The Fed has signaled it is unlikely to cut interest rates again in December, but we expect further rate cuts next year. We believe the Fed has not yet done enough to protect the economy against headwinds. While we don’t forecast a US recession, we think additional monetary policy easing will be needed to stabilize growth.
The Fed cut rates again and indicated that one more cut should be enough to shore up growth. We think more will be needed. But will rate cuts work? And if not, what else can the Fed do?
Financial markets are focused on the ongoing trade war between the US and China—which goods and services are in play and what measures are being taken or threatened in each case. But the trade conflict could spill over into currency markets—and that’s a risk that bears watching.
The Fed left its benchmark rate unchanged this week, but also signaled a very high probability of cuts later this year. Historically, rate cuts have been a sign of trouble—typically made in response to slower growth and rising unemployment. But this time around, growth data aren’t showing much weakness. What’s the story?
The trade war has taken a harsher turn, threatening to further dampen economic growth. We expect the Fed to respond with sizable rate cuts, but the timing and amounts are more speculative than normal. Why? Economic data haven’t yet taken a major downward turn, and there’s uncertainty over how the Fed will react.
Modern Monetary Theory (MMT) has moved from the fringe to broader public discussion recently, fueling concern from some investors about growing debt levels. We don’t expect MMT to replace our current economic structure, but its populist-inspired underpinnings will likely have a sizable influence on policy.
US inflation has been running low for some time, and key members of the Federal Reserve Open Market Committee (FOMC) are pointing a finger at the traditional policy framework. So rate hikes are on hold for the time being—and monetary policy is under the microscope.
Last week’s meeting of the Federal Open Market Committee (FOMC) surprised even those who expected a dovish outcome. As the Fed wrangles with its policy framework, one takeaway is clear: don’t expect rate hikes this year—and possibly next.
A generation ago, China had little influence beyond its borders. Today, its importance to the world economy rivals the United States’. China’s role in markets is growing, too: in April, it will join a major global bond index. The future may bring a freely traded Chinese yuan and a challenge to the US dollar.
Countries and companies have been on a borrowing binge even as the growth of the working-age population in many parts of the world slows. Is a prolonged period of low growth and low inflation in our future?
The government shutdown and temporary displacement of some workers didn’t cause the strong US labor market to miss a beat. Today’s jobs report reinforces that gains have been accelerating. That’s good news for the economy and markets.
The US government shutdown is almost four weeks old, and there’s no sign that the standoff will be resolved anytime soon. How much has the shutdown impacted—and how much will it impact—economic growth? That depends on how long it lasts.
As expected, the Fed hiked interest rates yesterday, but we now think there will be fewer hikes in 2019 than we previously called for. Not because the US economy is in trouble, but because the Fed is changing its approach to setting policy.
A rapid rise in US interest rates has put financial markets on the defensive lately. Will the Federal Reserve respond by slowing the pace of its tightening campaign? Don’t bet on it.
What might the US midterm election results mean for fiscal policy and financial markets? Probably not much if Democrats and Republicans end up splitting control of Congress. But a sweep by either party could lead to very different outcomes.
The revised NAFTA deal relieves uncertainty for Canada and avoids a possible Mexican barrier to ratification. But what does it really mean for the three countries involved—or for trade tension with China?
When it comes to the official US short-term interest rate, the Federal Reserve now appears to be on autopilot, with three more quarter-percentage-point increases likely by mid-2019. But after that, things should get more complicated.
Many investors have started to scrutinize the shape of the US Treasury yield curve, worried that a potential yield-curve inversion would mean imminent recession. In our view, things aren’t that simple.
Aluminum. Cars. Solar panels. It’s hard to track the tariffs without a scorecard. As headlines continue to swirl, many investors worry about the impact on the US economy. Clearly, tariffs and trade wars hurt growth, but we don’t think the impact will be big enough to derail the economy just yet.
The US Federal Reserve decided against an official short-term rate hike at this week’s meeting—hardly a surprise. But US Treasury yields continue to climb in 2018, and not all the explanations are good news.
There’s not much suspense around this week’s Fed meeting: the fed funds target rate is almost certain to rise by 25 basis points. We think it’s more important not to overlook this cycle’s endgame.
Market volatility has spiked recently, driven largely by growing concerns about rising inflation and interest rates. We think the volatility is exaggerated, but we’re not surprised inflation is rising—and rates along with it.
The tremors that have battered financial markets recently have been nerve-wracking. But remember, the market is not the economy. Economic growth can persist even when markets decline, and that growth can eventually help to stop the slide.
As 2018 gets rolling, markets don’t have great expectations for Fed interest-rate hikes. Based on futures pricing, roughly two small increases are anticipated this year. We think there will be more.
With the US economy humming and the Fed seemingly pushing all the right buttons, it makes sense to expect more of the same in 2018. That means more rate hikes on the way. The question is: How many?
The US Senate approved a tax bill last weekend, and it now appears highly likely that final tax legislation will be passed in the next few weeks. Big changes to the tax rules will impact the economy, taxpayers and financial markets.
Comprehensive, revenue-neutral tax reform could give the US economy a boost. But tax cuts alone are more likely to lead to higher budget deficits than to increased growth.
Jerome Powell, President Trump’s pick to lead the Federal Reserve, is likely to continue the central bank’s gradual retreat from unconventional policy. But the test for a Powell-led Fed will come when the economic cycle turns.
US economic activity is picking up, and as a result, we’ve raised our growth forecasts for 2017 and 2018. What’s behind the good news—and how will it impact interest rates?
The long-anticipated unwinding of quantitative easing (QE) in the US is set to begin, just as the Fed’s leadership faces a wave of turnover. We think a strong foundation should keep steady US economic growth on track.
Speculation is building about a looming shake-up in the leadership of the US Federal Reserve. Transitions are nothing new—but the stakes this time are unusually high for the economy and markets.
The Trump administration is starting to consider a replacement for US Federal Reserve Chair Janet Yellen after her term expires. This is only one potential leadership change in what could be a wave of turnover ahead for the institution.
May’s labor-market report disappointed, with every meaningful indicator lower than expected and down from last month. But we don’t believe it’s weak enough to stop a June rate hike or knock the Fed off track.
US inflation bounced back last month, but by less than expected. The data should support two more rate hikes in 2017, but if inflation doesn’t pick up, it may impact plans for more aggressive policy tightening down the road.
In an interview, AB’s new US Senior Economist, Eric Winograd, explains why he expects the US economy to continue growing and the Fed to raise rates two more times this year. He also highlights two risks: populism and protectionism.
Minutes from the Federal Reserve Open Market Committee (FOMC) March meeting highlight key aspects of the committee’s thinking, including the committee’s intent to reduce its balance sheet gradually over time.
