Financial conditions
Updated
What it is
Financial conditions describe the overall ease or tightness of borrowing and investing across an economy, combining interest rates, credit spreads, equity valuations and currency levels. The Chicago Fed's National Financial Conditions Index (NFCI) is a widely cited composite measure, where more negative readings indicate looser-than-average conditions.
Why it matters lately
The NFCI had eased to roughly -0.515 for the week of July 3, 2026, near an 11-year loose extreme, even before the Fed's September 16, 2026 hike to 3.75-4.00% (its first hike since 2023, under Chair Kevin Warsh). Despite that earlier looseness, a bond-market selloff pushed the 10-year Treasury yield above 5% between September 15-23, 2026 (highest since 2007), showing conditions can tighten sharply and move independently of, or ahead of, the policy rate.
Asymmetric Analytics view
Inference (AA): ELSI treats the NFCI/yield divergence in Sept 2026 as evidence that policy-rate moves alone are an unreliable proxy for financial-conditions easing or tightening.