Key inflation, spending and income data released on Friday should make the Federal Reserve's so-called dovish rate hike of 25 basis points in March a lot more reasonable by now. It also reaffirmed our call that the end of the hiking cycle is only a couple of months away. While the data ... READ MORE >
interest rates
Jobless claims inch up while revised GDP shows softer growth
New filings for jobless benefits inched up to 198,000 last week from 191,000 the previous week, staying below the pre-pandemic level, according to government data released Thursday. Claims numbers have been consistently low recently, showing a resilient labor market where demand for labor ... READ MORE >
The great deposit migration, moral hazard and a fragmented banking system
Fragmented and fragile are appropriate words to describe the American banking system. The recent financial shock has exposed the underlying problem: A flawed regulatory framework treats small and medium-size institutions unequally compared to their largest competitors. The current ... READ MORE >
The impact of expectations for Fed policy on the money and bond markets
After three months of what seemed to be disregard for the direction of Federal Reserve policy, the money markets are once more expecting a tightening of financial conditions. But it took a banking crisis to get there. The bond and credit markets in our estimation are pricing in a recession ... READ MORE >
Catch-25: Fed hikes rates amid financial stability risk
Joseph Heller’s novel “Catch-22” delved into the impossible conditions imposed upon people caught in situations from which there is no escape because of mutually conflicting or dependent conditions. That Catch-22 is an apt description of where the Federal Reserve finds itself as it lifted its ... READ MORE >
Financial shock sending Fed proxy rate into restrictive terrain
The financial shock affecting the U.S. economy will most likely result in tightened lending standards, tip the economy into recession this year and cause mild disinflation. The quandary faced by the Federal Reserve—balancing price stability, full employment and financial stability—requires an ... READ MORE >
Consumer sentiment fell in March, before the financial turmoil
Consumer sentiment in March dropped to 63.4 from 67 as consumers’ confidence in the current economic conditions and their expectations both worsened on the month, according to the University of Michigan’s survey released Friday. The decline in sentiment, though, was not influenced by the ... READ MORE >
The great deposit migration and emergency borrowing at the Fed discount window
The banking crisis has spurred a dramatic flight to safety at all levels of the financial system. From investors seeking the assurance of money market funds, to depositors shifting their money from smaller banks to systemically important financial institutions, to banks themselves accessing ... READ MORE >
How many jobs need to be sacrificed to tame inflation? Cost is rising, RSM models show.
Events are outpacing the best-laid plans of policymakers. The current turmoil in the financial sector will place constraints on the Federal Reserve’s efforts to restore price stability. Our research indicates that the Fed, facing persistent inflation, will for now have to accept a ... READ MORE >
Jobless claims and housing starts come in hotter than expected
Jobless claims and housing starts blew past forecasts in the most recent reports released Thursday, both showing stronger-than-expected results amid a looming economic downturn. New jobless claims fell by 20,000 last week to 192,000 following an unexpected spike in the previous week, ... READ MORE >