Ahead of this week’s policy decision by the Federal Open Market Committee and the publication of the November personal consumption expenditures price index, a look at the Federal Reserve’s terminal rate is in order. In the Federal Reserve’s Summary of Economic Projections released in September, that ... READ MORE >
federal funds rate
Real federal funds rate illustrates that Fed policy is restrictive
When I am on the road talking to clients about the economy and the path of Federal Reserve policy, the most frequent question I get is: If the economy is growing how can policy be restrictive? The answer lies not so much in the current economy as it does in what awaits if the Fed continues along its ... READ MORE >
Financial markets update: Front-running the Fed’s first cut, and our new call on rates
Investors expect the Federal Reserve to cut the federal funds rate and signal a series of further cuts through next year at its next meeting on Sept. 18. Those expectations have resulted in a notable decline in 10-year bond yields. By the second week of August, investors had pushed 10-year Treasury ... READ MORE >
Notes on a classic market panic: Unwinding of the yen-based carry trade
The turmoil in global financial markets on Monday was long in coming but spurred by short-term pressures: the unwinding of the yen-based carry trade, where speculators and short-term investors borrow against the yen to purchase risk assets elsewhere. As these investors exited their positions in the ... READ MORE >
Federal Reserve’s policy path points to a rate cut in June
Our modified Taylor Rule implies that the federal funds policy rate should be reduced to a range between 4.75% and 5% in the near term which underscores our call for the Federal Reserve to reduce its policy rate at the June meeting. Given our forecast of a modest 2.1% pace of growth this year, a cut in ... READ MORE >
FOMC preview: A status quo meeting
We anticipate that the Federal Open Market Committee meeting on March 19 and 20 will maintain the status quo in its policies. Our forecast implies no change in the federal funds rate, which will remain in a range between 5.25% and 5.5%. The FOMC’s median projection for interest rates in its dot ... READ MORE >
Fed signals end of rate hikes and projects cuts in 2024
The Federal Reserve signaled at its meeting on Wednesday that it is done raising its policy rate and is poised to reduce it by 75 basis points next year, with more cuts after that. The Fed also reduced its inflation forecast for next year to 2.8% from 3.3%, and to 2.4% from 2.5% for 2025, which ... READ MORE >
U.S. November jobs report: This is what a soft landing looks like
This is what a soft landing looks like. Through November this year, the American economy has produced nearly 2.6 million jobs as inflation has eased from 6.4% to 3.2%, all while the unemployment rate has remained below 4%. This is not a recession but instead is a sustained expansion amid labor ... READ MORE >
FOMC preview and the logic of Fed rate cuts in 2024
After nearly two years of raising the federal funds rate to restore price stability, the Federal Reserve is poised to all but declare that campaign to be over at its meeting next week. While the Federal Open Market Committee is likely to keep its policy statement largely unchanged, that statement ... READ MORE >
U.S. economic outlook: Expansion continues into 2024
Solid consumer spending driven by real personal income gains and sustained private investment will underscore a steady pace of growth at or near the 1.8% long-run rate in the United States in 2024. We expect that policy tailwinds from both the fiscal and monetary authorities will set the stage for ... READ MORE >