Lower for longer; constructive ambiguity. Chair Powell took pains to paint an image of constructive ambiguity, repeatedly highlighting that the Committee is focused on pursuing policy that is “appropriate” in achieving its dual mandate. The current policy stance is deemed appropriate with current projections achievable via modest policy adjustments (likely -75bps of cuts). Nonetheless, if the economy turns down, “a more extensive sequence of rate cuts is appropriate”. As we argued prior, “it is better to guide for looser policy in an open-ended manner (flattening backwardation of rate cut expectations) rather than encourage front-loading of rate cut expectations”. We think that the Chair has achieved such an outcome, together with “guidance” for an extended pause at a minimum; the best mix of policy, considering circumstances.

1. FOMC statement. Highlights (1)
FFR: -25bps to 1.75-2.00%. Majority decision (7-3; J.Bullard dissented in favour of a 50bps cut to 1.50-1.75%; E.George and E.Rosengren
dissented in favour of maintaining the FFR at 2.00-2.25). Overnight reverse repo: -30bps to 1.70%. IOER: -30bps to 1.80%. Primary Credit rate
(Discount Window): -25bps to 2.50%.
Confirmation of strength in household spending, investment and, now exports, have “weakened”. Economic activity has been rising at a
“moderate rate” while household spending rose at a “strong pace” (“has picked up”) though business fixed investment and exports have weakened (from
“has been soft”). The labour market remains “strong”; job gains “have been solid” and the unemployment rate remained “low”.
Both headline and core inflation are “running below 2%”. Market-based measures of inflation compensation remain “low” while survey-based
measures of longer-term inflation expectations are “little changed” (actually weakened in recent months).
Dual mandate; NAIRU seemingly not a policy anchor, (dis)inflationary expectations a larger worry. The Committee expect the job market to
remain strong and had expected some slowing from its strong pace. The Chair reiterated the “importance” of sustaining the expansion so as to provide
more opportunities for those deemed to be left behind. Inflation is expected to rise to 2% though pressures “clearly remain muted and the Committee
remain “mindful” that continued below-target inflation could lead to downward slide in longer-term inflation expectations with longer-term inflation
expectations at the lower end of its historical ranges.
Rate cut(s) reflects implications of global developments for the economic outlook and muted inflation pressures. The reason for further
accommodation was unchanged from July. The most likely outcomes are of a sustained expansion, strong labour market conditions, and inflation near
the symmetric 2% objective, though “uncertainties” about the outlook remain.
Lower interest rates is taken to help keep the US economy strong in the face of “notable developments” and to provide “insurance” against on-going risks
– elevated uncertainties, slower global growth, geopolitical risks, trade policy developments, and continued softness in business fixed investment. The
Chair (and Committee) highlighted the positive and favourable outlook which should be achieved via modest policy adjustments. Nonetheless, the
Committee is prepared to be aggressive if it is deemed “appropriate” to do so.
Monetary policy efficacy remains effective, according to the Chair, working through lower interest burden, stimulating interest-sensitive sectors, more
accommodative financial conditions and higher confidence. With regards to monetary policy at the zero lower bound, the Chair highlighted that Forward
guidance and asset purchases are still preferred to negative interest rates.
Private sector leverage not highly worrisome. The Chair purported that households’ finances remain in good shape. While corporate leverage are
high in certain pockets, he deemed it more as an amplifier of shocks rather than being 1st order driver of shocks.

2. FOMC statement. Highlights (2)
Committee will act as “appropriate” in line with its dual mandate. Still no views provided on balance of risks. The Committee will continue to
monitor incoming information (global growth, trade policy, geo-politics) and will act as “appropriate” to sustain the expansion, with a strong labour market
and inflation near its objective.
Guidance on data dependency unchanged. In determining the timing and size of adjustments to the FFR, realized and expected economic conditions
will be assessed relative to the i) maximum employment objective and ii) symmetric 2% inflation target. The Committee will take into account a wide
range of information including labour market conditions, inflation pressures and expectations, and financial and international developments.
Money market funding pressures deem mostly technical, reflecting corporate tax payments and Treasury securities settlement. Funding pressures
are deemed to have no implications for the economy or the stance of monetary policy (not true per se; funding pressures can force unwinding of levered
positions/losses due to asset spread compression which in turn tighten financial conditions). The Fed has conducted o/n repo operations and made
technical adjustments to both the IOER and o/n repo facility to foster trading in the FFs market at rates within the target range. Over time, monetary
policy will be conducted in an ample reserves regime and a sufficient supply of reserves will be provided to limit the amount of OMOs.
Chair stated an earlier resumption of the Fed’s balance sheet growth (“organic”) will be discussed during the inter-meeting period and in the Oct meeting.
Centre holds; Committee likely split on the tails. All the governors and the FRBNY (permanent voting member) voted as a bloc, in line with the Chair.
¾ of the rotating regional presidents (outside of Chicago’s C.Evans,) dissented, with 2 neutral (to hold) and 1 dovish (larger cut) dissents, likely reflecting
an array of views within the broader Committee (5 members preferred to hold; 7 members prefer another -25bps by end 2019).
Date Previous Latest Change, bps <Median Median >Median
2019 2.375 1.875 -50 7 5 5
2020 2.125 1.875 -25 8 2 7
2021 2.375 2.125 -25 7 4 6
2022 - 2.375 0 8 5 4
Longer-run 2.500 2.500 0 3 8 5
Mean
2019 2.17 1.85 -32
2020 2.21 1.88 -34
2021 2.32 2.07 -25
2022 - 2.27 0
Longer-run 2.70 2.57 -13

3. FOMC statement. Highlights (3)
Economic projections broadly unchanged; changes lean bullish. Median growth rates (2019-2022, longer-run) stood at 2.2% (+10bps), 2.0%, 1.9%
(+10bps), 1.8% and 1.9% respectively. Unemployment is estimated at 3.7% (+10bps), 3.7%. 3.8%, 3.9% and 4.2% (NAIRU), below NAIRU through
2019-2022. While headline inflation forecasts were 1.5%, 1.9%, 2.0%, 2.0% and 2.0%; core forecasts were 1.8%, 1.9%, 2.0% and 2.0%. Forecasts
ranges mostly shifted bullishly (rightward shifts in tails) despite the statement highlighting uncertainties surrounding the outlook.
Slight dovish shift to Fed path; unchanged neutral (2.50%). Fed’s median expectations, 2019 = 1.875% (unchanged from spot), dovish tilt – 7/17
expects cuts, 7x: 1.50-1.75%; 2020 = 1.875% (-25bps from Jun; unchanged from spot); 2021 = 2.125% (-25bps from Jun; +25bps from spot); 2022 =
2.375% (+50bps from spot); and longer run = 2.50%. This suggests 0/0/+1/+1 from 2019-2022, following by another +0.125% to neutral. The Committee
broadly skew dovish, with more members leaning dovish (<Median) than hawkish (>Median). Monetary policy will be loose (below neutral) throughout
2019-2022. Neutral range from 2.00-3.25% (2.25-3.25%).
Fed’s average expectations, 2019 = 1.85% (-32bps); 2020 = 1.88% (-34bps); 2021 = 2.07% (-25bps); 2022 = 2.27%; and longer run = 2.57% (-13bps).

4. Thoughts (1)
At least another rate cut ahead. We deem the chances of a further rate cut in 4Q19 highly likely, with the makeup of the Committee leaning dovish – 7
members expecting further cut while 5 members on hold (rate hikes in 2019 is close to impossible). The focus, as purported by the Chair, will be on the
trajectory of the US economy and its outlook, and the implications of global growth, trade policy, and geo-politics on the US outlook, especially the
domestic manufacturing and capital goods sector. The context of a lower (uncertain) perceived neutral and NAIRU, coupled with the willingness to run a
tight labour market, and to see an upturn in inflation (and expectations) provides cover for future accommodation, if needed.
Lower for longer; constructive ambiguity. Chair Powell took pains to paint an image of constructive ambiguity, repeatedly highlighting that the
Committee is focused on pursuing policy that is “appropriate” in achieving its dual mandate. The current policy stance is deemed appropriate with current
projections achievable via modest policy adjustments (likely -75bps of cuts). Nonetheless, if the economy turns down, “a more extensive sequence of
rate cuts is appropriate”. As we argued prior, “it is better to guide for looser policy in an open-ended manner (flattening backwardation of rate cut
expectations) rather than encourage front-loading of rate cut expectations”. We think that the Chair has achieved such an outcome, together with
“guidance” for an extended pause at a minimum; the best mix of policy, considering circumstances.
Chances of rate increases? Low. The hurdle to raise rates rises tremendously into a presidential election year, considering the communication
nightmare (bad visuals especially considering an abrasive presidency).
Positive set-up for risk. Policy is skewed dovish, with more cuts, if required, or an extended pause, otherwise. This set-up potentially a favourable
environment to foster growth (cushion debt service burdens and financial conditions), should uncertainties come to pass, allowing the economy to digest
uncertainties in a benign monetary environment. Globally, a Fed that is dovishly skewed/on an extended pause will provide more policy space for both
fiscal/monetary authorities to enact accommodative policies (many have already done so, especially in EM).
Key debates will revolve around i) global economic growth outlook – stabilisation in China/Europe, pick up in trade-exposed economies and EM, trade
negotiations; ii) global fiscal/monetary policies; iii) spill-overs from global growth and subdued goods and investment demand (disruptions to semi-cons,
autos, energy sectors; Boeing) to the broader economy, especially services, and employment (probability of US recession); iv) trajectory of inflation; and
v) impact of a strong USD.

5. Thoughts (2)
Markets continue to price dovishly, expecting the FFR at 1.25% (from 1.75-2.00% currently) by end 2020 and an extended hold to 2022. Marking to
the Fed suggests the risk-neutral fair value of the US5T and US10T at 2.05% and 2.27%, with spot 5T at 1.65% fair vis-à-vis the breakeven at 2.04% but
spot 10T at 1.77% dearer than its break-even at 1.98%. Our internal models (based on nominal GDP, PMI, cross-asset) points to US5T and US10T FV
around 1.30-2.22% and 2.02-2.28%. Our 10y2y yield curve model at 67bps suggests a curve that is too flat at 2bps.
We deem duration rich. Tactically, we think that duration is rich and see US5T and US10T closer to 2.00% and 2.30% into 1H20 (+10-15bps in break-
evens; +50bps in TP), expecting a bear steepening; prefer 0-5yr.
Bigger moves in rates require either a i) recession scenario (flattener), or ii) repricing of a rate hiking cycle (steepener), contingent on a reset of the global
economic cycle (global policies extending (resetting) the current cycle).
Supportive for risk assets. With a backdrop of continued accommodative policy and our view of generally anchored inflation and resilient growth over
coming quarters, we believe the set-up for broader asset markets remain positive into 2H19, within the current context (using more binary rather than
probabilistic analytical lenses; prolonged clarity over the opportunity cost of risk-free asset amid broadly stable growth/inflation). Global rates markets and
ex-US risk markets, we believe, are under-positioned for positive outcomes.
1.625 1.625
2.125
2.375
2.500
1.84
1.24 1.25 1.26
1.57
1.96
1.37
1.27 1.27 1.31
1.75
1.27 1.21
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
2019 2020 2021 2022 Longer-run
% FOMC, Sep 2019 OIS 1-Mth SOFR FFF
Year Fed Path Current
Fed Path,
Risk Neutral
Breakeven
Chng, bps
2018 1.625 5y 1.65 2.05 39
2019 1.625 10y 1.77 2.27 21
2020 2.125 data as of 19th Sep
2021 2.375 FOMC Sep 2019
2022 2.500
2023 2.500
2024 2.500
2025 2.500
2026 2.500
2027 2.500
-38
-52-5
-5
-40
-31-82
-88
-100
-80
-60
-40
-20
0
5Y 10Y
2019, bps chng TP Breakevens Implied Real Rate Nominal

6. USTs – US10T Models, FFRs and money markets
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
-150
-100
-50
0
50
100
Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
%bps Residuals (LHS) US10T Cross Asset Model*
*Oil, Metals, Gold, Lumber, Equity
0
1
2
3
4
5
6
7
Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
% US10T US10T, ISM Model +1stdev -1stdev
-51 -43 -58 -74 -74 -77 -86 -86 -92 -81
1.91 1.92 1.89 1.85
1.75 1.69 1.65 1.73 1.77
2.21
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
3.25
-100
-90
-80
-70
-60
-50
-40
-30
-20
-10
0
1-Mth 3-Mth 6-Mth 1-year 2-year 3-year 5-year 7-year 10-year 30-year
bps %bps chng (RHS) 2019 2018
0.00
0.25
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19
% Eff FFR IOER 1Mth T-Bills ON RRP Target FFR ONBF

7. USTs - Curves
The 10y3m have inverted, 10y2y remains flat while the 30y10y is steeper. The 10y1m forwards curves is expected to steepen, going forward, on the back
of rate cut expectations. RN curves remains positive and have re-steepened; TPs remain low though historically the TP curve steepens during rate
cutting cycle.
0
1
2
3
4
5
6
7
8
9-150
-100
-50
0
50
100
150
200
Jan-90 Jan-96 Jan-02 Jan-08 Jan-14
%
reverse scale
Risk Neutral
bps
10y2y 5y2y 10y5y FFR (RHS)
0
1
2
3
4
5
6
7
8
9-100
-50
0
50
100
150
200
250
300
Jan-90 Jan-96 Jan-02 Jan-08 Jan-14
%
reverse scale
TP, bps 10y2y 5y2y 10y5y FFR (RHS)
-100
-50
0
50
100
150
200
250
300
350
400
Jan-90 Jan-93 Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14 Jan-17
bps 10y2y 10y3m 30y10y
-100
-50
0
50
100
150
200
250
Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
bps 10y1m 10y1m, 1yfwd 10y1m, 2yfwd 10y1m, 3yfwd

8. USTs - Technicals
Technicals have weakened for USTs, as evidenced by MovAvgs and flows. Cross-asset pairs remain in
dis(inflationary) mode. The rally in USTs remains extended and the recent sell-off suggests a pull-back
which is rather limited.
1.2
1.4
1.6
1.8
2.0
2.2
2.4
2.6
2.8
3.0
3.2
3.4
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
% US10T 20dMA 50dMA 200dMA
-4
-3
-2
-1
0
1
2
3
4
5
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
52wk z-score
High-to-Low Beta/Gold Oil/Gold Ratio Metals/Gold Lumber/Gold US10T
Risk off
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2.75
3.00
3.25
3.50
3.75
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
% 10-Yr Treasury 50 WMA +2stdev -2stdev
-4
-3
-2
-1
0
1
2
3
4
Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
UST10, z-score 90-d
-10
-5
0
5
10
15
20
25
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
ICI Wkly Net Flows, US$ Bil, 12M Gov

9. Policy Stance, Appendix
0
1
-6
-4
-2
0
2
4
6
8
10
1Q71 1Q76 1Q81 1Q86 1Q91 1Q96 1Q01 1Q06 1Q11 1Q16
% Real Rates minus Potential Real GDP Growth Recession (0,1)
14.5
15.0
15.5
16.0
16.5
17.0
17.5
18.0
18.5
0
1
2
3
4
5
6
7
1Q95 1Q98 1Q01 1Q04 1Q07 1Q10 1Q13 1Q16 1Q19
%%
Corp Interest, %cost FFR HH Financial Obligations (RHS)
Households and corporates interest burden remains low, though marginal interest rates have been higher due to the prior rate hiking cycle. Policy is
loose, going by conventional Taylor-rule type models; though the 1st diff and Williams-Orp robust policy measures points to more neutral policy. Real GDP
growth remains above real rates.
-4
-2
0
2
4
6
8
1Q72 1Q78 1Q84 1Q90 1Q96 1Q02 1Q08 1Q14
% LW Neutral Rate Real FFR, 4QMA
-10
-5
0
5
10
Jan-95 Jan-99 Jan-03 Jan-07 Jan-11 Jan-15 Jan-19
Policy-rule Models, %
Williams, Orphanides Robust
1st Diff
FFR
Balanced
Change

10. Fed balance sheet
2,000
2,500
3,000
3,500
4,000
4,500
5,000
-20
-10
0
10
20
30
40
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
Federal Reserve, %yoy
Thousands
US$ BilAssets, B/S (RHS) %yoy
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
US$ Bil Fed Total Assets Banks' Reserves Balance
0
500
1,000
1,500
2,000
2,500
Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19
US$ Bil USTs held by Fed
92.0
34.1
46.0
3.9
3.6
7.8
2.1
54.1
39.1
0.6
3.3 4.9
0
10
20
30
40
50
60
70
80
90
100
06 to Sep 08 Oct 08-Oct 17 Current
Federal Reserves, %Liabilities
Currency in circulation Reverse repos Banks' reserves Treasury General acct
Foreign official Other deposits Others

11. Financial Conditions, Appendix
Financial conditions remain loose and not in imminent need of policy support. The SPX is merely -0.6% from its prior peak while corporate spreads
remain tight. Consumer interest rates have risen on the tightening cycle but has now levelled off. The only negative stems from the strong USD, mostly
reflecting global dynamics and uncertainties.
85
95
105
115
125
135
Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 Jan-19
Index, 7YMA US TWI
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
-1.25
-1.00
-0.75
-0.50
-0.25
0.00
0.25
0.50
0.75
1.00
Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
z-scoreyoy chng yoy chng Blended FCI (RHS)
300
400
500
600
700
800
900
Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
bps US Corporate HY Spreads
-60
-50
-40
-30
-20
-10
0
Jan-90 Jan-93 Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14 Jan-17
S&P500, %from peak Maximum Drawdown
8
9
10
11
12
13
14
15
16
17
2
4
6
8
10
12
Mar-00 Mar-02 Mar-04 Mar-06 Mar-08 Mar-10 Mar-12 Mar-14 Mar-16 Mar-18
% New Car 5/1Yr ARM CC (RHS) Personal Loans (RHS)

12. Growth, Appendix
0
50
100
150
200
250
300
1Q52 1Q58 1Q64 1Q70 1Q76 1Q82 1Q88 1Q94 1Q00 1Q06 1Q12 1Q18
Debt-to-GDP (%) Financials Non-financial corporates Household
Growth have slowed but, as yet, there is insufficient data to support a deep downturn. Indeed, most
estimates still support a moderate growth outcome in 3Q19 (1.4-2.7%). The US OECD CLI, however,
remains in contraction mode with the contraction marginally worsening. Fundamental imbalances remain
broadly contained, limiting negative feedback.
0
1
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
Jan-85 Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Jan-18
%yoy Recessions (RHS) SPX Bear Mkts (RHS) NowCast GDP
0
1
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
Jan-85 Jan-88 Jan-91 Jan-94 Jan-97 Jan-00 Jan-03 Jan-06 Jan-09 Jan-12 Jan-15 Jan-18
%yoy Recessions (RHS) SPX Bear Mkts (RHS) OECD, LEI/CEI NowCast GDP
1.8
1.6
2.7
1.4
0.0
0.5
1.0
1.5
2.0
2.5
3.0
Atlanta FRBNY St Louis GS
GDP Nowcast, %, 3Q19
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
-1.2 -1.0 -0.8 -0.6 -0.4 -0.2 0.0 0.2 0.4 0.6 0.8
US OECD Leading Index
Expansion, Accelerating
Expansion, DeceleratingContraction, Worsening
Contraction, Stabilising

13. Growth, Appendix
Growth worries stem from the uncertainties over the likelihood of contagion from the industrial/manufacturing sector to the consumption/svcs-based
sectors. The industrial sector is seeing stresses as bad as during 2015-16 energy sector downturn. This reflects uncertainties over trade and supply-
chains, inventory, and disruptions in the semi-conductors, autos, aviation and energy sectors. Nevertheless, confidence, on the whole, remains stable
while labour income will continue to provide some level of support for economic activities.
30
35
40
45
50
55
60
65
Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
Index Mfg PMI Svcs PMI
9 9
16
20
4
7
8
6
8
12 11
7 6
11
4 4
2
1
4
4 2
5
6
5 6
6
5
5
4 5
2
1
5
5 5
7
6
4
3
6
7
43 2
1
0
4
3 4
3 2
2 1
2 2
12 3 2 1
6
3 3
1 2
0 0 1 2 1
0
2
4
6
8
10
12
14
16
18
20
22
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
IP, No of industries, %yoy >8% 5-8% 2-5% 0-2% <0%
-4
-3
-2
-1
0
1
2
20
40
60
80
100
120
Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 Jan-19
z-scoreIndex U.Mich/Conf Board Consumer Exp Capex Exp.*
*NFIB, CEO Conf., Empire State, Phily, Dallas, Kansas, Richmond Fed
-8
-6
-4
-2
0
2
4
6
8
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19
%US$ Bil Private Earnings*, p.a. (LHS) %yoy Real
*Private: Hr earnings * Hrs * NFP

14. External, Appendix
US’s goods ex-energy NX remains at historical lows, despite rising trade protectionism. Strong labour income growth coupled with lower taxes, trade
diversion, and measures taken by trade partners meant that global re-balancing have yet occur. While capital imports have fallen on rising uncertainties,
consumption imports have been more robust. The outlook for trade appears challenging with the PMI (new export orders and imports indices) at low
levels.
-5
-4
-3
-2
-1
0
1
2
Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 Jan-19
US, %GDP Svcs NX Gds ex-energy NX Energy NX
30
35
40
45
50
55
60
65
70
Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19
PMI New Export Orders Import
-30
-20
-10
0
10
20
30
40
0
10
20
30
40
50
60
70
Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14 Jan-17
%yoy, 3MMAUS Real Capital Goods Imports US$ Bil %yoy 3MMA (RHS)
-20
-15
-10
-5
0
5
10
15
20
25
0
10
20
30
40
50
60
Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14 Jan-17
%yoy, 3MMAUS Real Consumer Gds Imports US$ Bil %yoy 3MMA (RHS)

15. Labour, Appendix
NFP, while slowing, remains stable (NFP: 150-156k, 6/3MMA; breakeven of 100k) with an low unemployment rate and rising labour participation. Claims
remain near historical lows. The job market outlook remains favorable for labour, with plentiful jobs available. Worryingly, however, is the rising number of
states with higher unemployment, likely reflecting sectoral differences (tradables/non-tradables; industrial/services).
130
156 150
173
0
20
40
60
80
100
120
140
160
180
200
Current 3MMA 6MMA 12MMA
NFP, '000
1,000
2,000
3,000
4,000
5,000
6,000
7,000
100
200
300
400
500
600
700
Jan-88 Jan-94 Jan-00 Jan-06 Jan-12 Jan-18
'000, 4WMA '000, 4WMAInitial Claims Continuing Claims (RHS)
-60
-40
-20
0
20
40
60
Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14 Jan-17
%, Net Conference Board Jobs Plentiful net Jobs Hard to Get
8
24
47
33
24
11
7 8
27
51 51
9
3 2 0 1
5
10
2
9
18
39
23
3
14
25
38
42 41
18
0 0
41
47 46
50 50
44
38
47
40
26
0
51
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
No. No of states with rising UE No Chng No of states with falling UE

16. Inflation, Appendix
(Dis)Inflation remains a concern, considering the persistency of under-shooting of the Fed’s target, though recent releases have printed stronger inflation
than expected. Overall, dis-inflationary worries should remain limited; other variants of inflation measures have been higher/more stable than the PCE
deflators.
Despite some stabilization, low inflation expectations continues to be a concern.
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
Jan-95 Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 Jan-19
z-score z-score of inflation measures
*Core PCE, CPI, Atlanta Fed, Trimmed Mean (Dallas & Cleveland Fed), FRBNY, FRBSF
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
%yoy
Cleveland Median
Dallas Trimmed Mean
Atlanta Fed Sticky Core
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
Jan-98 Jan-01 Jan-04 Jan-07 Jan-10 Jan-13 Jan-16 Jan-19
1yr ahead, z-score Composite Inflation expectations
Based on U.Mich, Conf Board, FRBNY, Cleveland Fed surveys
0.75
1.00
1.25
1.50
1.75
2.00
2.25
Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
Breakeven Inflation, % 5y5y 5y 10y 30y

17. Inflation, Appendix
Upstream price pressures appear limited with businesses not looking in increase prices in the near term, considering falling input prices, especially for
goods. Upstream services costs are stickier. Import prices is capped by the strong US$, coupled with weak commodity price growth.
-4
-3
-2
-1
0
1
2
3
4
Jan-98 Jan-02 Jan-06 Jan-10 Jan-14 Jan-18
NIFB Actual Price Chngs, 3M ago Price chngs, next 3M
-3
-2
-1
0
1
2
3
4
Jan-98 Jan-02 Jan-06 Jan-10 Jan-14 Jan-18
PMI Input Prices Mfg Non-Mfg
-40
-30
-20
-10
0
10
20
30
-2
-1
0
1
2
3
4
5
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
%yoy%yoy
PPI Int Demand, Core Gds, Stage 4 (LHS)
IM Price - Industrial Supplies
Thom/Reuters/Jeffries Commodity Price Index
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
PPI & PCE Svcs, %yoy
Final Demand Intermediate Demand - Stage 4 PCE Svcs ex-energy

18. Inflation, Appendix
Corporate margin pressures are arising despite improved productivity as higher wages are not passed through to higher prices. Labour is seeing better
income growth, with compensation growth likely maintained around 2.5-3.0%, going forward.
-6
-4
-2
0
2
4
6
8
1Q90 1Q95 1Q00 1Q05 1Q10 1Q15
%yoy Non-farm Corp Implicit Price Deflator Non-farm ULC CPI
-4
-2
0
2
4
6
8
1Q52 1Q60 1Q68 1Q76 1Q84 1Q92 1Q00 1Q08 1Q16
%yoy, 3Y, 10Y Non-farm Productivity
0
5
10
15
20
25
-3
-2
-1
0
1
2
3
4
5
Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19
%yoy, 3MMA US$Avg Hourly Earnings - Private Prod & Non-supervisory
%yoy (LHS)
real %yoy (LHS)
1.0
1.5
2.0
2.5
3.0
3.5
4.0
1Q02 1Q04 1Q06 1Q08 1Q10 1Q12 1Q14 1Q16 1Q18 1Q20
%yoy, T+2 ECI Leading Indicators ECI Model

19. Global, Appendix
The Fed does not target the exchange rate. As such, the USD is tangential to policy-making outside of impact on growth/inflation and markets. Globally,
interest rates are continuing to fall as central banks turn net easing with short-term yields declining rapidly. 5y5y real rates have seemingly bottomed on
the accelerated response by central banks, though remain at depressed levels. The stock of negative yielding bonds have fallen, on the margin, at
elevated levels. It remains to be seen whether coordinated global easing is able to cushion growth from heightened global uncertainties. We do not see a
global recession occurring.
-15
-10
-5
0
5
10
15
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
42 Central Banks Hikes Cuts Net
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19
G24, % Global ST Yields
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
5y5y Real Rates, % US EUR JPY
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
US$ Bil Global Agg -ve Yielding Debt MV