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 >
Federal Reserve
FOMC Preview: Insurance against a greater pace of economic deceleration
A sagging global economy dragged down by a trade war and a domestic manufacturing sector on the edge of contraction are sufficient risks to warrant a 25-basis-point-reduction in the federal funds rate to 2% to 2.25% percent when the Federal Open Market Committee concludes its policy meeting on Wednesday. In addition, we expect the committee will end its ... READ MORE >
Fed loses patience, sets tone for potential rate cuts
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
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 >
Fed policy bumps up against muted inflation expectations: Data point to ‘lower for longer’ inflation
The Federal Reserve’s April policy meeting featured an in-depth discussion around risks to the economic outlook from falling inflation and current inflation expectations. The central bank’s current policy framework has set a 2 percent inflation target. Meanwhile, core inflation has eased to 1.6 percent, well below the Fed’s target, while inflation ... READ MORE >
Yield curve inverts, though recession not yet in sight
Last week the policy-sensitive U.S. 10-year—three-month Treasury spread inverted, meaning yields on the short-term three-month Treasury bill were higher than yields on the 10-year Treasury note (Figure 1). The brief inversion implied that investors were willing to pay more for three-month short-term Treasury bills against the risk of holding depreciating ... READ MORE >
The Fed: Prudent, patient and setting up for a heavy policy lift
The Federal Reserve Open Market Committee on Wednesday signaled that it in all likelihood has ended its policy normalization campaign. The FOMC is attempting to engineer a soft landing for an economy that rapidly decelerated during the first quarter of 2019 amid global economic headwinds, volatility across asset space, and policy risks associated with U.S. ... READ MORE >
FOMC preview: Prudent pause and revising economic outlook downward
The dovish turn at the Federal Open Market Committee’s January meeting was predicated on an interesting juxtaposition: the committee telegraphed a prudent pause in its policy normalization campaign, while not substantially revising down its forward-looking economic outlook. We expect the March meeting to rectify that internal inconsistency as the central ... READ MORE >
FOMC minutes: setting up for a change in forecast, balance sheet and policy direction
The January minutes of the Federal Open Market Committee clearly indicated increasing concern about turmoil in financial markets and global trade tensions between the United States and its trading partners. The Fed hinted at a slower pace of growth due to asset volatility and the international economy. Trade tensions and financial volatility spilled over ... READ MORE >