%
1.5%
12%
10% 1.0% 0.7%
8%
5.4% 0.5% 0.3%
6%
4%
0.0%
2% 3.3%
0% -0.5%
11/1/21
11/1/20
11/1/22
1/1/20
3/1/20
5/1/20
7/1/20
9/1/20
1/1/21
3/1/21
5/1/21
7/1/21
9/1/21
1/1/22
3/1/22
5/1/22
7/1/22
9/1/22
1/1/23
3/1/23
11/1/20
11/1/21
11/1/22
1/1/20
3/1/20
5/1/20
7/1/20
9/1/20
1/1/21
3/1/21
5/1/21
7/1/21
9/1/21
1/1/22
3/1/22
5/1/22
7/1/22
9/1/22
1/1/23
3/1/23
Source: Zillow, SIFMA estimates

Setting the Scene
Turning to average national rents as per Zillow, we highlight the following:
• Average rent in April was $2,018.06, +5.3% Y/Y
o Peaked at +16.9% Y/Y in February 2022; April -11.6 pps to the peak
o On a Y/Y basis, the growth rate has been coming down since the peak; yet remains above the start
of 2020 level by 1.4 pps
• On a M/M basis, after going deflationary at the end of 2022, it has ticked up of late
o March +0.5% M/M

o April +0.6% M/M
Average Monthly Rent: Y/Y Change Average Monthly Rent: M/M Change
18% 16.9% 2.5% 2.2%
16% 2.0%
14%
1.5%
12%
10% 1.0%
0.6%
8% 0.5%
6%
3.9% 0.0% 0.2%
4% 5.3%
-0.5%
2%
0% -1.0%
11/1/20
11/1/21
11/1/22
11/1/22
1/1/20
3/1/20
5/1/20
7/1/20
9/1/20
1/1/21
3/1/21
5/1/21
7/1/21
9/1/21
1/1/22
3/1/22
5/1/22
7/1/22
9/1/22
1/1/23
3/1/23
11/1/20
11/1/21
1/1/20
3/1/20
5/1/20
7/1/20
9/1/20
1/1/21
3/1/21
5/1/21
7/1/21
9/1/21
1/1/22
3/1/22
5/1/22
7/1/22
9/1/22
1/1/23
3/1/23
Source: Zillow, SIFMA estimates

Setting the Scene
The Zillow data set shows the aforementioned lag in CPI/PCE that some market participants have identified. (We
acknowledge that indexes have different compositions and methodologies and will, therefore, never be identical.)
Looking at the full time series, from the start of 2020, and the more recent trailing twelve months view, Zillow and
CPI have directional differences. In the top chart, at the start of 2020, you see Zillow data (blue lines) beginning to
increase while CPI (green area) was trending down.
Importantly – and what some market participants have pointed to – in the bottom chart, the more recent view, Zillow
began to decline while CPI continued to trend up. These differences in data sets feed into the Fed’s policy
conundrum (discussed later in this note).
Zillow vs. CPI Data (Y/Y changes): From the Start of 2020
CPI - Shelter Zillow - Home Price Zillow - Monthly Rent
20.0% 9.0%
18.0% 8.0%
16.0% 7.0%
14.0% 6.0%
12.0%
5.0%
10.0%
4.0%
8.0%
6.0% 3.0%
4.0% 2.0%
2.0% 1.0%
0.0% 0.0%
11/1/20
11/1/21
11/1/22
1/1/23
1/1/20
3/1/20
5/1/20
7/1/20
9/1/20
1/1/21
3/1/21
5/1/21
7/1/21
9/1/21
1/1/22
3/1/22
5/1/22
7/1/22
9/1/22
3/1/23
Zillow vs. CPI Data (Y/Y changes): Trailing Twelve Months View
CPI - Shelter Zillow - Home Price Zillow - Monthly Rent
20.0% 9.0%
18.0% 8.0%
16.0% 7.0%
14.0% 6.0%
12.0%
5.0%
10.0%
4.0%
8.0%
6.0% 3.0%
4.0% 2.0%
2.0% 1.0%
0.0% 0.0%
10/1/22
11/1/22
12/1/22
5/1/22
6/1/22
7/1/22
8/1/22
9/1/22
1/1/23
2/1/23
3/1/23
4/1/23
Source: Bureau of Labor Statistics, Zillow, SIFMA estimates

Setting the Scene
Economy: The Consumer
As the Fed works to slow demand, it is monitoring consumers and their spending behaviors. According to personal
consumption data – a measure of how much of household earned income is being spent on goods and services –
the consumer continues to spend. Over the last twelve months, the trajectory remains upward sloping, and there
were only two months with a negative M/M trend and one flat month. From start to finish over this time period, the
level of spending grew 6.0%.
Personal Consumption Expenditures ($T)

18.4 18.3
18.2
18.0
17.8
17.6
17.4
17.2
17.2
17.0
11/1/22
8/1/22
10/1/22
12/1/22
5/1/22
6/1/22
7/1/22
9/1/22
1/1/23
2/1/23
3/1/23
4/1/23
However, over the last twelve months, retail sales have been on a downward trajectory. For this metric, there were
eight months with a negative M/M trend and one flat month – the opposite of the spending data above.
Retail Sales Growth (Y/Y %)

12
10 8.9
2
0.5
0
10/1/22
11/1/22
12/1/22
7/1/22
5/1/22
6/1/22
8/1/22
9/1/22
1/1/23
2/1/23
3/1/23
4/1/23

Setting the Scene
Additionally, savings growth has started to trend back up. The quarterly chart below shows the full journey. In 2020,
savings growth skyrocketed as COVID lockdowns and then the lack of willingness to go to crowded public spaces
cramped spending but grew bank accounts (savings). 2021 saw the economic reopening and corresponding
spending bursts – declining savings – and the data trends suffered tough comparisons to the prior year. Savings
growth remained negative in 2022, even after moving past tough comparisons. However – potentially a result of
growing recession fears among consumers – savings growth ticked up in 1Q23.
Net Private Savings Growth (Y/Y %)

250
150 101.8 86.0
50 10.9 20.6 7.4

19.7 5.6
-50
-150 -109.2
Differential -148.6
-250 Y/Y Growth -201.8
Linear (Y/Y Growth)
-350 -303.2
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22
1Q23

Note: Differential = the aggregate of the prior and current year’s growth in that quarter, i.e. the full direction change
Spending up – sales down – savings up. How do these data points fit together? One link is that consumer credit has
been growing. Since the plateau in 2021, revolving credit is up 16.5% while total consumer credit outstanding is up
19.7%. Growth has stabilized over the past three months for both accounts.
Consumer Credit Outstanding: Revolving ($T) Consumer Credit Outstanding: Total ($T)
1.24 4.85
1.25 4.9
4.8
1.20
4.7
1.15 4.6
4.5
1.10
1.06 4.4
1.05 4.3
4.2
1.00 0.97
4.1 4.03
0.95 4.0
10/1/20
10/1/21
10/1/22
10/1/19
10/1/20
10/1/21
10/1/22
1/1/19
4/1/19
10/1/19
7/1/19
1/1/20
4/1/20
7/1/20
1/1/21
4/1/21
7/1/21
1/1/22
4/1/22
7/1/22
1/1/23
4/1/23
1/1/19
4/1/19
7/1/19
1/1/20
4/1/20
7/1/20
1/1/21
4/1/21
7/1/21
1/1/22
4/1/22
7/1/22
1/1/23
4/1/23

Note: Revolving includes credit cards, home equity lines of credit (HELOC), personal lines of credit, etc. Total includes revolving plus all other (motor
vehicle loans, loans for mobile homes, education, boats, trailers, or vacations, etc.).

Setting the Scene
We saw this pattern during the global financial crisis as well – consumer credit builds, plateaus as the economy
weakens, and then turns downward. Although, we note that this is not a prediction that the possible impending
recession will be like that of the global financial crisis. Expectations are quite the opposite actually, given today’s
economy is entirely different than in 2008 – banks and consumers have stronger balance sheets. Just look at
delinquency rates for credit cards during the global financial crisis versus today. Back then delinquencies were 4.0%
heading into the crisis, peaking at 6.8%. Today, delinquencies were 2.5% before COVID hit, dropping to 1.5% at the
trough. We ended 1Q23 at 2.4%, barely back at pre-COVID levels and substantially below global financial crisis
levels.
More evidence to not experiencing a severe recession like in 2008, 100% of our Economist Roundtable members
expect the recession to be mild. However, the charts do show the pattern of plateau before the decline in consumer
credit growth.
Consumer Credit Outstanding: Revolving ($T) Consumer Credit Outstanding: Total ($T)
1.25 5.0
1.20
4.5
1.15
1.10 4.0
1.05
3.5
1.00
0.95 3.0
0.90
2.5
0.85
0.80 2.0
1/1/07
9/1/07
5/1/08
1/1/09
9/1/09
5/1/10
1/1/11
9/1/11
5/1/12
1/1/13
9/1/13
5/1/14
1/1/15
9/1/15
5/1/16
1/1/17
9/1/17
5/1/18
1/1/19
9/1/19
5/1/20
1/1/21
9/1/21
5/1/22
1/1/23
1/1/07
9/1/07
5/1/08
1/1/09
9/1/09
5/1/10
1/1/11
9/1/11
5/1/12
1/1/13
9/1/13
5/1/14
1/1/15
9/1/15
5/1/16
1/1/17
9/1/17
5/1/18
1/1/19
9/1/19
5/1/20
1/1/21
9/1/21
5/1/22
1/1/23
Credit Card Delinquency Rates
7.5
6.8
6.5
5.5
4.5 4.0
3.5
2.5 2.4
2.5
1.5
1.5
4Q10
1Q07
4Q07
3Q08
2Q09
1Q10
3Q11
2Q12
1Q13
4Q13
3Q14
2Q15
1Q16
4Q16
3Q17
2Q18
1Q19
4Q19
3Q20
2Q21
1Q22
4Q22

Setting the Scene
That said, delinquencies could curtail consumer spending, much of which appears to have been done on credit.
Over the last twelve months, 30+ day credit card delinquencies increased 0.32 pps, while 90+ day delinquencies
increased 0.16 pps. Both types of delinquencies have been on a sharp upward trend, albeit plateauing over the last
few months.
The health of the consumer shown in the spending data may be an illusion given delinquency rates. As
delinquencies increase, consumers’ credit scores decline, making it harder to obtain additional loans. This can
curtail consumer spending. Additionally, as delinquencies increase, lenders tend to tighten standards to curb losses
from non-performing loans, i.e. credit tightening.
Credit Card Delinquencies (%): 30+ Days Credit Card Delinquencies (%): 90+ Days
1.15 0.55
1.10 1.11 0.53 0.53
0.51
1.05
0.49
1.00 0.47
0.95 0.45
0.90 0.43
0.41
0.85
0.79 0.39 0.37
0.80 0.37
0.75 0.35
5/1/22
10/1/22
11/1/22
12/1/22
10/1/22
11/1/22
12/1/22
6/1/22
7/1/22
8/1/22
9/1/22
1/1/23
2/1/23
3/1/23
4/1/23
5/1/23
5/1/22
6/1/22
7/1/22
8/1/22
9/1/22
1/1/23
2/1/23
3/1/23
4/1/23
5/1/23

Setting the Scene
Economy: Credit Tightening
Speaking of credit tightening, the regional bank turmoil that began in March led to credit tightening for corporate and
consumer borrowers. Some market participants have estimated that the credit tightening is equivalent to 100 bps of
Fed rate hikes. After the collapse of SVB, investment grade credit spreads widened, widening further after the sale
of First Republic. Spreads remain elevated today.
This increases the cost of borrowing, thereby limiting lending. Lending is further hindered as banks tighten credit
standards for borrowers, shrinking the borrowing pool. We show the rate hike equivalency calculation below:
(using 30-day averages for current spreads and the pre-SVB level)
1. Regional bank spreads increased 179.2 bps, diversified (large) banks 39.0 bps
2. Multiplying by percentage of loans performed by these groups, we get 80.2 bps for regionals and 21.5 bps
for diversified
3. This totals 101.8 bps of spread widening for the entire system
(this is down from peak spreads, representing 124.7 bps for the entire system)
With a roughly 100 bps equivalency hikes, this would put the implied Fed Funds rate at 6.00-6.25% instead of the
actual 5.00-5.25%. This is well ahead of what people expect to be the peak rate, in the range of 5.00-5.50%.
US IG Banking Index Bond Spreads (bps) 367.05

375
Regional Banks Diversified Banks 346.84
350
325
323.72
300 290.43
275
250 262.52
225
195.79 192.99
200
175190.59
150 164.01
1/11/23
1/21/23
1/31/23
2/10/23
2/20/23
3/12/23
3/22/23
4/11/23
4/21/23
5/11/23
5/21/23
5/31/23
1/1/23
3/2/23
4/1/23
5/1/23
Source: Apollo Chief Economist, Bloomberg
We note that 66.7% of our Economist Roundtable respondents believe the corresponding credit tightening after the
regional bank turmoil in March is equivalent to 50 bps of additional Fed rate hikes, while 33.3% replied 25
bps. Using these figures, the implied Fed Funds rate would be: 5.50-5.75%, ahead of expected peak rate; or 5.25-
5.50%, at expected peak rate.

Setting the Scene
The Fed’s Policy Conundrum
This leads us to our final section, the Fed’s policy conundrum. The Fed Funds rate stands at 5.00-5.25%, after
increasing 500 bps in fifteen months, an unprecedented rate.
Fed Funds Hikes (bps): From 0 to 500 bps in 15 Mo
80 75 75 75 75
70
60
50 50
50
40
30 25 25 25 25
20
10
0
0
Feb23
Jan22
Jun22
Jul22
Mar22
Mar23
Nov22
Dec22
Sep22
May22
May23
Source: Federal Reserve
As we move forward, economists and markets continue to anticipate the Fed’s next move. The Fed has repeatedly
stated that it will be data dependent. Unfortunately, the tone of the data is continuously changing and can even send
opposing signals on the same day (see the May jobs report). With the data all over the map, so must be the Fed
when analyzing its next move.
Inflation remains stubborn, ticking up again 0.2 pps in April. The economy has held up, but economic data shows
mixed signals, as discussed above. Pressure on average hourly earnings has eased somewhat, coming down from
the peak but still elevated to historical levels. The unemployment rate ticked up in May – from 3.4% to 3.7% – but
the permanency of that path is unclear. The May employment report showed a gain of 339,000 jobs, the largest
monthly gain since January. The consumer has held up but has also been living beyond their means for the last few
years, which they will not be able to do going forward, at least not to the same extent as in the past.
With economic factors continuing to change quickly and the absence of a clear positive or negative trend, the data
may justify a pause, or at least not argue against one.
There are other factors to consider as well. The impact of the credit tightening remains unclear, as does the future
state of commercial real estate and what that could mean for the economy. The U.S. Treasury needs to refill its
coffers and increase the percentage of T-bills to a targeted 20% of total outstanding, estimated around 16% as of
April. Analysts estimate this issuance might be $1.1 trillion in new T-bills in just over half a year, considered a large
amount in a short time period. This Treasury issuance will take liquidity out of the system, but will it come from the
real economy – taking money from savings or stocks – or a shifting of Treasury’s accounts, moving money from one
account to another? The answer is not clear.
These factors appear to justify a pause.

Setting the Scene
Such is the Fed’s policy conundrum:
• Continue hiking?
• Pause to assess the monetary policy lag and other factors?
• When to begin the pivot (rate cuts)?
What are markets saying? Fed Funds futures have increased since April. At the short end of the curve, the shift is
small – markets still expect a June pause. However, the shift is showing less chance of a cut and higher rates than
previously expected through the fall.
30-Day Federal Funds Futures Current April

5.5 5.29 5.28
5.18 5.25
5.13 5.14
5.04 4.97
5.0 4.78
5.01 4.99 4.69
4.89 4.55
4.83
4.5 4.71 4.32
4.54 4.18
4.44 4.07
4.36
4.0 4.16
4.08
3.94
3.5 3.74
3.63 3.55
3.0
Jun23
Jul23
Jan24
Jun24
Jul24
Mar24
Nov23
Dec23
Feb24
Aug23
Sep23
Oct23
Apr24
May24
We note that our Economist Roundtable expects the Fed to pause in June (92.9% of respondents). 78.6% of
respondents expect the peak rate will be 500-550 bps, to be achieved by 2Q23.

Executive Summary
Executive Summary
Comparing the Current and Prior Surveys

In our semiannual economic surveys (published every June and December), we ask our Economist Roundtable to
provide their best assessment of the current economic environment and where we could be headed. We begin by
comparing results from the current and prior surveys for questions that were repeated in each survey, to gauge
changes in estimates of the economic outlook. For questions where responses were ranked, we show the top
answer for each survey. As not all questions are repeated – we adapt the survey to the current economic
environment each time – we include additional highlights from the current and prior survey later in this section.
Economic Forecasts Current Survey Flash Poll Last Survey

Economic Indicators: (2023E/2024E) (2023E) (2023E)
Real GDP (4Q/4Q) +0.5%/+1.7% +0.2% -0.3%
Unemployment Rate (4Q average) +4.1%/+4.4% 4.4% 4.5%
Labor Force Participation Rate (4Q average) +62.7%/+62.7% n/a 62.6%
CPI (4Q/4Q) +3.0%/+3.0% 3.1% 3.1%
Core CPI (4Q/4Q) +3.8%/+2.6% 3.8% 3.3%
PCE (4Q/4Q) +3.1%/+2.2% 3.0% 2.9%
Core PCE (4Q/4Q) +3.5%/+2.3% 3.3% 2.9%
Rates (monthly averages): (Dec ‘23E/Jun ‘24E) (Dec 2023E) (Dec 2023E)
Federal Funds Rate (midpoint) +5.125%/+4.410% 5.125% 4.375%
2-Year UST Yield +3.850%/+3.570% n/a 4.520%
10-Year UST Yield +3.390%/+3.293% n/a 4.000%
30-Year Fixed Mortgage Rate +6.000%/+5.658% n/a 6.900%
Changes in Curves/Spreads: (2023E/2024E) n/a (2023E)
Fed Funds Rate vs.10Y UST yield curve 71.4% invert slightly n/a 37.5% invert markedly
more/57.1% steepen more
markedly
2Y vs. 10Y UST yield curve 83.3% invert slightly n/a 37.5% steepen slightly
more/50% each steepen
slightly & steepen markedly
3M vs. 10Y UST yield curve 62.5% invert slightly n/a 37.5% invert markedly
more/57.1% steepen more
markedly
TED spread (T-bill to Eurodollar) 50.0% remain the n/a 100.0% widen
same/50.0% remain the same
IG corporates to Treasury spread 50.0% remain the n/a 100.0% widen
same/50.0% remain the same
HY corporates to Treasury spread 50.0% remain the same/ n/a 100.0% widen
50.0% remain the same
Note: Current survey May 15-26, 2023, flash poll March 27-April 7, past survey November 11-25, 2022.

Executive Summary
Economic Outlook Current Survey Last Survey

What factors will have the greatest impact Inflation, tight labor market, regional U.S. monetary policy, inflation,
on U.S. economic growth: 2023 bank turmoil/credit tightening, US recession threat
monetary policy
What factors will have the greatest impact US monetary policy, US consumer n/a
on U.S. economic growth: 2024 spending, recession threat, tight
labor market
What is your estimate of the long-term 1.5% to 2% (92.3% of respondents) >1.5-2% (83.3% of respondents)
potential growth rate of the U.S. economy
Has your estimate of the long-term growth No (100.0% of respondents) No (63.6% of respondents)
rate changed in the last 12 months
Top risks to economic forecasts - upside Inflation, labor market, Inflation – demand side, monetary
recession/economy policy, and inflation
Top risks to economic forecasts - downside Credit tightening, inflation, debt Inflation – supply side, monetary
ceiling/rating downgrade policy, and inflation
US already in a recession No (100.0% of respondents) No (100.0% of respondents)
US to enter a recession Yes (69.2% of respondents) Yes (83.3% of respondents)
Severity of a potential recession Mild (100.0% of respondents) Mild (88.9% of respondents)
Timing of a potential recession 4Q23 (36.4% of respondents) 1H23 (60.0% of respondents)
Employment & The Consumer Current Survey Last Survey

Labor force participation rate to return to the Never (41.7% of respondents) Beyond (63.6% of respondents)
~63% pre-COVID average
Factors driving the labor supply gap The Great Retirement (76.9% of Health concerns around long
respondents) COVID & The Great Retirement
(each 63.6% of respondents)
Labor shortages impacting consumer In-restaurant dining (60.0% of Travel, airlines & in-restaurant (each
behavior respondents) 50.0% of respondents)
Work-from-office return to pre-COVID Never, hybrid work is here to stay Never, hybrid work is here to stay
norms (84.6% of respondents) (81.8% of respondents)
Have you personally returned to the office Hybrid/part-time (50.0% of Hybrid/part time (66.7% of
respondents) respondents)
Factors limiting return to offices to historical Choose to continue working at Not want to commute/time freed up
levels home; unwilling to commute; WFH from not commuting; choose to
option is available continue working at home; b/c the
WFH option is available (did not ask
but it was offered)
Note: Current survey May 15-26, 2023, past November 11-25, 2022. Questions and/or ranges may change across surveys

Executive Summary
Inflation Current Survey Last Survey

Fed poised to make a mistake in tackling Yes, overshooting & no (45.5% of Yes, overshooting (54.5% of
inflation respondents each) respondents)
Are prices pressures structural/broad-based Yes, have been for some time Yes, for some time & yes, recently
(54.5% of respondents) (36.4% of respondents each)
Assessment of prices pressures On our way back down, but Passed peak, remain elevated for
disinflation momentum will slow some time (75.0% of respondents)
(83.3% of respondents)
Fed will materially revise higher its inflation No (66.7% of respondents) No (72.7% of respondents)
expectations in the next SEP
PCE by the end of: 2023 3.0-3.5% & >4.0% (each 40.0% of 2-3% & 3-4% (each 45.5% of
PCE by the end of: 2024 2.0-2.5% & 3.0-3.5% (each 40.0% n/a
of respondents)
What are the most important factors in your Consumer spending – services, Historically hot labor market,
outlook for core inflation stickiness of wage increases, consumer spending on services,
historically hot labor market domestic supply chain issues
Confident the Fed can achieve its 2% goal in Very confident (63.6% of Very confident (77.8% of
a sustainable way: commitment to the fight respondents) respondents)
Confident the Fed can achieve its 2% goal in Somewhat confident (54.5% of Somewhat confident (90.9% of
a sustainable way: effectiveness of policy respondents) respondents)
Inflation to reach Fed’s preferred 2% target 2H24 (50.0% of respondents) Beyond 2024 (54.5% of
respondents)
Probability of the US experiencing structurally 15-25% (54.5% of respondents) 15-25% (54.5% of respondents)
higher inflation over the longer run (>3 years)
What factors do you believe could push long- Reversal of globalization, increased Stickiness of wage increases,
term inflation higher costs as we move supply chains reversal of globalization, and
back to the U.S., stickiness of wage sustained breakdown of supply
increases chains
Which component has the greatest impact on Demand side (70.0% of Demand side (90% of respondents
the level/peak or sticky nature of inflation respondents ranked this #1) ranked this #1)
Do you believe we are in a wage-price spiral No (81.8% of respondents) No (80.0% of respondents)
Reached a peak in wage pressures Yes (91.7% of respondents) Yes (72.7% of respondents)
Expect acceleration of wage growth to slow to 2024 (70.0% of respondents) 2H23 (66.7% of respondents)
the historical +3.0% level
What level of unemployment is needed to 4.0-4.5% (58.3% of respondents) 4.5-5.0% (45.5% of respondents)
meaningfully impact inflation
When can reach this unemployment rate 2024 (58.3% of respondents) 2H23 (80.0% of respondents)
Note: Current survey May 15-26, 2023, past November 11-25, 2022. Questions and/or ranges may change across surveys. SEP = Summary of
Economic Projections

Executive Summary
Inflation (cont.) Current Survey Last Survey

Inflation expectations currently unanchored No (90.9% of respondents) No (100.0% of respondents)
Inflation expectations to become unanchored No (100.0% of respondents) No (100.0% of respondents)
Fed’s strong rhetoric has kept inflation Yes (90.9% of respondents) Yes (100.0% of respondents)
expectations in check
Fed can navigate a soft-landing (meet inflation Doubtful (66.7% of respondents) Doubtful (63.6% of respondents)
goal without causing a recession)
Possibility of risking a big accident (a more Low probability (72.7% of Low probability (54.5% of
severe or prolonged recession) respondents) respondents)
Concern of disinflation at this time No (91.7% of respondents) No (81.8% of respondents)
The significant amount of government Yes, moderate upside risk (50.0% of Yes, moderate upside risk (63.6% of
spending (>$7T) poses a risk to inflation respondents) respondents)
Greater long-term risk to the economy Stagflation (90.9% of respondents) Stagflation (77.8% of respondents)
Rates & Credit Markets Current Survey Last Survey

Factors having the greatest impact on long- Inflation/inflationary expectations; Inflation/inflationary expectations;
term Treasury yields U.S. monetary policy; U.S. U.S. economic conditions; U.S.
economic conditions monetary policy
10Y UST to end: 2023 3.25-3.50% (50.0% of respondents) 3.50-3.75% (40.0% of respondents)
10Y UST to end: 2024 3.00-3.25% (37.5% of respondents) n/a
30Y mortgage rate to end: 2023 5.50-6.00%, 6.00-6.50% & 6.50- <7.00%(100.0% of respondents)
7.00% (each 28.6% of respondents)
30Y mortgage rate to end: 2024 5.00-5.50% (42.9% of respondents) n/a
Expect the Treasury yield curve to return to Beyond 2024 (45.5% of 2024 (55.6% of respondents)
a normal upward sloping curve respondents)
Note: Current survey May 15-26, 2023, past November 11-25, 2022. Questions and/or ranges may change across surveys. At the time of the survey, the
10Y UST was: 1H23 survey = 3.6738%, 2H22 survey = 3.7742%. At the time of the survey, the 30Y mortgage rate was: 1H23 survey = 7.04%, 2H22
survey = 6.86%.

Executive Summary
Monetary Policy Current Survey Flash Poll Last Survey

Fed Funds Rate:
Fed Funds rate action at next FOMC Pause (92.9% of Raise 50 bps (100.0% of
meeting respondents) respondents)
Peak Federal Funds rate estimate 500-525 bps (78.6% of 500-525 bps (66.7% 500-550 bps (46.2% of
respondents) of respondents) respondents)
Timing of peak Federal Funds rate 2Q23 (78.6% of 2Q23 (66.7% of Mid 2023 (91.7% of
respondents) respondents) respondents)
Length of monetary policy lag time 9-12 months (38.5% of n/a 9-12 months (91.7% of
Should the Fed pause rate hikes to Yes (92.3% of n/a Yes (58.3% of
account for lag time of monetary policy respondents) respondents)
When should the Fed pause to account 2Q23 (92.3% of 2Q23 (83.3% of 2Q23 (50.0% of
for this lag respondents) respondents) respondents)
When will the Fed begin cutting rates? 1Q24 (71.4% of 1Q24 (83.3% of n/a
Fed should consider global monetary No (100.0% of n/a No (80.0% of
policy in its own policy decisions respondents) respondents)
Fed Balance Sheet:
Fed to accelerate the pace of balance No (84.6% of n/a No (83.3% of
sheet reduction respondents) respondents)
What is the expected size of the Fed’s >$8T (70.0% of n/a >$7T (63.6% of
balance sheet: 2023 respondents) respondents)
What is the expected size of the Fed’s $5-6T (71.4% of n/a n/a
balance sheet: 2024 respondents
General Monetary Policy:
Which of the following factors do you Tight labor n/a Inflation – wage increases,
think are the most important to the Fed’s market/elevated wage inflation – supply chain
decision making growth, persistently higher issues, stronger U.S.
inflation, credit tightening consumer spending
How do you rate the efficiency of the Excellent, very clear & ok, n/a Ok, somewhat murky but
Fed’s communication with markets somewhat murky but decipherable (63.6% of
decipherable (each 50.0% respondents)
of respondents)

Executive Summary
Fiscal Policy Current Survey Last Survey

Fiscal Stimulus:
Sustained higher inflation should Yes (70.0% of respondents) Yes (81.8% of respondents)
deter further fiscal spending
Russia/Ukraine increase fiscal No (60.0% of respondents) Yes (70.0% of respondents)
spending policy
(Potential) impending recession Yes (60.0% of respondents) Yes (70.0% of respondents)
deter fiscal spending policy
Or will the government want to do Yes (60.0% of respondents) No (66.7% of respondents)
more to boost the economy
Will the Inflation Reduction Act No, will pressure budget (50.0% of Not at all (71.4% of respondents)
(IRA) be: budget deficit reducing respondents)
Will the IRA be: help lower inflation Not at all (70.0% of respondents) Not at all (80.0% of respondents)
Bigger risk to the economy, Much, further pressuring inflation Much, further pressuring inflation
government does too: (62.5% of respondents) (70.0% of respondents)
Has the government already done Yes, but not to a significant extent Yes, fiscal (over)spending main
too much? (>$7T in spending) (54.5% respondents) inflation driver (70.0% respondents)
Consider the debt/GDP level when Yes, further rise impede LT econ Yes, further rise impede LT econ
considering additional stimulus growth & no, govt needs to invest in the growth & yes, further rise incite inflation
economy (each 36.4% respondents) (each 57.1% respondents)
If responded no, what level of debt 150-175% (80.0% of respondents) 150-175% (100.0% of respondents)
to GDP is concerning
Would the U.S. government actually No (72.7% of respondents) No (90.9% of respondents)
ever default
Either party is focused on No (90.0% of respondents) No (90.0% of respondents)
reinstating a balanced budget
Tax Policy:
IRA 15% corp. minimum tax have No (100.0% of respondents) No (100.0% of respondents)
material impact on econ. growth
If responded yes, impact on 2023 n/a n/a
GDP estimates
Trade Policy:
Geopolitical tensions/COVID Yes (100.0% of respondents) Yes (66.7% of respondents)
policies have lasting impact on
trade relations with China
Geopolitical tensions/COVID Yes (90.0% of respondents) Yes (60.0% of respondents)
policies cause a meaningful shift to
domestic production
Note: Current survey May 15-26, 2023, past November 11-25, 2022. Questions and/or ranges may change across surveys. Corp = corporate, econ =
economic growth

Executive Summary
Additional Survey Results Highlights: 1H23 (Current)

For questions that were not repeated or changed substantially, i.e. not listed in the comparison tables above, we
highlight the following from the current survey (populated between May 15-26, 2023).
Monetary Policy
• Fed actions
o 71.4% of respondents expect a rate cut in 1Q24; once the Fed begins cutting rates, 76.9% of
respondents believe it will have to cut rates by over 100 bps before stabilizing
o As to whether regulatory authorities took appropriate actions in response to the March regional bank
turmoil, respondents indicated:
▪ The Fed: Yes, 100.0%
▪ FDIC: Yes, 91.7%
o 50.0% of respondents believe all bank deposits should be insured, but up to a certain amount
▪ For those responding “yes, but up to a certain amount”, 50.0% replied the amount should be
$500,000 and 50.0% replied $1,000,000
o As to whether the regional bank turmoil will cause lasting damage to confidence in banking sector,
58.3% responded yes, but confidence will return over time
o 66.7% of respondents believe the corresponding credit tightening after the regional bank turmoil in
March is equivalent to 50 bps of additional Fed rate hikes
o As to whether credit tightening be a factor in the Fed’s decision making for further rate hikes,
respondents indicated:
▪ Should be: Yes, 91.7%
▪ Is/will be: No, 91.7%
o Given the aforementioned credit tightening and its impact on the economy, 63.6% of respondents
indicated they are somewhat worried about the commercial real estate sector but it’s “too early to
model”
o As to whether the Fed can get its balance sheet back down to historical levels, respondents
indicated:
▪ The pre-COVID level, ~$4 trillion: No, 84.6%
▪ The post-GFC level, ~$2 trillion: No, 92.3%
• Inflation
o As to whether respondents’ positions changed about the Fed making a mistake in tackling inflation
after the regional bank turmoil, 45% responded yes, somewhat more concerned
o 50.0% of respondents believe the Fed will tolerate an above 2% inflation level
▪ For those that answered yes to the above question, 100.0% responded that a 2.0-2.5% level
would be acceptable

Executive Summary
Macro Policy
• Fiscal Stimulus
o 70.0% of respondents believe debt ceiling increases should be procedural only (not tied to
alternative measures)
o 72.7% of respondents believe the debt ceiling debate is not doing material damage to the global
perception of the USD
o With a movement to dethrone the US Dollar (USD), including Yuan denominated purchase of natural
gas and regional trade agreements in local currencies, 77.8% of respondents do not believe the
USD is losing credibility as the dominant currency

Executive Summary
Additional Survey Results Highlights: 2H22 (Prior)

For questions that were not repeated or changed substantially, i.e. not listed in the comparison tables above, we
highlight the following from the prior survey (populated between November 11-25, 2022): https://www.sifma.org/wp-
content/uploads/2022/12/SIFMA-US-Economic-Survey-2H22.pdf
Monetary Policy: Inflation Expectations
• Ranking supply side inflation components, economists replied: domestic supply chain issues (port
congestion, labor shortages), commodity price shocks (oil due to Russia/Ukraine war), and supply chain
issues (China’s Zero COVID policy)
o 36.4% of respondents expect domestic supply chain disruptions to dissipate by 1H23
o 63.6% of respondents believe President Xi will end China's Zero COVID policy, with 57.1%
responding this will happen by 2H23
o 90% of respondents believe current policy moves – specifically releasing the strategic petroleum
reserves (SPR) – will not have a lasting impact on the price of oil
o The key factors keeping pressure on the price of oil over the long run include: geopolitical tensions
impact supply (Russia/Ukraine war, Saudi Arabia relations); strong demand heading into winter
months on top of low supplies in Europe; and strong demand into winter/low supplies in the U.S.
o 50.0% of respondents expect relief from other commodity price pressures by 1H23
• Ranking demand side inflation components, economists replied: consumer spending on services, consumer
spending on goods, and fiscal spending
o 63.6% of respondents believe all of the fiscal stimulus was not necessary, and became a main driver
of inflation
o 30.0% of respondents expect goods prices on an aggregate level to return to normal levels by 1H23
and another 30.0% by 2H23
o 50.0% of respondents expect services prices on an aggregate level to return to normal levels by
2H23

Economic Outlook
Economic Outlook
GDP Growth Expectations

With COVID in the rear-view mirror – in terms of modeling economic forecasts – we surveyed our Economist
Roundtable on the key factors driving economic models.
• Key factors impacting economic growth, 2023: 84.6% inflation, 84.6% tight labor market, 76.9% regional
bank turmoil/credit tightening, 76.9% U.S. monetary policy
• Key factors for economic growth, 2024: 83.3% U.S. monetary policy, 75.0% U.S. consumer spending, 66.7%
recession threat, 66.7% tight labor market
Factors Impacting US Economic Growth: 2023 Factors Impacting US Economic Growth: 2024
Inflation 84.6% US monetary policy 83.3%

Tight labor market 84.6%
US consumer spending 75.0%
Regional bank turmoil/credit tightening 76.9%
Recession threat 66.7%
US monetary policy 76.9%
Tight labor market 66.7%
US consumer spending 61.5%
Recession threat 46.2% Inflation 58.3%
US fiscal policy/stimulus 30.8% Economic conditions – US 41.7%
Economic conditions – US 30.8% Regional bank turmoil/credit tightening 25.0%

US private credit market conditions 23.1%
US private credit market conditions 25.0%
US business confidence 15.4%
US business confidence 25.0%
Russia/Ukraine conflict 7.7%
US fiscal policy/stimulus 25.0%
Higher energy prices 7.7%
Other 7.7% Russia/Ukraine conflict 8.3%
Full Questions: What factors will have – or have already had – the greatest impact on US economic growth in full year 2023/2024? (Ranked by % that
listed a factor). Other: (’23) Mortgage rates; Not selected: (‘23) energy supply concerns – US, energy supply concerns – Europe, strong US Dollar,
economic conditions – Europe, economic conditions – China, economic conditions – global / (‘24) higher energy prices, energy supply concerns – US,
energy supply concerns – Europe, strong US Dollar, economic conditions – Europe, economic conditions – China, economic conditions – global

Economic Outlook
We asked our Economist Roundtable their expectations for GDP growth, as well as their expectations for the long-
term growth rate potential.
• Annual real GDP growth to finish 2023 at +0.5% (median forecast, 4Q/4Q), shifting to +1.7% in 2024
• On a quarterly basis, respondents forecast +1.6% real GDP growth in 2Q23, +0.3% in 3Q23, -0.8% in
4Q23, +1.0% in 1Q24, and +1.7% in 2Q24 (Q/Q, SAAR)
2023 Real GDP Growth Forecasts, 4Q/4Q Median Real GDP Growth Forecasts, 4Q/4Q
High Median Low High Median Low
3%
3%
2.5%
2.5%
2% 2%
1.5%
1.7% 1.7%
1.4%
1.4%
1%
0.7% 1%
0.5%
0% -0.3% 0.5%
-0.6% 0.1%
0%
-1%
-0.6%
-1.2%
-2% -1%
-2P -1P CP 2023E 2024E
Real GDP Growth, Q/Q Change (SAAR)

Actual Est.-High Est.-Median Est.-Low
4% 3.2%
2.9%
3% 2.6%
2.3%
1.9%
2% 1.3% 1.2%
0.9%
1% 1.6% 1.7%
1.0%
0%
0.3%
-1%
-0.8% -0.8%
-2% -1.2%
-3% -2.5%
-2.8% -2.9%
-4%
3Q22 4Q22 1Q23 2Q23E 3Q23E 4Q23E 1Q24E 2Q24E
Source: Bureau of Economic Analysis, SIFMA Economist Roundtable

Note: SAAR = seasonally adjusted annual rate

Economic Outlook
• In terms of the long-term GDP growth rate, 92.3% of respondents replied 1.5-2.0%
• 100.0% of respondents stated that their estimate had not changed in the last twelve months
US Economy Long-Term Growth Rate Forecast Change in LT Growth Rate Estimate in Last 12 Months
0% to 1% No 100%
Yes, somewhat
lower
1% to 1.5% 7.7%
Yes, a good deal
lower
1.5% to 2% 92.3%
Yes, somewhat
higher
>2% Yes, a good deal

higher
Full Question: What is your estimate of the long-term potential growth rate of the US economy?
Full Question: Has your estimate of the long-term potential growth rate of the US economy changed over the last twelve months?

Economic Outlook
Risks to Economic Forecasts

We asked our Economist Roundtable to list their top risks to their economic forecasts, highlighting the following:
• Upside: Inflation, labor market, and recession/economy
Top 3 Risks to Economic Forecasts - Upside
Inflation 66.7%
Labor Market 66.7%
Recession/Economy 58.3%
Consumer Spending 41.7%
Geopolitical 25.0%
Credit Tightening 16.7%
• Downside: credit tightening, inflation, and debt ceiling/rating downgrade
Top 3 Risks to Economic Forecasts - Downside
Credit Tightening 83.3%
Inflation 75.0%
Debt Ceiling/Rating Downgrade 50.0%
Monetary Policy/Interest Rates 25.0%
Recession/Economy 25.0%
Labor Market 16.7%
Fiscal Policy/Spending 8.3%
Geopolitical 8.3%
Full Question: Please list your top three upside/downside risks to your economic forecasts
Upside: Inflation = supply side pressures; Labor Market = job growth, resilient wages; Recession/Economy = housing market rebound, productivity
increase, domestic investment in energy, stronger capex; Consumer Spending = resilient consumer; Geopolitical = Russia/Ukraine, foreign relations
improvement; Credit Tightening = banking sector stress relief
Downside: Credit Tightening = escalation of regional bank stress, banking turmoil; Inflation = sticky; Debt Ceiling/Rating Downgrade = debt limit breach,
US default; Recession/Economy = energy prices, commodity crisis, fear of recession; Labor Market = weak job market, labor market deterioration; Fiscal
Policy/Spending = fiscal stimulus; geopolitical = global turmoil

Economic Outlook
Recession Expectations
As the Fed continues its inflation fight, economists and market participants continue to assess whether or not the
U.S. economy will enter a recession, and, if so, how severe that recession could be. As such, we asked our
Economist Roundtable their thoughts around a potential recession and if the Fed can navigate a soft landing
(achieve its 2% inflation target without causing a recession).
• None of respondents believe the U.S. is already in a recession

• 69.2% of respondents believe the U.S. will enter a recession
• If the U.S. enters a recession, 100.0% of respondents believe it will be mild
• If the U.S. enters a recession, 36.4% of respondents believe it will occur in 4Q23, 27.3% in 3Q23, 18.2%
beyond 2024
US Recession: Already In US Recession: To Enter
No
30.8%
Yes
69.2%
No
100.0%
Severity of Potential Recession Timing of a Potential Recession
2Q23 9.1%
3Q23 27.3%
4Q23 36.4%
1Q24 9.1%
2Q24
Mild Beyond 18.2%

100.0%
Full Question: Do you believe the U.S. is in a recession currently?

Full Question: Do you believe the U.S. will enter a recession in this cycle (~two years)?
Full Question: If you expect the U.S. to enter a recession, will it be mild or severe?
Full Question: If you expect the U.S. to enter a recession, when?

Economic Outlook
• The majority of respondents (66.7%) are doubtful the Fed can navigate a soft-landing (achieve its 2%
inflation target without causing a recession): 16.7% somewhat confident, 8.3% very confident, 8.3% not
confident at all
• With the Fed raising rates at an unprecedented pace, 72.7% of respondents put low probability of risking a
big accident (a more severe or prolonged recession), 27.3% high
Confidence in Fed Navigating a Soft-Landing Probability of Big Accident Given Pace Rate Hikes
Doubtful 66.7%
Low probability 72.7%
Somewhat
16.7%
confident
High probability 27.3%

Very confident 8.3%
Won't happen
Not confident at all 8.3%
Full Question: How confident are you that the Fed can navigate a soft-landing, meaning achieve its inflation goal without causing a recession (or “pain”
as referred to in Fed officials’ speeches)?
Full Question: With the Fed raising rates at an unprecedented pace, what is the possibility of risking a big accident (a more severe or prolonged
recession)?

Economic Outlook
Employment and the Consumer

As a key component in the inflation battle, we asked our Economist Roundtable their expectations for employment
and the consumer landscape.
• Economists expect the unemployment rate to end 2023 at 4.1% and increase to 4.4% in 2024 (4Q average)
• Employment growth (average monthly change in non-farm payroll employment) is expected to average
110,000 in 2023 and 64,000 in 2024
• Respondents expect the labor force participation rate to increase to 62.7% in 2023 and remain at 62.7% in
2024
Unemployment Rate & Non-Farm Payroll Employment Labor Force Participation Rate
Employment (K; RHS) Unemployment
8% 800 63.0%
606
600 62.7% 62.7%
6.8%
7% 399
400
62.5%
6% 110 64 200 62.2%
0
5% 62.0% 61.9%
(200)
4% (400) 61.6%
4.4%
4.2% 4.1%
(600) 61.5%
3% 3.6%
(800)
(774)
2% (1,000) 61.0%
2020 2021 2022 2023E 2024E 2020 2021 2022 2023E 2024E
Source: Bureau of Labor Statistics, SIFMA Economist Roundtable

Note: Average monthly change for non-farm payroll employment, 4Q average for unemployment rate

Economic Outlook
• 41.7% of respondents expect the labor force participation rate to never return to the ~63% pre-COVID
average, with another 25.0% responding beyond 2023
• The factors respondents believe continue to drive the labor supply gap are: The Great Retirement (76.9%),
childcare issues (38.5%), upward pressure on wages (15.4%), and health concerns around long COVID
(15.4%)
o Other: Skill mismatches, accumulation of savings, robust demand, residual of immigration shortfall
during pandemic
• Respondents expect real personal consumption growth to end 2023 at +1.3% and +1.5% in 2024 (4Q/4Q)
• Average hourly earnings growth is expected to decrease to +4.0% in 2023 and +3.7% in 2024 (4Q/4Q)
• 60.0% of respondents believe labor shortage are impacting consumer behavior towards in-restaurant dining
with 30.0% indicating travel – airlines and another 30.0% travel - hotels
Labor Force Participation Return to Pre-COVID Level Factors Continuing to Drive the Labor Supply Gap
1H23 The Great Retirement 76.9%
2H23 8.3% Childcare issues 38.5%
1H24 8.3% Upward pressure on

15.4%
wages
2H24 16.7% Health concerns

15.4%
around long COVID
Beyond 25.0% Lack of real wage

7.7%
growth
Never 41.7% Other 30.8%
Consumer Spending (4Q/4Q) & Hourly Earnings (4Q/4Q) Labor Shortages Impacting Consumer Behaviors
Consumption Earnings
8% 7.2%
In-restaurant dining 60.0%
7%
6%
4.9% 4.9%
5% 4.0%
5.3% 3.7% Travel - airlines 30.0%
4%
3%
2% Travel - hotels 30.0%
1% 1.7%
1.3% 1.5%
0%
-1% Other 40.0%
-2% -1.4%
2020 2021 2022 2023E 2024E

Full Question: When do you expect the labor force participation rate to return to the ~63% pre-COVID average? (62.6% in April 2023, unchanged M/M;
63.4% in February 2020)
Full Question: With 9.6 million job vacancies and 5.7 million Americans reporting a position of unemployment, what factors do you believe continue to
drive the labor supply gap?
Full Question: Do you believe labor shortages are impacting consumer behavior towards?

Economic Outlook
Finally, we asked our Economist roundtable their thoughts on the return to offices.
• 84.6% of respondents never expect work-from-office to return to pre-COVID norms, indicating hybrid work is
here to stay
• 50.0% of respondents indicated they have personally returned to the office on a hybrid/part-time schedule
• The key factors limiting return to offices to historical levels: choose to continue working at home, not want to
commute/time freed up from not commuting, and because WFH option is available (did not ask but it was
offered)
Work-from-Office to Return to Pre-COVID Level Have You Personally Returned to the Office
Already has
Hybrid/Part-time 50.0%
1H23
2H23
Full-time 35.7%
2024
Beyond 15.4%
WFH full-time 14.3%
Never, hybrid work
84.6%
is here to stay
Factors Limiting Return to Office to Historical Levels
Choose to continue working at home 25.0% 58.3% 8.3% 8.3% #1
Unwilling to commute 25.0% 25.0% 33.3% 16.7% #2
WFH option is available 33.3% 8.3% 33.3% 8.3% 16.7% #3
Childcare issues 16.7% 8.3% 58.3% 8.3% 8.3% #4
Lingering COVID heath concerns 8.3% 16.7% 25.0% 16.7% 33.3% #5
Safety issues in big cities 8.3% 8.3% 33.3% 33.3% 16.7% #6
Unwilling to use public transportation 8.3% 33.3% 33.3% 25.0% #7
Other #8
Full Question: When do you expect work-from-office to return to pre-COVID norms?

Full Question: Have you personally returned to the office?
Full Question: Which factors do you believe are limiting return to offices to historical levels? (Factors listed in order of average rank)

Monetary Policy
Monetary Policy
Fed Actions
In this section, we drill down into everything monetary policy – rate hikes/pauses/cuts, recession probability,
inflation, and long-term rate expectations. The Fed has indicated that they remain data dependent when making
policy decisions. Yet, the data seems to point to a different outcome every week. This leaves economists and
markets wondering what the Fed will do not only at the June meeting but throughout the rest of 2023.
We asked our Economist Roundtable the most important factors in the Fed’s decision making. The top factors were:
• Tight labor market/elevated wage growth (100.0%)
• Persistently higher inflation (92.3%)
• Credit tightening post regional bank turmoil (84.6%)
Factors Important to Fed's Decision Making
Tight labor market/elevated wage

100.0%
growth
Persistently higher inflation 92.3%
Credit tightening post regional

84.6%
bank turmoil
Stronger US economic conditions 46.2%
Stronger US consumer spending 23.1%
Weaker US economic conditions 15.4%
Full Question: Which of the following factors do you think are the most important to the Fed’s decision making? (Factors listed in order of average rank)

Monetary Policy
To begin, we asked our Economist Roundtable about their expectations for Fed actions.
• 92.9% of respondents expect the Fed to pause rate hikes in June
• 78.6% of respondents expect the peak rate will be 500-550 bps
• 78.6% of respondents expect the peak rate to be achieved by 2Q23
Expected Fed Rate Action at June FOMC Meeting
Hike 25 bps 7.1%
Hike 50 bps
Hike >50 bps
Pause 92.9%
Cut
Expectations for Peak Federal Funds Rate: Level Expectations for Peak Federal Funds Rate: Timing
475-500 bps 2Q23 78.6%
3Q23 14.3%
500-525 bps 78.6%
4Q23 7.1%
525-550 bps 7.1%
1Q24
550-575 bps 14.3%

2Q24
575-600 bps Beyond
Full Question: Now in the 5.00%-5.25% range – +500 bps in around 15 months –, what action do you expect the Fed to take in June?
Full Question: What do you believe will be the peak rate?
Full Question: When do you expect that will be achieved?

Monetary Policy
Monetary policy comes with a lag time before working its way into the economy. As such, we asked our Economist
Roundtable how they view this lag and what it could mean for the Fed actions.
• 38.5% of respondents believe the lag time is 9-12 months
• 92.3% of respondents think the Fed should pause and assess the impact of earlier rates hikes
• 91.7% of respondents believe this pause should take place in 2Q23
Monetary Policy Time Lag before Hitting the Economy
0-3 months 7.7%
3-6 months
6-9 months 30.8%
9-12 months 38.5%
>12 months 23.1%
Should the Fed Pause & Assess When Should the Fed Pause Rate Hikes
2Q23 91.7%
No
7.7%
3Q23 8.3%
4Q23
1Q24
2Q24
Yes Beyond
92.3%
Full Question: Monetary policy comes with a lag time before working its way into the economy. What do you believe is the lag time?
Full Question: Should the Fed pause and assess the impact of earlier rate hikes?
Full Question: When should they take this pause?

Monetary Policy
Hike. Pause. Pivot. We had multiple hikes, at an unprecedented rate. The expected timing of the pause is 2Q23, at
the June meeting. When will we get the cuts?
• 71.4% of respondents expect the Fed to cut rates in 1Q24
• Once the Fed begins cutting rates, 76.9% of respondents think it will take over 100 bps of cuts before
stabilizing
Expectations for Rate Cut: Timing Expectations for Rate Cut: Level
2Q23 25 bps 7.7%
3Q23
50 bps 7.7%
4Q23 7.1%
75 bps
1Q24 71.4%
100 bps 7.7%

2Q24 14.3%
Beyond 7.1% >100 bps 76.9%
Full Question: Do you expect a rate cut any time soon, and if so when?
Full Question: Once the Fed begins cutting rates, how many bps do you think they will have to cut before stabilizing?

Monetary Policy
The regional bank turmoil that began in March was viewed by many as a sign that monetary policy had worked its
way into the economy. Markets are still digesting what the credit tightening that stemmed from this event will mean
for the economy and the Fed’s policy moves. For example, prior to these events, markets had expected a 50 bps
rate hike at the March FOMC meeting, after signs that the labor market remained hot. The regional bank turmoil led
markets to revise down expectations and the FOMC ultimately vote to hike only 25 bps.
We asked our Economist Roundtable their thoughts on the regulatory response to the regional bank turmoil and
potential changes to the deposit insurance regime.
• As to whether regulatory authorities took appropriate actions in response to the March regional bank turmoil,
100.0% of respondents believe the Fed did
• As to whether regulatory authorities took appropriate actions in response to the March regional bank turmoil,
91.7% of respondents believe the FDIC did
• As to whether all bank deposits be insured (i.e. drop the $250,000 cap), 50.0% of respondents replied yes,
but up to a certain amount
• Respondents were evenly split on the amount deposits should be insured up to: 50.0% said $500,000 and
50.0% $1,000,000
Appropriate Response to March Appropriate Response to March

Bank Turmoil: Fed Bank Turmoil: FDIC
No
8.3%
Yes Yes
100.0% 91.7%
Full Question: Do you believe regulatory authorities took appropriate actions in response to the March regional bank turmoil: (a) The Fed? (b) The
FDIC?

Monetary Policy
Should All Bank Deposits Be Insured Bank Deposits Should Be Insured Up To:
Yes, but up to a $500,000 50.0%

50.0%
certain amount
$750,000
No 41.7%
$1,000,000 50.0%
Yes, all 8.3%

$5,000,000
Full Question: Should all bank deposits be insured (i.e. drop the $250,000 cap)?
Full Question: If you responded “yes, but up to a certain amount”, what amount? Up to?

Monetary Policy
We then asked our Economist Roundtable how they expect the regional bank turmoil to impact the Fed’s rate
decisions.
• 58.3% of respondents believe the regional bank turmoil will cause temporary damage to confidence in
banking sector
• 66.7% of respondents estimate the corresponding credit tightening post the regional bank turmoil is
equivalent to 50 bps of additional Fed rate hikes
• As to whether this credit tightening should be a factor in the Fed’s decision making for further rate actions:
o 91.7% of respondents said it should be
o 91.7% of respondents said it is/will be
Regional Bank Turmoil Cause Damage to Confidence Impact of Credit Tightening Post Reg Bank Turmoil
25 bps 33.3%
Yes, but confidence will
58.3%
return over time
50 bps 66.7%
No 41.7% 75 bps
100 bps
Yes, confidence
permanently eroded
>100 bps
Credit Tightening Impact Fed Credit Tightening Impact Fed

Rate Hikes: Should Rate Hikes: Will/Is
No No
8.3% 8.3%
Yes Yes
91.7% 91.7%
Full Question: Will the regional bank turmoil cause lasting damage to confidence in banking sector?
Full Question: After the regional bank turmoil in March, many consider the corresponding credit tightening – for both consumers and businesses – as
equivalent to additional Fed rate hikes. What do you believe could be the impact of credit tightening?
Full Question: Should this credit tightening be a factor in the Fed’s decision making for further rate hikes: (a) Do you believe it should be? (b) Do you
believe it is/will be?

Monetary Policy
Finally, we asked our Economist Roundtable their thoughts on commercial real estate and whether the fed should
be assessing other central bank actions in its own policy decisions.
• Given the aforementioned credit tightening, 63.6% responded they are “somewhat worried, but too early to
model” the impact on the commercial real estate sector
• Despite the continued inflation battle and corresponding monetary policy actions in the UK and EU, 100.0%
of respondents do not believe the Fed should be considering global monetary policy responses when
making its decisions on its own policy moves
Concerns About Commercial Real Estate Sector Fed Should Consider Global
Monetary Policy
Somewhat worried, too
63.6%
early to model
Significantly worried,
27.3%
too early to model
Somewhat worried,
9.1%
downgrading estimates
Significantly worried,
downgrading estimates
Not worried at all

No
100.0%
Full Question: Given the aforementioned credit tightening and its impact on the economy, how worried are you, in particular, about the commercial real
estate sector?
Full Question: Given the continued inflation battle and corresponding monetary policy actions in the UK and EU, should the Fed be considering global
monetary policy responses when making its decisions on its own policy moves?

Monetary Policy
The Fed continues the drawdown of the balance sheet. At the writing of the survey, the Fed’s balance sheet was at
$8.5 trillion (up from $4.2 trillion in February 2020). We gathered our Economist Roundtable’s thoughts on the
reduction of and the end game for the balance sheet.
• 84.6% of respondents expect the Fed will not need to accelerate the pace of balance sheet reduction
• 70.0% of respondents expect the balance sheet to be below $8 trillion by the end of 2023
• 71.4% of respondents expect the balance sheet to still be $5-6 trillion by the end of 2024
Fed to Accelerate Pace of BS Reduction
No 84.6%
Yes 7.7%
Uncertain 7.7%
Expected Balance Sheet Size by Year End: 2023 Expected Balance Sheet Size by Year End: 2024
$4-5 trillion, pre-

<$8 trillion 70.0% COVID level
$5-6 trillion 71.4%

$8.0-8.5 trillion 30.0%
$6-7 trillion 28.6%
$8.5-9.0 trillion
$7-8 trillion
>$9 trillion >$8 trillion
Full Question: As the Fed continues its drawdown of the balance sheet, do you expect the Fed to accelerate the stated pace of reductions?
Full Question: Given your earlier expectations, what do you expect the size of the balance sheet to be at the end of: 2023/2024 (currently $8.5 trillion, up
from $4.2 trillion in February 2020)

Monetary Policy
As to whether the Fed will ever get its balance sheet back down to historical levels, respondents indicated:
• The pre-COVID level, ~$4 trillion: No 84.6%
• The post-GFC level, ~$2 trillion: No 92.3%
Fed Get Balance Sheet Back to: Fed Get Balance Sheet Back to
$4T (pre-COVID level) $2T (post-GFC level)
Yes
Yes 7.7%
15.4%
No
84.6% No
92.3%
Full Question: Will the Fed ever get its balance sheet back down to: (a) The pre-COVID level, ~$4 trillion? (b) The post-GFC level, ~$2 trillion?

Monetary Policy
Finally, we asked respondents to rate the efficiency of the Fed’s communication with markets around its timeline for
monetary policy adjustments. respondents were equally split between the communication being very clear (50.0%)
and somewhat murky but decipherable (50.0%).
Efficiency of Fed's Communication with Markets
Excellent, very clear 50.0%
OK, somewhat murky but

50.0%
decipherable
Not great, more questions than

answers
Terrible, no clues to timing at all
Full Question: In general, how do you rate the efficiency of the Fed’s communication with markets around its timeline for monetary policy adjustments
(rate moves, balance sheet draw down)?

Monetary Policy
Inflation Expectations
Economists and market participants – and really every single person on the street – continue to watch inflation
reports7. More importantly, inflation is the main metric the Fed is watching to determine when/if it should shift its
policy actions.
Our Economist Roundtable had the following expectations for inflation forecasts:
• CPI: +3.0% to end 2023, +2.2% to end 2024 (2022 actual 7.1%)
• Core CPI: +3.8% to end 2023, +2.6% to end 2024 (2022 actual 6.0%)
• PCE: +3.8% to end 2023, +2.6% to end 2024 (2022 actual 6.0%)
• Core PCE: +3.1% to end 2023, +2.2% to end 2024 (2022 actual 5.7%)
CPI & Core CPI PCE Deflator & Core PCE Deflator
CPI Core CPI PCE Core PCE
8.0% 7.0%
7.1%
6.8% 6.0%
7.0% 5.7%
6.0%
6.0% 5.7%
5.0%
6.0%
5.0% 5.0% 3.8%
5.0% 3.8% 4.0%
4.0%
2.6% 3.0% 2.6%
3.0% 3.1%
3.0% 2.0% 1.6%
1.6%
2.0% 2.2%
2.2%
1.0% 1.0%
1.2% 1.2%
0.0% 0.0%
2020 2021 2022 2023E 2024E 2020 2021 2022 2023E 2024E
7
Release dates: For May data. CPI/Core CPI June 13; PCE/Core PCE June 30.

Monetary Policy
Despite having come down significantly from the peak – PCE +4.4% Y/Y change in April, -2.6 pps from the June
2022 peak of 7.0% – the inflation rate still has a long path to the Fed’s 2% target. On the other hand, we are seeing
signs of slowing in the economy and economists continue to analyze the impact of credit tightening on the economy.
As such, we asked our economists about inflation levels and the Fed’s actions.
• 45.5% of respondents indicated the Fed is poised to make a mistake in tackling inflation by overshooting,
while another 45.5% do not expect a mistake
• 45.5% of respondents noted their view has changed after the regional bank turmoil to somewhat more
concerned
Fed Poised to Make a Policy Mistake Position Changed Post Regional Bank Turmoil
Yes, somewhat more

Yes, overshooting 45.5% 45.5%
concerned
No 45.5% No 36.4%
Yes, significantly
Yes, undershooting 9.1% 18.2%
more concerned
Full Question: Are you concerned the Fed is poised to make a mistake when it comes to tackling inflation?
Full Question: Has your position changed after the regional bank turmoil?

Monetary Policy
• 54.5% of respondents believe price pressures have become more structural or broad-based throughout the
economy for some time
• 83.3% of respondents note price pressures on the way back down, but disinflation momentum will slow
• Given the current level of inflation, 66.7% of respondents believe the Fed will not materially revise higher its
expectations for inflation in the June Summary of Economic Projections
Price Pressures Structural/Broad-Based Price Pressures at Peak Level
On way back down,

Yes, for some time 54.5% 83.3%
disinflation to slow
On way back down,

No 27.3% 16.7%
disinflation continues
Will reverse course,

Yes, recently 27.3%
begin to increase again
Revise Inflation Expectations

Higher in June SEP
Yes
33.3%
No
66.7%
Full Question: The Fed continues to be concerned that price pressures have become more structural or broad-based throughout the economy. Do you
agree?
Full Question: With the PCE at 4.2% as of March – down from the June 2022 high of 7.0% but still above the Fed’s 2% target – how do you assess price
pressures?
Full Question: Given the current level of inflation, will the Fed materially revise higher its expectations for inflation in the June Summary of Economic
Projections?

Monetary Policy
We then asked our Economist Roundtable where they expect PCE to end:
• 2023 expected to be 3.0-3.5% or over 4.0% (40.0% of respondents each)
• 2024 is expected to be 2-2.5% or 2.5-3% (40.0% of respondents each)
Inflation Expectations (PCE) by Year End: 2023 Inflation Expectations (PCE) by Year End: 2024
2.0-2.5% 2.0-2.5% 40.0%
2.5-3.0% 10.0% 2.5-3.0% 40.0%
3.0-3.5% 40.0% 3.0-3.5% 10.0%
3.5-4.0% 10.0% 3.5-4.0% 10.0%
>4.0% 40.0% >4.0%
Full Question: Given your assessment above, where do you see the inflation rate, in terms of the PCE figure, by the end of: 2023/2024

Monetary Policy
The Fed has vowed to do whatever it takes to rein in inflation. Is our Economist Roundtable confident the Fed can
achieve its 2% goal in a sustainable way?
• Based on the Fed’s commitment to the fight, 63.6% of respondents are very confident
• Based on the effectiveness of the Fed’s policy, 54.5% of respondents are somewhat confident
• 50.0% of respondents expect inflation will not reach the Fed’s preferred 2% target until 2H24
Confidence Fed Achieves 2% Inflation Target: Confidence Fed Achieves 2% Inflation Target:
Commitment to Fight Effectiveness of Policy
Very confident 63.6% Somewhat confident 54.5%
Somewhat confident 36.4% Very confident 27.3%
Doubtful Doubtful 18.2%
Not confident at all Not confident at all
Don't know/Not sure Don't know/Not sure
Inflation to Reach Fed’s 2% Target
1H23
2H23
1H24 16.7%
2H24 50.0%
Beyond 2024 33.3%
Never
Full Question: The Fed has vowed to do whatever it takes to rein in inflation. How confident are you that the Fed can achieve its 2% goal in a sustainable
way? Given: (a) the Fed’s commitment to the fight and (b) the effectiveness of the Fed’s policy
Full Question: When do you expect inflation to reach the Fed’s preferred 2% target?

Monetary Policy
And will 2% remain the magic number? According to our Economist Roundtable:
• As to whether the Fed will tolerate an above 2% inflation level, respondents were evenly split between yes
and no
• The higher level was estimated at 2.0-2.5%, 100.0% of respondents
• 54.5% of respondents expect a 15% to 25% probability the U.S. will experience structurally higher inflation
over the longer run (defined as longer than three years from now)
Fed Tolerate >2% Inflation Inflation Tolerance Level Above 2%
2.0-2.5% 100.0%
No Yes 2.5-3.0%
50.0% 50.0%
>3.0%
Probability of LT Structurally Higher Inflation in the US
0-15% 36.4%
15-25% 54.5%
25-50% 9.1%
>50%
Full Question: Do you believe the Fed will tolerate an above 2% inflation level?
Full Question: If yes, at what level?
Full Question: Looking further out, what probability would you place on the U.S. experiencing structurally higher inflation over the longer run (defined as
longer than three years from now)?

Monetary Policy
The top factors listed as most important to core inflation forecasts include:
• Consumer spending on services, 75.0%

• Stickiness of wage increases, 75.0%
• Historically hot labor market, 75.0%
• Monetary policy, 50.0%
• Other: Softening in housing market
Factors Important to Core Inflation Forecasts
Consumer spending - services 75.0%
Stickiness of wage increases 75.0%
Historically hot labor market 75.0%
Monetary policy 50.0%
Regional bank turmoil/credit tightening 25.0%
Consumer spending - goods 25.0%
Supply chain issues 16.7%
Fiscal spending 16.7%
Inflation expectations 16.7%
Commodity price shocks 8.3%
Other 8.3%
Full Question: What are the most important factors in your outlook for core inflation? (Ranked by percentage of economists that listed a factor)

Monetary Policy
The top factors to push long-term inflation higher include:
• Reversal of globalization, 66.7%

• Increased costs as we move supply chain back to the U.S., 66.7%
• Stickiness of wage increases, 55.6%
• Sustained breakdown of supply chains, 44.4%
• Other: Greenflation, unanchoring of inflation expectations
Factors Contributing to LT Higher Inflation
Reversal of globalization 66.7%
Increased costs as we move

66.7%
supply chains back to the US
Stickiness of wage increases 55.6%
Sustained higher deficits 44.4%
Sustained breakdown of
22.2%
supply chains
Return of consumer
11.1%
purchasing power
Other 22.2%
Full Question: What factors do you believe could push long-term inflation higher? (Ranked by percentage of economists that listed a factor)

Monetary Policy
When analyzing inflation, it can be broken out into three sections: demand side, supply side, and labor component.
We asked our Economist Roundtable to rank which factor is having the biggest impact on the aggregate inflation
rate. Looking at each component of inflation, we calculate the number of times they were ranked #1 and #2, ranking
them accordingly:
• Demand side: 70.0% responded #1 factor
• Labor component: 60.0% responded #1 or #2 factor
• Supply side: 50.0% responded #3 factor
Component of Inflation Having Greatest Impact
Demand side 70.0% 20.0% 10.0% #1
Labor component 20.0% 40.0% 40.0% #2
Supply side 10.0% 40.0% 50.0% #3
Full Question: Which component do you believe has had the greatest impact on the level/peak or the sticky nature of inflation?

Monetary Policy
As it has been noted that the Fed will need to push up the unemployment rate to aid in its inflation fight, we asked
our Economist Roundtable to breakdown the labor component impacts on inflation.
• 81.8% of respondents believe we are not in a wage-price spiral8

• With wages +4.3% in May, versus +5.5% a year ago, 91.7% of respondents believe we have reached a
peak in wage pressures
In Wage-Price Spiral At Peak in Wage Pressures
No
Yes 8.3%
18.2%
No
81.8% Yes
91.7%
Full Question: Do you believe we are (still) in a wage-price spiral?

Full Question: With wages +4.4% in April, versus +5.7% a year ago, have we reached a peak in wage pressures?
8
Price increases as a result of higher wages – when workers receive a wage hike, they demand more goods and services. This, in turn, causes prices to
rise. The wage increase then increases business expenses that are passed on to the consumer through higher prices. This creates a perpetual loop of
consistent price increases.

Monetary Policy
• While wage growth averaged +5.3% per month in 2022, year-to-date through May the trend is down to
+4.4%. As such, 70.0% of respondents expect growth to return to the historical +3.0% level (three-year pre-
COVID average) by 2024
• 50.0% of respondents believe the U3 unemployment rate needs to increase to 4.0-4.5% to meaningfully
impact inflation
• 58.3% of respondents expect to reach this U3 target rate by 2024
Wage Growth Slow/Return to Historical +3% Level
1H23
2H23
2024 70.0%
Beyond 30.0%
Never
UE Level Needed to Meaningfully Impact Inflation When Reach this Targeted UE Level
3.50-4.00% 1H23
2H23 25.0%
4.00-4.50% 58.3%
2024 58.3%
4.50-5.00% 16.7%
Beyond 16.7%
>5.00% 25.0% Never
Full Question: While wage growth averaged +5.3% per month in 2022, year-to-date through March the trend is down to +4.4%. When do you expect the
acceleration to slow closer to the historical +3.0% level (three-year pre-COVID average)?
Full Question: While we can debate whether or not the U3 unemployment rate accurately accounts for the level of unemployed, many have stated that
the Fed will need to push up this rate to aid its inflation fight. At 3.5% in March – up from 3.4% in January but down from 3.6% in February – what level
do we need to reach to meaningfully impact inflation?
Full Question: Based on your answer above, when do you believe we can reach this targeted U3 unemployment rate?

Monetary Policy
Next, we move on to address inflation expectations, an important factor driving the inflation rate. With rising inflation,
if consumers believe prices will rise again in the future, this can create a self-fulfilling prophecy. Expected higher
prices push employees to demand wage increases and consumers to not delay today’s purchases. At the same
time, businesses increase prices to accommodate higher wages and consumer demand. This further drives up
inflation.
As such, we asked our Economist Roundtable about their thoughts on inflation expectations.
• 90.9% of respondents believe inflation expectations are not currently unanchored

• All of respondents expect inflation expectations will not become unanchored
• Unlike in the 1970s, 90.9% of respondents believe the Fed’s strong rhetoric has kept inflation expectations
in check
Unanchored Inflation Unanchored Inflation

Expectations: Currently Expectations: To Become
Yes
9.1%
No No
90.9% 100.0%
Fed Rhetoric Kept Inflation

Expectations In Check
No
9.1%
Yes
90.9%
Full Question: Rising inflation can become a self-fulfilling prophecy by boosting inflation expectations. Are inflation expectations unanchored?
Full Question: Do you believe inflation expectations will become unanchored?
Full Question: Do you believe, unlike in the 1970s, the Fed’s strong rhetoric has kept inflation expectations in check?

Monetary Policy
Finally, we close out the inflation section by looking to the future.
• 91.7% of respondents do not see any concern of disinflation at this point in time
• 50.0% of respondents view the massive expansion of the government’s balance (>$7 trillion in fiscal
spending) does pose a risk to inflation in terms of a moderate upside risk
• 90.9% of respondents believe the greater long-term risk to the economy is stagflation
Disinflation Concern Massive Fiscal Spending Pose Risk to Inflation
Yes Yes, moderate

8.3% 50.0%
upside risk
No 30.0%
Yes, significant
20.0%
upside risk
Yes, but
No deflationary rise
91.7%
Greater Long-Term Risk to the Economy
Stagflation 90.9%
Deflation 9.1%
Hyperinflation
Full Question: Is there any concern of disinflation at this point in time?

Full Question: Does the massive expansion of the government’s balance sheet given over $7 trillion in fiscal spending pose a risk to inflation?
Full Question: What is the greater long-term risk to the economy?

Monetary Policy
Rate Estimates, Yield Curves, and Spreads

Putting together all of the above, in this section we gauge our Economist Roundtable’s expectations on Treasury
yields, mortgage rates, yield curves and spreads. At the time of the survey, the ten year Treasury was 3.6738%. The
thirty-year mortgage rate was 7.04%. Based on these figures, we polled our economists on their expectations for
rates by the end of this year and next.
• 50.0% of respondents expect the 10Y UST yield to end 2023 at 3.25-3.50%
• 37.5% of respondents expect the 10Y UST yield to end 2024 at 3.00-3.25%
• 28.6% of respondents each expect the 30Y mortgage rate to end 2023 at 5.5-6.0%, 6.0-6.5% or 6.5-7.0%
• 42.9% of respondents expect the 30Y mortgage rate to end 2024 at 5.0-5.5%
• Overall rates expectations
o Fed Funds = 2Q23 5.125%, 3Q23 5.125%, 4Q23 5.125%, 1Q24 4.875%, 2Q24 4.410%
o 2-Year UST = 2Q23 4.25%, 3Q23 4.10%, 4Q23 3.85%, 1Q24 3.74%, 2Q24 3.57%
o 10-Year UST = 2Q23 3.60%, 3Q23 3.50%, 4Q23 3.39%, 1Q24 3.34%, 2Q24 3.29%
o 30-Year Mortgage = 2Q23 6.30%, 3Q23 6.14%, 4Q23 6.00%, 1Q24 5.5.77%, 2Q24 5.66%
UST 10Y Rate Expectations: 2023 UST 10Y Rate Expectations: 2024
< 2.50% < 2.50%
2.50-2.75% 2.50-2.75%
2.75-3.00% 2.75-3.00% 25.0%
3.00-3.25% 30.0% 3.00-3.25% 37.5%
3.25-3.50% 50.0% 3.25-3.50% 25.0%
3.50-3.75% 3.50-3.75% 12.5%
3.75-4.00% 20.0% 3.75-4.00%
> 4.00% > 4.00%
30Y Mortgage Rate Expectations: 2023 30Y Mortgage Rate Expectations: 2024
< 4.00% < 4.00%
4.00-4.50% 4.00-4.50%
4.50-5.00% 4.50-5.00% 28.6%
5.00-5.50% 14.3% 5.00-5.50% 42.9%
5.50-6.00% 28.6% 5.50-6.00%
6.00-6.50% 28.6% 6.00-6.50% 14.3%
6.50-7.00% 28.6% 6.50-7.00%
> 7.00% > 7.00%
Full Question: At the writing of this report, the ten year was just over 4%, where do you expect it to end: 2023/2024
Full Question: At the writing of this report, the thirty-year mortgage rate was just over 7%, where do you expect it to end: 2023/2024

Monetary Policy
Expected Rates
30-Y Mortgage (RHS) Fed Funds 2-Y UST 10-Y UST
7.0% 6.52% 7.0%
6.29% 6.30% 6.14%
6.11% 6.00%
6.0% 5.77% 5.66% 6.0%
5.13% 5.13% 5.13%
4.17% 4.71% 4.88%
5.0% 4.41% 5.0%
4.29% 4.25% 4.10%
3.86% 3.85% 3.74%
4.0% 4.30% 3.57% 4.0%
3.52% 3.62% 3.66% 3.60% 3.50%

3.0% 3.39% 3.34% 3.0%
3.29%
2.65%
2.0% 2.0%
1.0% 1.0%
0.0% 0.0%
Sep'22 Dec'22 Mar'23 Jun'23E Sep'23E Dec'23E Mar'24E Jun'24E
Federal Funds Target Rate 2 Year UST Rate

Actual High Median Low Actual High Median Low
6.5% 5.5%
6.0% 4.85%
5.250% 5.625% 5.625% 5.625% 5.625% 5.0% 4.70% 4.65% 4.60% 4.65%
5.5% 5.125% 5.125% 4.29% 4.30% 4.25%
5.125% 4.875% 4.5% 4.10%
5.0% 4.712% 3.86% 3.85% 3.74%
5.060% 5.120% 4.410% 4.0%
4.5% 4.170% 3.57%
4.625% 3.97%
3.5% 3.70%
4.0%
3.5% 3.0%
3.15%
3.625%
3.0% 2.648% 2.5% 2.90%
2.625% 2.70%
2.5% 2.0%
Jun'
Jun'
Mar'
Sep'
Dec'
Sep'
Mar'
Dec'
24E
23E
24E
23E
23E
Mar'
Jun'
Mar'
Jun'
Sep'
Dec'
Sep'
Dec'
23E
24E
24E
23E
23E
23
22
22
23
22
22
10 Year UST Rate 30 Year Fixed Mortgage Rate

Actual High Median Low Actual High Median Low
4.5% 4.25% 7.0% 6.52% 6.60%

6.50% 6.50% 6.40%
4.00% 6.29% 6.20%
3.95% 3.98% 3.97% 6.5% 6.11%
4.0%
3.62% 3.66% 3.60% 6.0% 6.30%
3.52% 3.50% 6.14%
3.39% 6.00%
3.5% 3.34% 3.29% 5.5% 5.77% 5.66%
5.0%
3.0% 3.30% 3.25%
4.5%
3.00% 3.85%
2.90% 4.0% 3.70%
2.5% 2.80% 3.50% 3.55%
3.45%
3.5%
2.0% 3.0%
Jun'
Jun'
Mar'
Mar'
Sep'
Dec'
Sep'
Dec'
23E
24E
24E
23E
23E
Sep'
Jun'
Sep'
Jun'
Mar'
Mar'
Dec'
Dec'
23E
24E
24E
23E
23E
23
22
22
23
22
22
Source: Federal Reserve, Bloomberg, SIFMA Economist Roundtable

Note: Monthly averages. Fed funds = midpoint of target rate range

0
1
2
3
4
5
6
7
2.5
3.0
3.5
4.0
4.5
1.5
2.0
1/3/00
3/1/22
8/3/00
3/15/22 3/3/01
3/29/22 10/3/01
4/12/22 5/3/02
12/3/02
4/26/22
7/3/03
10-Year UST Rate

5/10/22 2/3/04
5/24/22 9/3/04
6/7/22 4/3/05
6/21/22 11/3/05

6/3/06
7/5/22
1/3/07
7/19/22 8/3/07
8/2/22 3/3/08
8/16/22 10/3/08
Source: US Treasury, SIFMA Economist Roundtable

5/3/09
8/30/22
12/3/09
9/13/22
7/3/10
9/27/22 2/3/11
10/11/22 9/3/11
10/25/22 4/3/12
11/3/12
11/8/22
6/3/13
11/22/22
Historical Rates: 10 Year UST and 30 Year Mortgage
1/3/14
12/6/22
10 Year UST Rate: Historical
8/3/14
12/20/22 3/3/15
1/3/23 10/3/15
5/3/16
1/17/23
12/3/16
10 Year UST Rate: Since Fed Began Raising Rates

1/31/23 7/3/17
2/14/23 2/3/18
2/28/23 9/3/18
4/3/19
3/14/23
11/3/19
3/28/23
6/3/20
4/11/23 1/3/21
4/25/23 8/3/21
5/9/23 3/3/22
Avg. 3.224% 10/3/22
5/23/23
5/3/23
Monetary Policy
Page | 80
4.5
5.0
5.5
6.0
6.5
7.0
7.5
2.5
3.5
4.5
5.5
6.5
8.5
4.0
7.5
3/1/22 1/3/00
3/15/22 8/3/00
3/3/01
3/29/22
10/3/01
4/12/22 5/3/02
4/26/22 12/3/02
5/10/22 7/3/03
2/3/04
5/24/22
9/3/04
30-Year Mortgage Rate
6/7/22 4/3/05
6/21/22 11/3/05

7/5/22 6/3/06
1/3/07
7/19/22
8/3/07
8/2/22
3/3/08
Source: Bloomberg, SIFMA Economist Roundtable

8/16/22 10/3/08
8/30/22 5/3/09
9/13/22 12/3/09
7/3/10
9/27/22
2/3/11
10/11/22 9/3/11
10/25/22 4/3/12
11/8/22 11/3/12
6/3/13
11/22/22
1/3/14
12/6/22 8/3/14
30 Year Mortgage Rate: Historical
12/20/22 3/3/15
1/3/23 10/3/15
5/3/16
1/17/23
12/3/16
1/31/23
7/3/17
30 Year Mortgage Rate: Since Fed Began Raising Rates
2/14/23 2/3/18
2/28/23 9/3/18
3/14/23 4/3/19
11/3/19
3/28/23
6/3/20
4/11/23 1/3/21
4/25/23 8/3/21
5/9/23 3/3/22
Avg. 4.94%
10/3/22
5/23/23
5/3/23
Monetary Policy
Page | 81
Monetary Policy
Then, we asked our Economist Roundtable to explain the factors that have the greatest impact on their expectations
for long-term Treasury yields in 2023.
• Inflation/inflation expectations, 90.0%

• U.S. monetary policy, 80.0%
• U.S. economic conditions, 60.0%
Greatest Impact on LT Treasury Rates in 2023
Inflation/inflationary expectations 90.0%
US monetary policy 80.0%
US economic conditions 60.0%
Current rate of economic activity (GDP) 40.0%
Longer run expectations for GDP growth 40.0%
US fiscal policy 40.0%
Geopolitical risks 40.0%
Budget deficit trend 20.0%
Global economic conditions 20.0%
Flight to quality 20.0%
Strength of the US Dollar 10.0%
Full Question: Which of the following will have the greatest impact on long-term Treasury yields in 2023? (Ranked by percentage of economists that
listed a factor)

Monetary Policy
Yield Curves: Economic Indicators

Yield curves can act as good economic indicators – in particular, historically, they have been predictors of economic
weakness or recessions. A normal yield curve slopes up and to the right as yields increase with maturity, indicating
that the economy is healthy and functioning normally. A steep yield curve looks like a normal upward sloping yield
curve but with a steeper slope, suggesting better market conditions are expected to prevail over the longer term.
When the rates for short-term maturities are higher than those for longer-term maturities – the curve slopes down
and to the right instead of up – an inverted yield curve exists, indicating market dysfunction and a rising likelihood of
recession.
We asked our Economist Roundtable for their expectations for yield curves. Respondents expect the following
movements in key rates:
• 45.5% of respondents don’t expect the Treasury yield curve to return to a normal upward sloping curve until
beyond 2024
• As to how the Fed Funds Rate vs.10-year Treasury yield curve will change in 2023, 71.4% of respondents
believe it will invert slightly more
• As to how the Fed Funds Rate vs.10-year Treasury yield curve will change in 2024, 57.1% of respondents
believe it will steepen markedly (resume normal upward sloping shape)
Treasury Yield Curve Return to Normal Upward Slope
2Q23
3Q23
4Q23
1Q24 18.2%
2Q24 36.4%
Beyond 45.5%
Full Question: In general, when do you expect the Treasury yield curve to return to a normal upward sloping curve?

Monetary Policy
Fed Funds vs 10Y Yield Curve Expectations: 2023 Fed Funds vs 10Y Yield Curve Expectations: 2024
Steepen markedly (resume

Invert slightly more 71.4% 57.1%
normal upward sloping shape)
Remain relatively unchanged 14.3% Steepen slightly 42.9%
Steepen slightly 14.3% Invert slightly more
Invert markedly more Invert markedly more

Remain relatively unchanged
Full Question: As the Fed pushes forward, how do you expect the Fed Funds Rate vs.10-year Treasury yield curve to change in: 2023/2024?

Monetary Policy
Historically a predictor of recession, the 2-year Treasury versus 10-year Treasury (2s/10s) curve has been inverted
since July 2022. As such, we asked our Economist Roundtable for their expectations on how it will change.
• For 2023, 83.3% of respondents believe it will invert slightly more

• For 2024, 50.0% of respondents each believe it will steepen slightly or steepen markedly (resume a normal
upward sloping shape)
2Y vs 10Y Yield Curve Expectations: 2023 2Y vs 10Y Yield Curve Expectations: 2024
Invert slightly more 83.3% Steepen slightly 50.0%

Steepen slightly 16.7% 50.0%
Invert markedly more Invert slightly more
Remain relatively unchanged Invert markedly more

Full Question: Historically a predictor of recession, the 2-year Treasury vs.10-year Treasury curve has been inverted since July 2022. How do you
expect the 2s/10s curve to change in: 2023/2024?
After showing signs of inversion in late October 2022, we asked our economists for their expectations on how the 3-
month T-bill versus 10-year Treasury yield curve will change.
• For 2023, 62.5% of respondents believe it will invert slightly more

• For 2023, 57.1% of respondents believe it will invert markedly more (resume normal upward sloping shape)
3M vs 10Y Yield Curve Expectations: 2023 3M vs 10Y Yield Curve Expectations: 2024

Invert slightly more 62.5% 57.1%
Invert markedly more 12.5% Steepen slightly 42.9%
Remain relatively unchanged 12.5% Invert slightly more
Steepen slightly 12.5% Invert markedly more

Full Question: After showing signs of inversion in late October, how do you expect the 3-month T-bill vs.10-year Treasury yield curve to change in:
2023/2024?

Monetary Policy
Yield spreads can be used as key metrics to estimate valuations for fixed income assets. When yield spreads
expand or contract, it can signal changes in the underlying economy or financial markets. Fixed income investors
use the following three spreads (and others) to triangulate the right prices to pay for different assets. This becomes
particularly useful in markets where there is a lot of volatility, such as today.
We asked our Economist Roundtable for their expectations on how these spreads will change.
• TED spread (T-bill to Eurodollar)

o For 2023, 50.0% of respondents believe it will remain about the same
TED Spread Expectations: 2023 TED Spread Expectations: 2024
Remain about the same 50.0% Remain about the same 50.0%
Widen 25.0% Widen 25.0%
Narrow 25.0% Narrow 25.0%
Full Question: How do you expect the TED spread (T-bill to Eurodollar) to change in: 2023/2024

Monetary Policy
• Investment grade corporates to Treasury spread

• High yield corporates to Treasury spread
IG Corporates vs UST Spread Expectations: 2023 IG Corporates vs UST Spread Expectations: 2024
HY Corporates vs UST Spread Expectations: 2023 HY Corporates vs UST Spread Expectations: 2024
Full Question: How do you expect the investment grade corporates to Treasury spread to change in: 2023/2024?
Full Question: How do you expect the high yield corporates to Treasury spread to change in: 2023/2024?

Macro Policy
Macro Policy
Fiscal Stimulus
With over $7 trillion in fiscal spending since the spring of 2020 – and what appears to be an appetite to continue
spending – questions and concerns remain around the impact on inflation and the ever growing government debt
burden, now $31 trillion (particularly concerning with the rise in interest rates, which increases interest payments
due on this debt). We asked our Economist Roundtable about the impact of fiscal (over)spending and the role the
country’s financial position should play in making spending decisions. We also asked the group about potential
lingering impacts from the debt ceiling debate.
• 70.0% of respondents believe sustained higher inflation should deter further fiscal spending
• 60.0% of respondents believe the (potentially) impending recession should not deter further fiscal spending
• 60.0% of respondents believe the Russia/Ukraine conflict will cause further international aid and therefore
more U.S. fiscal spending
• 60.0% of respondents believe the government does want to spend more to boost the economy, given the
(potentially) impending recession
Deter Fiscal Spending: Deter Fiscal Spending:

Sustained Inflation Impending Recession
No
30.0%
Yes
40.0%
No
60.0%
Yes
70.0%
Full Question: Do you believe sustained higher inflation should deter further fiscal spending packages?
Full Question: Do you believe the (potentially) impending recession should deter further fiscal spending packages?

Macro Policy
More Fiscal Spending: Ukraine More Fiscal Spending: to Boost

Require More Aid the Economy (b/c Recession)
No No
40.0% 40.0%
Yes Yes
60.0% 60.0%
Full Question: Do you believe the Russia/Ukraine conflict will cause further international aid and therefore more U.S. fiscal spending?
Full Question: Or will the government want to spend more to boost the economy, given the (potentially) impending recession?

Macro Policy
• 50.0% of respondents believe the so-called Inflation Reduction Act (IRA) will not be budget deficit reducing
but will pressure budget
• 70.0% of respondents believe the IRA will not help lower inflation at all (in the short term or long run)
• 62.5% of respondents view the bigger risk to the economy is the government doing too much, therefore
further pressuring inflation
• 54.5% of respondents believe the government has already done too much, but not to a significant extent
IRA: Actually Be Budget Deficit Reducing IRA: Help Lower Inflation
No, will pressure

50.0% Not at all 70.0%
budget
Yes, in long term No, will pressure

30.0% 20.0%
(>10Y) inflation
Yes, in long term

Not at all 20.0% 10.0%
(>10Y)
Yes, in short term Yes, in short term
Bigger Risk of Govt. Doing Too: Government Has Already Done Too Much
Yes, but not to a significant extent 54.5%
Little, further
pressuring the Yes, fiscal (over)spending has
36.4%
economy been a main driver of inflation
37.5%
Much, further No, was the right amount 9.1%

pressuring
inflation
62.5% No, they should have done/will
need to do more
Full Question: Do you believe the so-called Inflation Reduction Act (IRA) will actually be budget deficit reducing?
Full Question: Do you believe the IRA will help lower inflation?
Full Question: What do you view is the bigger risk? The government does:
Full Question: Do you believe the government has already done too much? (fiscal spending: ~$6T directly and loosely related to COVID, ~$1T
infrastructure package, “only” $53B CHIPS act)

Macro Policy
• When considering additional stimulus, 36.4% of respondents each indicated the government should
consider the debt level as it could impede long-term growth while another 36% indicate government should
not consider the debt level as it needs to invest in the economy for the (Debt/GDP ratio 121.1% for 2022)
• 80.0% of respondents believe a Debt/GDP level of 150%-175% would be concerning
• 90.0% of respondents do not believe either party is focused on reinstating a balanced budget
Govt Consider Debt Burden Before Spending More
Yes, could impede LT economic growth 36.4%
No, govt needs to invest in the economy

36.4%
for the future
Yes, could incite further inflation 27.3%
Yes, but will need to be offset with painful

18.2%
cuts elsewhere
Yes, but will need to be offset with tax

9.1%
increases
What Debt/GDP Level Is Concerning Either Party Focused on

Balancing Budget
125%-150% Yes
10.0%
150%-175% 80.0%
175%-200%
>200% 20.0% No
90.0%
Full Question: With the debt/GDP ratio already above 100% (120.2% as of 4Q22, source: FRED), should the government be considering the debt
burden when proposing additional spending?
Full Question: If you responded no above, what level of debt to GDP is concerning?
Full Question: Do you believe either party is focused on reinstating a balanced budget?

Macro Policy
• 70.0% of respondents believe debt ceiling increases should be procedural only

• 72.7% of respondents believe the U.S. government would not actually default
• 72.7% of respondents believe the debt ceiling debate is not doing material damage to the global perception
of the US Dollar (USD)
• With a movement to dethrone the USD, including Yuan denominated purchase of natural gas and regional
trade agreements in local currencies, 77.8% of respondents believe the USD is not losing credibility as the
dominant currency
Debt Ceiling Increases Should: US Government Would Actually Ever Default
No 72.7%
Be tied to
alternative
measures
30.0%
Yes, a technical default 27.3%
Be procedural
only
70.0% Yes, a debt services
default
Debt Ceiling Debate Causing US Dollar Losing Credibility as Dominant Currency

Material Damage to US Dollar
No 77.8%
Yes
27.3% Yes, b/c fiscal policy/debt
22.2%
ceiling debate
Yes, b/c monetary policy
No
72.7%
Yes, both of the above
Full Question: Should debt ceiling increases be procedural or tied to alternative measures/requirements?
Full Question: Do you believe the US government would actually ever default?
Full Question: Is the debt ceiling debate doing material damage to the global perception of the USD?
Full Question: With a movement to dethrone the US Dollar(USD) including Yuan denominated purchase of natural gas and regional trade agreements in
local currencies, what is the impact on the strength of the USD?

Macro Policy
Tax Policy
We asked our Economist Roundtable about the potential impacts of the Inflation Reduction Act (IRA). All of
respondents believe the IRA will not have a material impact on economic growth.
IRA 15% Min Corp Tax

Materially Impact Econ Growth
No
100.0%
Full Question: The Inflation Reduction Act included a 15% corporate minimum tax rate. Do you believe this will have a material impact on economic
growth?

Macro Policy
Trade Policy
We asked our Economist Roundtable about the impact of geopolitical tensions and past COVID policies as it relates
to future U.S.-China trade relations.
• When asked if geopolitical tensions and memories of China’s COVID policies will have a lasting impact on
trade relations with China, 100.0% responded yes
• In light of this, 90.0% of respondents expect a meaningful shift to domestic production, thereby reducing
U.S. reliance on overseas production
COVID/Geopolit Tensions: COVID/Geopolit Tensions: Shift

Lasting Impact Trade w/ China to Domestic Production
No
10.0%
Yes Yes
100.0% 90.0%
Full Question: Will geopolitical tensions and memories of its COVID policies have a lasting impact on trade relations with China?
Full Question: Will geopolitical tensions and memories of China’s COVID policies cause a meaningful shift to domestic production, reducing the country’s
reliance on overseas production in terms of a replacement scenario not a nominal increase?

SIFMA Economist Roundtable Forecasts
SIFMA Economist Roundtable Forecasts

Economic Indicators – Annual
(%, unless indicated) 2020 2021 2022 2023E 2024E

Real GDP (4Q/4Q) -1.5 5.7 0.9 0.5 1.7
Real Personal Consumption (4Q/4Q) -1.4 7.2 1.7 1.3 1.5
Nonresidential Fixed Investment (4Q/4Q) -3.5 5.0 4.5 -0.5 1.4
Residential Fixed Investment (4Q/4Q) 16.4 -0.3 -18.8 -2.3 2.8
Real Federal Government Spending (4Q/4Q) 5.4 0.4 0.1 2.1 0.9
Real State and Local Government Spending (4Q/4Q) -1.6 0.6 1.3 1.8 1.0
Non-Farm Payroll Employment (K, avg. monthly change) -774.1 605.6 399.4 110.0 64.0
Unemployment Rate (4Q average) 6.8 4.2 3.6 4.1 4.4
Labor Force Participation Rate (4Q average) 61.6 61.9 62.2 62.7 62.7
Average Hourly earnings (4Q/4Q) 4.9 5.3 4.9 4.0 3.7
Real Disposable Income (4Q/4Q) 3.7 -0.4 -1.9 3.0 2.3
Personal Savings Rate (annual average) 16.8 11.9 3.5 4.8 5.7
CPI (4Q/4Q) 1.2 6.8 7.1 3.0 2.2
Core CPI (4Q/4Q) 1.6 5.0 6.0 3.8 2.6
PCE deflator (4Q/4Q) 1.2 5.7 5.7 3.1 2.2
Core PCE deflator (4Q/4Q) 1.4 4.7 4.8 3.5 2.3
Industrial Production Index (annual % change) -7.2 4.4 3.4 -0.5 0.2
Housing Starts (K, annual average) 1,397 1,606 1,551 1,300 1,364
S&P Corelogic Case-Shiller Home Prices (Y/Y) 6.1 17.1 14.8 -3.6 -2.3
New Home Sales (K, annual average) 833 769 637 619.0 645.0
Motor Vehicle Sales (M, annual average) 14.4 14.9 13.7 15.2 15.9
Federal Budget ($B, FY) -3,132 -2,776 -1,375 -1,520 -1,504
Current Account Deficit ($B) -619.7 -846.4 -943.8 -858.3 -925.0
Economic Indicators – Quarterly

(%) 3Q22 4Q22 1Q23 2Q23E 3Q23E 4Q23E 1Q24E 2Q24E
Real GDP (Q/Q, annualized) 3.2 2.6 1.3 1.6 0.3 -0.8 1.0 1.7
Real Personal Consumption (Q/Q, annualized) 2.3 1.0 3.8 1.2 0.5 -0.1 1.2 1.7
Nonresidential Fixed Investment (Q/Q, annualized) 6.2 4.0 1.4 0.5 -1.6 -2.2 1.0 1.6
Residential Fixed Investment (Q/Q, annualized) -27.1 -25.1 -5.4 -3.5 -2.8 1.0 1.5 2.4
Unemployment Rate 3.6 3.6 3.5 3.5 3.7 4.1 4.6 4.6
CPI (Y/Y) 8.3 7.1 5.8 4.1 3.3 3.0 2.7 2.5
Core CPI (Y/Y) 6.3 6.0 5.6 5.2 4.5 3.8 3.2 2.8
PCE Deflator (Y/Y) 6.3 5.7 4.9 3.8 3.4 3.2 2.8 2.5
Core PCE Deflator (Y/Y) 4.9 4.8 4.7 4.4 4.0 3.6 2.9 2.7
Interest Rates
(%, monthly averages) Sep'22 Dec'22 Mar'23 Jun'23E Sep'23E Dec'23E Mar'24E Jun'24E
Federal Funds Target Rate (midpoint) 2.648 4.170 4.712 5.125 5.125 5.125 4.875 4.410
2-Year UST Yield 3.86 4.29 4.30 4.25 4.10 3.85 3.74 3.57
10-Year UST Yield 3.52 3.62 3.66 3.60 3.50 3.39 3.34 3.29
30-Year Fixed Mortgage Rate 6.11 6.29 6.52 6.30 6.14 6.00 5.77 5.66

Reference Guide: Economic Landscape
GDP Breakout
US Real GDP - Total ($T) US Real GDP - By Category

NE Business PC Government
22 100%
20.0
20 90% 18.5% 17.0%
18 16.6 80%
16 70%
14 60%
12 50% 67.7% 70.6%

40%
10
30%
8
20%
6
10% 16.9% 18.7%
4
0%
2 -3.1%
-10% -6.8%
0
2013 2022 2013 2022
US Real GDP - Personal Consumption ($T) US Real GDP - Business Investment ($T)
Durable Goods Nondurable Goods Services Inventories Residential Nonresidential
16 4.0
0.1
14 3.5
0.6
12 3.0 0.1
10 8.7 2.5 0.5
8 2.0
7.5
6 1.5 2.9
4 1.0 2.2
3.3
2.5
2 0.5
2.3
1.2
0 0.0
2013 2022 2013 2022
GDP by Region ($T) GDP per Capita by Region ($K)

2013 2022 2013 2022
30 90
25.5 80 76.3
25
70
20 18.1 60 53.2
16.8 16.6
15.3 50 43.5 45.3
15 40.9
40 37.4
34.8 33.8
9.6
10 30
5.2 20
4.2 12.8
5 2.8 3.1
10 7.0
0 0
US EU27 UK Japan China US EU27 UK Japan China

Debt and Fed Balance Sheet
Debt to GDP - 2022 Change in US GDP vs. Public Debt

GDP Debt
300% 25%
261.3%
250% 19.6%
20%
200% 15%
10.7%
150% 9.2%
121.7% 10%
7.2% 6.7%
102.6% 5.4% 5.6% 6.1%
100% 85.3% 4.1%
5%
50% 0%
11.1%
-1.5%
0% -5%
US EU UK Japan China 2018 2019 2020 2021 2022
Fiscal Deficit as % GDP Central Bank Balance Sheets as % GDP

US EU UK Japan US EU UK Japan 133.5%
2% 140%
0%
120%
-2%
-4% -3.6% 100%
-4.5%
-6% -5.5%
-6.7% 80% 70.0%
-8%
60%
-10%
41.6%
-12% 40%
-14% 37.9%
20%
-16%
-18% 0%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Fed Balance Sheet ($B) Fed Balance Sheet Changes During QE Phases ($B)
6 Mo Change (RHS) Total BS 3,000 2,786
10,000 3,500
9,000 2,500
3,000
8,000
2,500
7,000 2,000
1,665
6,000 2,000
1,500
5,000 1,500
4,000 1,000 1,000
3,000
500 566
2,000
500
1,000 0 204
14
0 -500 0
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 QE1 QE2 Twist QE3 QE4

Employment Breakout
US Non-farm Employment by Industry (M) US Non-farm Employment (M)

180 Private Government
Admin/Waste Mgmt 22.8 155
160 148 150 152 150
143 145 142
Govt 22.3 137 140
140 23 22 22
22 22 23
Trade 21.5 22 22 22
22
120
Healthcare 21.0
100
Other 19.5
80
Leisure/Hospitality 16.3
123 125 127 129 128 132
60 116 118 121 121
Manufacturing 13.0
40
Fin/Ins 9.1
20
Mining/Util/Const 9.0
0
0 5 10 15 20 25 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
US Employment Statistics US Unemployment and Labor Participation

NE Unemployment rate Labor force participation rate (RHS)
2.0% 14% 65%
PTE 12% 63.0%

62.6% 62.5% 62.4% 62.4% 62.4% 62.8%
10.2% 63%
62.0%
61.7%
10% 61.3%
61%
8%
FTE
49.8% 6%
6.5% 59%
NLF 6.5%
4% 5.4%
38.0% 4.8% 4.5%
3.9% 3.7% 3.7% 57%
2% 3.4% 3.3%
0% 55%
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Unemployment Rate (%)

U-6 U-5 U-4 U-3
14%
12.0%
11.6%
12% 10.9%
9.9% 9.7% 10.1% 9.6%
10% 8.9%
8.1% 7.9% 7.6%
7.7% 7.4%
8% 7.2% 7.1% 7.0% 7.2% 7.0%
6.8% 6.6% 6.6% 6.7%
6.2% 6.1% 6.4% 6.3% 6.4% 6.4%
5.7% 5.5% 5.7%
6% 5.3%
4.6% 4.3% 4.4% 4.1%
3.9% 3.7% 3.8% 3.8% 3.8% 3.8%
4% 3.3% 3.4% 3.3% 3.4% 3.4% 3.3%
2%
0%
J-21 F-21 M-21 A-21 M-21 J-21 J-21 A-21 S-21 O-21 N-21 D-21 J-22 F-22 M-22 A-22 M-22 J-22 J-22 A-22 S-22 O-22 N-22 D-22

Appendix: Terms to Know

• Statistical analysis
o M/M – month-over-month change

o Q/Q – quarter-over-quarter change
o Y/Y – year-over-year change
o Bps – basis points
o Pps – percentage points
• Gross Domestic Product (GDP): A comprehensive measure of U.S. economic activity, indicating the value
of the final goods and services produced without double counting the intermediate goods and services used
up to produce them. GDP data are seasonally adjusted to remove the effects of yearly patterns – winter
weather, holidays, or factory production schedules – to reflect true patterns in economic activity. The
Bureau of Economic Analysis (BEA) releases new statistics every month, as it estimates GDP three times:
o Advance estimate – This comes out around one month after the quarter's end, an early look based
on the best information available at that time
o Second estimate – Incorporates additional source data that were not available the month before,
improving accuracy
o Third estimate – Incorporates even more source data that were not available the month before,
considered the most accurate estimate
• Federal Funds Rate (Fed Funds): The interest rate at which banks and other depository institutions lend
money to each other, typically on an overnight basis. An important monetary policy tool is the Fed’s open
market operations, consisting of buying and selling U.S. Treasury securities on the open market, with the
aim of aligning the actual Fed Funds rate with the Federal Open Market Committee’s (FOMC) target rate.
• Unemployment: The unemployment rate represents the number of unemployed people as a percentage of
the labor force, which is the sum of the employed and unemployed: (Unemployed ÷ Labor Force) x 100.
According to the Bureau of Labor Statistics Current Population Survey, people are classified as not in the
labor force if: (a) they were not employed during the survey reference week; and (b) they had not actively
looked for work (or been on temporary layoff) in the last 4 weeks. People not in the labor force are those
who do not meet the criteria to be classified as either employed or unemployed as defined above and can
be classified into several subgroups: (a) people who want a job now; (b) people marginally attached to the
labor force (not in the labor force but currently want a job); and (c) discouraged workers (not actively
searched for work in the last four weeks).

• Inflation: It is reflected quantitatively by an increase in the average price level of a basket of selected goods
and services in an economy and represents the rate of decline of purchasing power of a given currency
over some period of time. There are multiple components that go into the inflation equation. Pressure points
can be bucketed as: supply side, demand side, and the labor component.
o Consumer Price Index (CPI) – headline inflation; measures the change in direct expenditures for all
urban households for a defined basket of goods and services (three largest components are
housing, transportation, and food/beverages)
o Personal Consumption Expenditures (PCE) – the metric the Fed monitors for monetary policy –
measures the change in the prices of goods and services consumed by all households and
nonprofit institutions serving households
o Core CPI or PCE – makes adjustments to remove the source of the noise in the price data, i.e. food
and energy, to get a measure of the underlying component of inflation
o Differences between CPI and PCE include (among others): Basket composition – CPI based on
household purchases (includes imports) versus PCE based on what businesses are selling
(includes capital goods); calculation methodologies – expenditure weights assigned to categories of
basket items (housing a main difference); accounting for basket changes (PCE allows substitution,
CPI is always the same basket); CPI covers only out-of-pocket expenditures, PCE includes
expenses paid by employers and federal programs; seasonal adjustment differences; PCE includes
rural and urban consumers, CPI only urban; PCE includes expenditures from non-profit institutions
serving households, CPI households only

Appendix: About the SIFMA Economist Roundtable
Appendix: About the SIFMA Economist Roundtable
The SIFMA Economist Roundtable brings together chief U.S. economists from nearly 30 global and regional
financial institutions. SIFMA Research undergoes a semiannual U.S. Economic Survey with this group, analyzing
the median economic forecasts of Roundtable members, published prior to the upcoming Federal Open Market
Committee (FOMC) meetings in June and December. In those reports, we analyze the Economist Roundtable’s
expectations for: GDP, unemployment, inflation, interest rates, etc. We also review expectations for policy moves at
the upcoming FOMC meeting and discuss key macroeconomic topics and how these factors impact monetary
policy.
SIFMA Research also produces Quarterly Flash Polls to update key Economist Roundtable forecasts and select
monetary policy questions on the off quarters from the main survey. The latest flash poll can be found here:
https://www.sifma.org/wp-content/uploads/2023/04/SIFMA-Economist-Roundtable-Flash-Poll-1Q23.pdf.
This survey was conducted between May 15-26, 2023.

Appendix: SIFMA Economist Roundtable Members
Appendix: SIFMA Economist Roundtable Members
Chair
Lindsey Piegza, Ph.D.
Stifel Financial
Members
Michael Gapen Marc Giannoni Nathaniel Karp
Bank of America Barclays Capital BBVA Compass
Mickey Levy Douglas Porter Andrew Hollenhorst

Berenberg BMO Financial Citigroup
Nicholas Van Ness Nannette Hechler-Fayd’herbe Peter Hooper

Credit Agricole Credit Suisse Deutsche Bank Securities
Christopher Low Jan Hatzius Michael Feroli

FTN Financial Goldman Sachs J.P. Morgan
Thomas Mills Mark Zandi Ellen Zentner

Jefferies Moody’s Analytics Morgan Stanley
Kevin Cummins Lewis Alexander Carl Tannenbaum

NatWest Nomura Northern Trust
Augustine Faucher Eugenio Alemán Stephen Gallagher

PNC Financial Raymond James Société Générale
Jonathan Pingle Jay Bryson

UBS Securities Wells Fargo Securities

Authors
Authors
SIFMA Research
Katie Kolchin, CFA, Managing Director, Head of Research
Justyna Podziemska
Dan Song
Website: www.sifma.org/research
Email: [email protected]
Disclaimers: This document is intended for general informational purposes only and is not intended to serve as investment advice to any individual or
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Setting the Scene

US Economic Survey: Mid-Year 2023

US Economic Survey: Mid-Year 2023 Page | 1

US Economic Survey: Mid-Year 2023 Page | 2

GDP Breakout .......................................................................................................................................................................................... 96

US Economic Survey: Mid-Year 2023 Page | 3

Setting the Scene

A Message from Our Chair

US Economic Survey: Mid-Year 2023 Page | 4

US Economic Survey: Mid-Year 2023 Page | 5

We recap the drivers of inflation:

• Fiscal spending1: >$7 trillion since March 2020

Inflation (CPI, % Y/Y): How Did we Get Here? 8.9

Source: FRED, IMF, SIFMA estimates

US Economic Survey: Mid-Year 2023 Page | 6

1. After the global financial crisis (GFC), the BS grew 205%

Federal Reserve Balance Sheet Growth ($T) #4

US Economic Survey: Mid-Year 2023 Page | 7

1. After the GFC, M2 grew 82%

M2 Money Supply Growth ($T) #4

Source: Bloomberg, SIFMA estimates

US Economic Survey: Mid-Year 2023 Page | 8

o Consumer Price Index (CPI) +5.0%

o Core CPI +5.5%

o Core PCE +4.7%

Fed's Target Inflation (% Y/Y): The Path Back Down to 2%

Source: FRED, SIFMA estimates

US Economic Survey: Mid-Year 2023 Page | 9

M/M Changes in Inflation since June 2022 Peak PCE

US Economic Survey: Mid-Year 2023 Page | 10

SUPPLY LABOR DEMAND

This compares to our December 2022 results of:

US Economic Survey: Mid-Year 2023 Page | 11

Inflation: Supply Side

Ports of Los Angeles/Long Beach: Ships in Queue

Source: BofA Global Research estimates

Source: Bloomberg, SIFMA estimates

US Economic Survey: Mid-Year 2023 Page | 12

US Economic Survey: Mid-Year 2023 Page | 13

Inflation: Demand Side

• Non-core components, food and energy, represent 20.4%

CPI Category Weightings

30% Core Components

Transp: Used vehicles

US Economic Survey: Mid-Year 2023 Page | 14

o Goods – Durable5 -0.2%

o Goods – Non Durable 3.2%

Inflation (% Y/Y): Services vs. Goods Services

Source: Bureau of Labor Statistics, SIFMA estimates

US Economic Survey: Mid-Year 2023 Page | 15

CPI (% Y/Y): Food CPI (% Y/Y): Energy

CPI (% Y/Y): Services CPI (% Y/Y): Goods

Source: Bureau of Labor Statistics, SIFMA estimates

US Economic Survey: Mid-Year 2023 Page | 16

• April versus peak level

• April trend versus the prior month

CPI (% Y/Y): Services - Shelter CPI (% Y/Y): Services - Medical

Source: Bureau of Labor Statistics, SIFMA estimates

US Economic Survey: Mid-Year 2023 Page | 17

US Economic Survey: Mid-Year 2023