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 >
monetary policy
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 >
Powell statement: Market challenging Fed’s credibility on inflation targeting
The knee-jerk market response that sent the 10-year Treasury yield to 1.54% during Thursday’s speech by Federal Reserve Chairman Jerome Powell implies that the Fed may have to act to dampen yields at the long end of the curve. That may be necessary to reinforce its policy regime of flexible average ... READ MORE >
U.S. inflation outlook: Don’t believe the hype
The reflation of the American economy following the debilitating effects of the pandemic has begun. Recent increases in growth forecasts, the January jump in retail sales, trillions of dollars in fiscal aid and stimulus, as well as the prospect of a household-led boom over the next two years, have ... READ MORE >
Global fiscal policy: Reflation led by fiscal firepower
Despite efforts over the past four years to tear down the underpinnings of the global economy, pandemic economics has reinforced that this is indeed a global economy. Every one of the major-currency economies suffered through a health crisis and negative economic growth last year, according to the most ... READ MORE >
Bank of England: Deteriorating economic outlook and negative interest rates
The Bank of England at its meeting on Thursday is expected to keep its policy matrix unchanged as it downgrades its economic outlook and publishes its view on the use of negative interest rates. We expect the central bank to keep its policy rate at 0.1% and the total asset purchase program -- an ... READ MORE >
FOMC meeting: Fed adds to debate on further fiscal aid
Federal Reserve Chairman Jerome Powell said in the opening statement of his news conference on Wednesday that the arrival of vaccines has bolstered the economic outlook for later this year and noted the role of monetary policy in combating the economic downturn caused by the pandemic. At the same time, ... READ MORE >
Monetary policy and inflation in the modern era
The Fed is embarking on a new era in monetary policy, switching from its point target of 2% inflation to a target range of 1% to 3%. This change is predicated on longer-run structural changes in the economy that are inherently disinflationary, a real neutral interest rate near zero and much slower growth ... READ MORE >