This week’s discussion surveys a more troubling turn in the data, as rising producer prices, falling new home sales, and a sharp steepening of the yield curve combine to reinforce a narrative of stagflation and a possible recession. Producer prices in February surprised to the upside and point to firmer core PCE in the near term. Inflationary pressures look set to intensify further in March, as higher oil prices tied to the conflict in Iran begin to feed through the data. Housing offers little reassurance. New home sales in January fell 17 percent from December, while sales of speculative homes dropped to levels below those seen at the depths of the financial crisis. Prices are now beginning to soften, suggesting that demand is faltering even as supply adjusts. Against this backdrop, Chair Powell struck a cautious tone at the March FOMC press conference, emphasizing elevated uncertainty while continuing to prioritize inflation within the Federal Reserve’s mandate. Markets have taken notice. Expectations for rate cuts have faded, with some investors now contemplating the possibility of higher policy rates in 2026. The bond market has moved accordingly. Longer term Treasury yields have risen to their highest levels in six months, signaling tighter financial conditions ahead. In our view, a combination of rising long term rates and further firmness in short term policy would risk placing additional strain on an already fragile economy and a labor market showing signs of stress.