Default Rates Normalizing

This week will be closely tracking U.S. Federal Reserve Chairman Jerome Powell’s testimony on Capitol Hill. We’re expecting him to continue to deliver a hawkish message and will be listening for hints as to whether the central bank will raise interest rates by 25 or potentially 50 basis points at their next meeting. The release of the February employment report on Friday will reveal whether the surprisingly strong jobs data we saw in January will continue. The consensus is expecting that around 223,000 jobs were created last month—a much lower number than the 517,000 jobs created in January, but still strong job growth nevertheless. As we watch for signs of weakness in the economy, we’re following default rates for auto loans and credit cards—which are starting to tick upwards. While it’s true that these trends are showing some level of deterioration, which is expected given the Fed’s rate hikes, broadly speaking we’re still at relatively low default levels—yet another indication the economy is continuing to hold strong in the current environment.

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