Yesterday, the FOMC altered its view of household spending and business capex. It wasn’t a huge difference, they never are. Figuratively, these sorts of downgrades are little by little even though if things were ever to go the right way the language upgrades wouldn’t be subject to so much reservation. There isn’t much in the official statements anyway, just a [...]
They will have to be forced into it. There is no voluntary rate cut and there never has been. This idea, however, is what’s being offered today in the wake of another stubborn line in the sand. Central bankers are always, always the last to figure things out. Jay Powell was still talking about inflation and more aggressive monetary policy [...]
In early February 1994, Alan Greenspan’s Fed would begin to raise the federal funds rate target for the first time in five years. Not since February 1989 had the FOMC thought economic conditions warranted an increase. In between, the 1990-91 recession which wasn’t especially bad, certainly not by contemporary standards set by the contractions in the seventies and early eighties. [...]
All Presidents love to talk stocks when the stock market is making record highs. It is the one asset class the public knows about. Even the iconic 1980’s movie Wall Street made it seem just that important. The Masters of the Universe are buying equities, so everything has to be awesome. The BSD’s on Wall Street were never stock jockeys, [...]
Federal funds is up again. As of yesterday, the 29th, the effective rate (EFF) is now 5 bps above IOER. That takes it to within 5 bps below the top of the Federal Reserve’s policy range. According to FRBNY, the 1st percentile in yesterday’s session was 2.40%, meaning that almost the entire federal funds market is paying more than IOER. [...]
Ever since the first major outbreaks of Euro$ #4 last year, the balance of data has tipped further and further toward the minuses. Yesterday was a big one. US income growth in 2019 is no longer growth. Not huge declines, but minus signs where, if the prior boom narrative had been valid, large plus signs should rule unchallenged. The business [...]
The easy answer for “muted” inflation is consumers. Forget the unemployment rate debate. Let’s assume that labor markets are tight. Workers are scarce and companies have to compete, and pay up, to secure labor. Input costs are rising. That doesn’t necessarily guarantee an accelerating CPI or PCE Deflator. There is a final step in the Fed’s recovery process. Those labor-driven [...]
The administration continues to plead for rate cuts. I think they understand the gravity of the situation, if not quite the situation itself. The President’s chief economic advisor, Larry Kudlow, was back at his old TV home on CNBC today. In the wake of more “muted” inflation figures one quarter of the way through 2019, Kudlow said: The inflation rate [...]
Last April, monetary officials in Japan were publicly contemplating ending asset purchases under QQE. This April, they are more quietly wondering what other financial assets they might have to buy just to keep it all going a little longer. I’d suggest something like the clouds passing over the islands or the ocean water surrounding them. Nobody would notice either way [...]
You don’t always have to understand the minute details behind these things to gain a sense of what they mean. I’m talking about things like negative swap spreads and related. From the textbook view, a negative spread makes no sense at all. On the surface, it seems to suggest the market thinks financial counterparties are less risky than the US [...]
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