August 1914: a global financial crisis caused by the outbreak of World War I resulted in the Bank of England’s losing two-thirds of its gold reserves in less than a week, placing at risk London’s pre-eminence as the center of global finance. To prevent a financial collapse, the U.K. government ... READ MORE >
Natural gas and the move toward energy self-sufficiency
The major move toward energy self-sufficiency in the United States and in Europe in recent years has been the development of the U.S. natural gas industry and the export of liquefied natural gas to our allies. Natural gas accounts for roughly 30% of the energy used domestically, and the U.S. is now ... READ MORE >
Solow Residual: Total factor productivity and the U.S. economy
For decades, the productivity of American workers seemed stuck. No matter how hard people worked, or how much was invested, productivity, except for a few years, never seemed to move much. That may be changing. Last year, American productivity improved by 2.7%, and gained steam in the second half ... READ MORE >
Geopolitical tensions and risks to the inflation outlook
Just as inflation appeared to be coming under control in recent months, rising tensions in the Middle East have shaken this view and now represent the major risk to our economic and inflation outlooks. The focus of this new uncertainty centers on the energy markets, which have been roiled by ... READ MORE >
Inflation expectations remain remarkably well anchored
The inflation shock of the past three years is abating. One reason is that expectations of inflation continue to remain remarkably well anchored. The Federal Reserve’s five-year inflation forward breakeven rate-—a closely watched measure of pricing expectations—stands at 2.3%, which is below the ... READ MORE >
CPI: Fed to remain patient as real wages rise 1.4%
Energy and goods disinflation continue to underscore slower growth in the U.S. Consumer Price index, which increased by 0.3% on the month and by 3.1% on an annual basis, according to Labor Department data released on Tuesday. Disinflation in the energy and the goods sectors has now resulted in a ... READ MORE >
Revising our 2024 inflation outlook: Moving back to a 2% target
The recent easing in inflation, a clear downward trend in rents and what we think is a budding productivity boom have led us to revise our inflation forecast for the year. We now expect that the Federal Reserve’s preferred measure of inflation—the personal consumption expenditures price index—will ... READ MORE >
Hiring accelerates in January as unemployment remains below 4%
Remarkable, resilient and robust. There is simply no other way to describe the sustained strength in the U.S. labor market that has resulted in an American unemployment rate below 4% for 24 consecutive months for the first time since 1967. The U.S. economy created 353,000 new jobs in January on the ... READ MORE >
Productivity continues to rise in potential game changer for economy
Paul Krugman, the Nobel laureate in economics, once said that “productivity is not everything, but in the long run it’s almost everything.” The increase in American productivity over the past year, if sustained, is a potential game changer for the economy that represents that mythical rising tide ... READ MORE >
FOMC policy decision: Setting the predicate for rate cuts
The Federal Open Market Committee on Wednesday left is its policy rate unchanged between 5.25% and 5.5% and maintained the pace of quantitative tightening. The committee, however, made major changes to the policy statement that implies a coming upward revision in its economic forecast and a shift ... READ MORE >