When Federal Reserve Chairman Jerome Powell meets the news media today, he will face difficult questions on trade, tariffs, immigration and fiscal policy. His answers to those questions will drive whatever volatility takes place across asset classes given the sensitivity of the U.S. 10-year Treasury ... READ MORE >
Economics
Strong core business spending hints at another robust GDP report
American business spending on core equipment came in higher than forecast in December, with both orders and shipments pointing to strong growth to end the year, according to Commerce Department data released on Tuesday. Stronger growth, however, caused consumer confidence to fall in January as ... READ MORE >
Morning market minute: Rate path more uncertain as era of fiscal dominance begins
The Federal Open Market Committee will in all likelihood keep the federal funds rate unchanged in a range between 4.25% and 4.5% when it meets this week. Our forecast of the optimal federal funds rate implies a range between 3.75% and 4%, or a need for two 25 basis-point reductions this year—one in ... READ MORE >
Morning market minute: Managing the dollar’s risk, volatility and tariffs
With the Trump administration’s changes in trade and financial policies looming, the U.S. dollar is sensitive to headline risks and will be subject to volatility in the coming months. And that volatility injects an uncertainty tax that distorts the efficient functioning of financial markets and the ... READ MORE >
Morning market minute: A look at the U.S. trade and current account balances
The key to rebalancing the global economy depends on narrowing the U.S. current account and trade deficits. For years, the global economy has operated on a simple, if unstated, agreement: As the United States has imported more goods and services than it exports, its trading partners have used some of ... READ MORE >
Morning market minute: The contradictions at the heart of U.S. economic policy
Abraham Lincoln once said that a house divided against itself cannot stand. That was true in 1858 and it’s true today when it comes to economic policy. The Trump administration’s strategic economic objective is to rebalance the global economy. That is, the Trump administration intends to reverse the ... READ MORE >
Morning market minute: Bond market volatility and the Federal Reserve
The late-year selloff in the bond market has begun to look overextended. Recent trading pushed 10-year yields back down to 4.56% on Jan. 17 after reaching as high as 4.8%. The sudden shift in the market coincided with the growing sentiment that the Federal Reserve will cut the overnight policy rate by ... READ MORE >
To understand rising rates and volatility, look to regime change in global economy
Over the past three years, the core analytical framework we have used to understand the post-pandemic economy is that a fundamental structural shift, or regime change, is taking place. It's this shift that explains why long-term interest rates have been rising even as the Federal Reserve has ... READ MORE >
Morning market minute: The political economy of demographic growth
The American public expressed its preference for reduced immigration in electing President Trump to a second term. Yet underlying demographic realities show that those current policy preferences stand at cross-purposes with the needs of the U.S. economy. In a recent report, the Congressional ... READ MORE >
Morning market minute: Modeling the impact of tariffs
As firms and households await the expected increase in import taxes through a flurry of executive orders over the next several days, it is important to note just how challenging it will be to estimate their impact on growth, employment and inflation. Modeling such a shock to the economy depends upon ... READ MORE >