The Real Economy Blog

Federal Reserve

The Fed walked a tightrope in cutting rates, and succeeded

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In July, the Fed did what markets had been pushing for when it cut the federal funds rate by a quarter percentage point. But rather than calm the markets, the Fed only added to the concern when it did not send a clear message that there were more cuts to come. Advocates for more rate cuts maintained that the Fed was not giving enough credence to ... READ MORE >

October US employment report: solid trend in hiring continues

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The GM strike distorted the October U.S. employment report, resulting in a net gain of 128,000 in total jobs. Investors will hang an asterisk on the October report--42,000 jobs linked to the strike and a 17,000 job decline in census workers. But once the damage caused by the strike is excluded, it appears the economy generated close to 187,000 new jobs, ... READ MORE >

Fed cuts interest rate, but does not commit to more

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The Federal Reserve reduced its targeted federal funds rate by a quarter point to a range between 1.5 and 1.75 percent at its October meeting Wednesday. In its policy statement, the committee removed the phrase “act as appropriate,” possibly opening the door to taking a wait-and-see approach to additional rate cuts. The change to the policy statement notes ... READ MORE >

Expect the Fed to cut its target rate by a quarter point

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We expect the Federal Reserve to cut the federal funds rate this week by 25 basis points to a range between 1.50% to 1.75% as the central bank attempts to offset the downward drag of the trade conflict and challenges in the domestic manufacturing sector. But policymakers, investors and firm managers should not expect clarification on the direction of ... READ MORE >

FOMC policy decision: ‘Catch-22’ in a monetary context

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Demands by market actors for accommodative policy linked to a diminished global and domestic economic outlook resulted in a reduction in the federal funds rate by 25 basis points to a range between 1.75% and 2%. In our estimation, this is likely not the final rate cut of 2019 by a central bank clearly concerned with the direction of trade policy, a modest ... READ MORE >

Fed preview: Difficulty and divided FOMC

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Monetary policy is difficult under the best of circumstances. The cross currents of the trade war, a modest exogenous supply shock in oil markets, political pressure from the executive branch to reduce interest rates and former colleagues suggesting the Federal Reserve get political make the rate decision resulting from the upcoming FOMC meeting one of the ... READ MORE >

Low rate environment poses challenge for banks

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On July 30, the Federal Reserve announced a 25-basis-point reduction in the federal funds rate. Federal Reserve Chair Jerome Powell characterized the move as an “insurance” cut to help extend what is now a record-long U.S. economic expansion amid economic headwinds related to a slowing global economy and an inversion of the yield curve, which many market ... READ MORE >

Fed loses patience, sets tone for potential rate cuts

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The Federal Reserve set the predicate for a shift in policy to an accommodative stance later this year by revising downward its forecast on inflation and its estimate on the path of rate policy. In our estimation, monetary policy is too tight, given the deceleration in the domestic economy, low inflation, contraction in global manufacturing in train, and ... READ MORE >

Jobs report clunker puts June rate cut on the table

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An interest rate cut at the June 19 Federal Reserve meeting is now on the table as firms pulled back significantly on hiring in May. The weak hiring report is likely due to the uncertainty tax linked to trade policy out of the White House that has been placed on the economy. While topline hiring showed a net gain of 75,000 jobs, there was noticeable ... READ MORE >