Oh, the irony. Recall Janet Yellen’s plight, circa early 2015. Oil prices were “unexpectedly” crashing raining on her recovery-like parade. The Federal Reserve, Yellen as its Chairman, was about to embark on an ambitious program of regular every-meeting rate hikes to head off, its models assumed, the coming inflationary bump which was to confirm full if belated monetary policy success. [...]
The primary reason for that first rate hike in a decade in December 2015 was ferbus figuring that full employment had probably been reached, certainly close to where the unemployment rate had fallen at that time. The Fed’s main econometric model calculated this key economic level at between 4.8% and 5.0% unemployment; the actual rate for that month hit five [...]
It was another pretty embarrassing day for the Federal Reserve and its policymaking body the FOMC. The latter voted, as expected, to raise the federal funds corridor (or double floor, if you can’t get over IOER fail) by another 25 bps. The long end of the Treasury bond market, however, was bid pushing yields down not up. There is a [...]
The June FOMC meeting coincides with the quarterly update of the Federal Reserve’s modeled economic and policy projections. As usual, the economy forecasts have been cut for both 2016 and 2017. The upper bound for the “central tendency” of real GDP in 2016 was 3% in the modeled calculations made at the end of 2014, those that saw no fallout [...]
When the difference between your rhetoric and your actions is wide, inconsistency is pretty much axiomatic. However, Janet Yellen’s press conference was much more than that. I understand it’s a lot to charge blatant dishonesty, but almost everything she said is cow manure. And I make that assertion not on my own reading of the situation, but on hers. The [...]
In light of the enlightening of the full-scale of the first quarter’s disaster, it seems fitting to calculate the FOMC’s growth target with this new information. The current “central tendency” is estimated between 2.1% and 2.3% for calendar year 2014. Given these revised figures, the target for average real GDP of $16.084 trillion, just to get to 2.05%, is inordinately [...]
We have had an ongoing discussion of the “wealth effect” here, spurred by my colleague Margie Fernandez, including some good outside discussion. Current orthodox thinking is that there is significant downstream economic benefits from inducing rising “wealth”, such as can be done. Van Hoisington and Lacy Hunt, PhD from Hoisington Investment Management summarize it as: FOMC leaders may feel justified [...]
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