One of the more underdiscussed economic developments following the shocks of the pandemic has been the United States’ outperformance compared to its peers. This success can be traced to bold monetary and fiscal policies put in place that have hardened supply chains, bolstered energy independence and ... READ MORE >
Federal Reserve
Fed cuts rates to support a soft landing in the economy
The Federal Reserve on Wednesday reduced its policy rate by 50 basis points to a range between 4.75% and 5% to protect full employment and preserve the soft landing it has achieved following a historic price shock. The central bank also laid out a path of monetary policy that suggests additional 25 ... READ MORE >
U.S. retail sales and industrial production beat expectations
Retail sales in the United States increased by 0.1% in August—much closer to our forecast of a 0.2% increase compared to the market consensus of a 0.2% decline. The stronger-than-expected retail sales data came as industrial production also topped forecasts in August, growing by 0.8% from a month ... READ MORE >
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 >
Producer inflation and initial jobless claims stabilize further
While the producer price index came out slightly higher than forecasted at 0.3% on the month and 1.7% on a year-ago basis on Thursday, it remained on a moderating trend with July’s number being revised down. For 18 consecutive months, producer inflation has been in the 2% range or below on a year-ago ... READ MORE >
FOMC preview: Why the Fed’s pivot to lower rates matters
The Federal Open Market Committee’s meeting on Sept. 18 will implement a significant turn away from a focus on price stability—which has been achieved—to supporting maximum sustainable employment. In turn, the policy pivot will create the conditions for greater fixed business investment, increased ... READ MORE >
U.S. August CPI: Further signs of moderation as energy prices decline
Inflation inside the consumer price index continued to moderate in August as the top-line figure increased by 0.2% on the month and by 2.5% on a year-ago basis. Core inflation increased by 0.3% and 3.2%, respectively, on the back of a 1% decline in used cars and truck prices as well as an 0.8% drop in ... 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 >
U.S. August jobs report: A soft landing in the economy
The U.S. August report was a solid if unspectacular one that reflected the type of non-inflationary job growth that will give Federal Reserve policymakers confidence as they embark on their long-awaited campaign to reduce rates. Once one adjusts for the benchmark revision, employment has been ... READ MORE >
Job openings fall amid imminent rate cuts
With job openings falling back to normal and the labor supply increasing, the labor market was in balance in July, an important reason for why the Federal Reserve in our view should have cut its policy rate in July. The drop in job openings explained part of why job gains were unexpectedly low in July. ... READ MORE >