At its June policy meeting, the Bank of Canada reiterated its intention to maintain an accommodative monetary policy as uncertainty over the pace of the pandemic abates and the economy recovers. As it has for the past 16 months, the bank is keeping its policy rate at near-zero to maintain liquidity ... READ MORE >
monetary policy
FOMC comment: Fed creates context to end pandemic policy efforts
The Federal Reserve on Wednesday took another step in the long road to policy normalization in the post-pandemic economy. At the monthly meeting of the Federal Open Market Committee, the central bank kept its policy rate unchanged in a range between 0 and 25 basis points. But it is clear that given the ... READ MORE >
What’s behind the recent decline in 10-year Treasury yields
The yield on 10-year Treasury bonds has dropped nearly 25 basis points to below 1.5%, touching 1.42% overnight on June 11 from its recent peak of 1.74% on March 31. If the initial move up to 1.74% can be rationalized as a response to the risks around higher growth and inflation, then this recent move ... READ MORE >
Interest rate update: Recent increase shows progress on the path to normalization
The yield on 10-year Treasury bonds is approaching 1.7%, within 20 basis points of already low pre-pandemic rates. The recent increase in the 10-year is in response to signs of an economic recovery and perceived risks around higher inflation. But sub-2% interest rates on the 10-year Treasury are far ... READ MORE >
Frothy markets and the risk to the economic outlook in the era of low interest rates
The Bloomberg U.S. Financial Conditions Plus Index has reached 2.9 standard deviations above neutral, an unprecedented level that signals the possibility of froth in asset markets in line with the warning by the Federal Reserve’s Financial Stability Report issued on May 6. This comes at a time when ... READ MORE >
Interest rate update: The changing yield landscape, in eight charts
The yield on 10-year Treasury bonds has moved to 1.55%, within 50 basis points of already low pre-pandemic rates. While anything near 1.60% is better than the roughly 0.60% observed last year, we expect the yield to rise to 1.9% at the end of the year as the economy reopens and the nearly $6 trillion in ... READ MORE >
Bank of Canada policy decision: Tapering bond purchases by $3 billion a week
An improved economic outlook and growing confidence among central bankers have created the conditions in which the Bank of Canada is now comfortable paring back the pace of bond purchases by $3 billion per week. The central bank’s announcement on Wednesday represents a slowing in the pace of ... READ MORE >
FOMC meeting comment: Welcome to the boomtown
The onset of a recovery in the U.S. economy and the growing likelihood of a robust expansion this year and next resulted in a significant upgrade of the Federal Reserve’s Summary of Economic Projections forecast through 2023. The dovish outlook on the committee is an apt description of the risks to ... READ MORE >
FOMC preview: Fed to consider adjustments key to the middle market
Much is riding on the Federal Open Market Committee policy rate meeting next week, given recent changes in the economic landscape. Rising growth expectations, increasing interest rates, modestly higher inflation expectations and the recent challenge to the Federal Reserve’s flexible average inflation ... READ MORE >
Flattening Phillips curve implies greater space to address economic needs
The traditional workhorse among policymakers attempting to estimate the tradeoff between employment and inflation has been the Phillips curve. During the past few decades, as the economy has shifted from one based on manufacturing to one based on information and digital technologies, this traditionally ... READ MORE >