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 >
federal funds rate
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 >
U.S. October jobs report: Moderation in hiring as wage gains outpace inflation
Hiring in the American economy moderated in October, pointing to a cooler pace of growth and inflation that is a much-needed elixir following the torrid pace of hiring and expansion of recent months. The economy added 150,000 jobs in October with the unemployment rate at 3.9%, the Bureau of Labor ... READ MORE >
R-star: The role of the natural rate of interest in monetary policy and economic growth
The pandemic has spurred profound changes in the global economy like a tight labor market and elevated inflation that policymakers are only beginning to understand. But one result is clear: The days of historically low interest rates are over. Now, policymakers are wrestling with the question of ... READ MORE >
Why the Fed should lift its 2% inflation target
We think that the Federal Reserve’s current cycle of rate hikes has peaked at a range between 5.25% and 5.5%. While inflation stands well above the Fed’s official 2% target, we think that because of the economic and political shocks since the pandemic, the Fed will raise its inflation target in the ... READ MORE >
Rates outlook: As economy enters glide path, bond market hedges its bets
There are growing signs that inflation is retreating while the labor market remains healthy. Absent another shock, the Federal Reserve is likely to ease up on its rate increases as these dynamics take hold. Even a pause in rate hikes would most likely guide the economy toward a mild downturn rather ... READ MORE >