The Federal Reserve (Fed) doesn’t like to spook markets, that is the reason why it has crafted its communication on monetary policy to give indications way in advance and nothing has been pointing to a change of heart that could lead to a surprise move next week.
The reaction from markets to the release of Q1 2024 real GDP results has given every sector of the market another chance to give their own interpretation of what is coming regarding Federal Reserve (Fed) policy, inflation, and the federal funds rate.
Do you know that the headline Personal Consumption Expenditures (PCE) was 2.4% in January while the core PCE was 2.8%? This is very close to the 2% target.
Sometimes, and February was one of those times, the information on the U.S. labor market doesn’t make sense. Many argue that government agencies are cooking the books.
Personal income increased more than expected in January, up 1.0% (or $233.7 billion). The increase in January closely matches what happened in January of 2023 when it increased by 0.95% (or $213 billion).
From a very weak retail sales report for January 2024 to stronger inflation readings as well as increases in credit card and auto loan delinquency rates during the last quarter of 2023, the picture for consumer demand has weakened considerably.
Even at the risk of sounding like a parrot by repeating the same thing again and again, we think that it is, once again, appropriate at this time to do so: “One data point doesn’t a trend make.”
Once again, as we have argued several times before, if the Fed, once after having achieved its 2% target and remained at the target for several years, decides that a different target may be more effective for conducting monetary policy, they may decide to change the target.
Markets have made themselves clear for a while: they want more rate cuts than what Federal Reserve (Fed) members seem to be willing to accept at this time.
In the middle of 2023 we argued that, according to our forecast for GDP at the time for the whole of 2023, employment was growing too fast and that it would have to slow considerably during the second half of the year.
The negative side of the strong increase in mortgage rates has fallen on those who did not have a home before the start of the increase in rates and on the ability of those Americans to purchase a home.
We have read plenty of analysis on what the Federal Reserve (Fed) should do as it decides when to start lowering interest rates this year. Much of the analysis is well-intentioned as well as based on very good arguments.
The Federal Reserve (Fed) left the door so wide open after the end of the Federal Open Market Committee (FOMC) meeting in mid-December 2023, that markets have run ahead and have continued to push long-term rates lower since the decision was announced.
The year 2023 will be remembered by economists and investors as 365 days of resiliency and defied expectations. This week’s Weekly Economics will dive into the U.S. economic landscape and summarize the major factors that shaped the nation’s economic trajectory this year.
November’s inflation numbers delivered good news for the Federal Reserve (Fed) even though the Consumer Price Index (CPI) was higher than what markets were expecting, with shelter costs surprising to the upside.
To argue that the U.S. consumer has remained resilient has become a cliché and at the same time an understatement. After a very strong increase in real incomes during the pandemic, real income growth started to slow considerably.
Our forecast for the federal funds rate has the Federal Reserve (Fed) starting to cut rates in July 2024, with a second rate cut before the end of 2024.
October news on CPI inflation was all the doctor recommended and has markets spinning and repricing the Federal Reserve’s (Fed) potential path forward.
We understand that many economists/analysts/market participants are already discounting inflation as a serious problem for the U.S. economy. Even if this seems correct on the surface, the problem is very different for those who suffer the most from higher prices – middle- and lower-income individuals.
After the October/November meeting, it seems that Fed officials have an added objective, as Fed Chair Jerome Powell said during the press conference that they needed to see interest rates “persistently high.”
Chief Economist Eugenio J. Alemán discusses current economic conditions.
The strength in consumer demand has been one of the defining characteristics of a very resilient U.S. economy and September’s retail and food services sales report confirmed that the U.S. consumer is alive and well.
We hear and read daily analysis on how inflation is coming down and that the Federal Reserve (Fed) has beaten inflation. This is probably very close to the truth from an economics point of view.
The Federal Reserve (Fed) only controls one rate of interest, and it is a very short-term rate called the federal funds rate, the rate that banks charge each other for overnight, intra-bank loans.
While government shutdowns impact the economy directly and indirectly, the magnitude of the impact is determined by the length and scope of the shutdown. Some operations can continue in a “partial shutdown” scenario, and thus impact the economy differently.
Wednesday’s Federal Reserve (Fed) decision to keep the federal funds rate unchanged wasn’t a surprise at all. Markets, as we argued last week, had predicted that the Fed was going to stay put and that is what it did.
Markets are convinced that the Federal Reserve (Fed) is going to pause its interest rate campaign after it finalizes its Federal Open Market Committee (FOMC) meeting on Wednesday, September 20.
There has been lots of speculation lately regarding China’s economic “decline” or potential economic “perils,” so much so that newspaper articles about the coming demise of China’s miracle economic growth over the previous decades continue to take (our) time away from other, perhaps, more important topics.
Last week we changed our economic forecast because the economy has remained stronger than we expected. We delayed the start of the recession to the first quarter of 2024 rather than the last quarter of 2023.
Watching coverage of the BRICS (Brazil, Russia, India, China and South Africa) summit in South Africa this week made us wonder why the members of the BRICS decided to name the section, in which Vladimir Putin was addressing the conference by video conference, “BRICS BUSINESS FORUM,” in English, yes?
We have heard lots of commentary on the student loan repayment issues facing almost 44.5 million Americans. Some of these commentaries are correct but there are others that miss the mark.
Once again, markets are taking the elevator while economic data takes the stairs.
For now, and according to the June Summary of Economic Projections (SEP) ‘dot-plot,’ the Fed still has one more 25 basis point increase for the federal funds rate before the end of this year.
The question many economists, as well as market participants, asked themselves after the June Federal Open Market Committee (FOMC) meeting was why the Federal Reserve (Fed) paused its federal funds rate hike campaign if they were going to increase it again in July anyway.
Mortgage rates are the highest they’ve been in over 30 years, keeping home affordability in unprecedented territory. However, mortgage rates above 7% aren’t the only factor keeping home prices high.
Chief Economist Eugenio Alemán and Economist Giampiero Fuentes note that while it is taking longer to bring inflation down, the Fed will continue to conduct monetary policy to reach its target rate.
The U.S. economy grew at a more-than-expected 2.0% annualized rate of growth during the first quarter of the year compared to the previous quarter. In some sense, this rate of economic growth makes a little bit more sense than the previously reported 1.3% rate...
The Federal Reserve (Fed) still has a very tough job ahead to bring inflation down to its 2% target over the long run while facing pressures from markets, which have a very different timetable than the Fed.
This week’s inflation numbers were mostly positive and benign for the U.S. economy as well as for the Federal Reserve (Fed) and confirms our view that, at least for now, the Fed is done increasing interest rates for this monetary tightening cycle.
If there was a message the Federal Reserve (Fed) wanted to make clear after the end of the Federal Open Market Committee (FOMC) meeting on May 3, it was that it reserves the right to remain hawkish.
The current Federal Reserve’s (Fed’s) tightening cycle is approaching an end. This has been one of the most forceful as well as the fastest tightening cycle in history. However, because the federal funds rate was well below the neutral federal funds rate, the time it has been above that neutral level has not been that long.
