Category: Life

The pickup in growth of real GDP to nearly 5 percent in the third quarter, illustrated in the chart below, got a lot of attention. This growth was especially notable since many forecasters had come to expect a recession in the latter part of this year, largely brought on by the Fed's policy tightening measures … Continue reading There’s Still Momentum in the Economy

The July labor market and consumer price reports were met with a sigh of relief. A reduced pace of labor market hiring and deceleration in the CPI—both headline and core measures—were viewed as pointing to a “soft landing”— a return to low (2 percent) inflation without a recession. Does a careful assessment of recent data … Continue reading Can This Really Be a Soft Landing?

Has the Back of Inflation Been Broken? CPI inflation data for June came in below expectations, prompting a rally in financial markets and raising hope that inflation can be tamed without undergoing a recession—a so-called soft landing. The chart below shows that both headline (the blue line) and core CPI prices (the red line) posted … Continue reading Inflation News: Bright Spot or Head Fake?

The Issue: At its mid-June FOMC meeting, the Fed announced that it was holding its target for the federal funds rate unchanged at 5 to 5-1/4 percent following ten consecutive increases that accumulated to 5 percentage points. The Fed reasoned that it wanted time to assess the impact of previous rate increases and the extent … Continue reading Is it Time for the Fed’s Pause to End?

The current debt ceiling—at $33.4 trillion—is expected to be reached around June 1. Once the ceiling is reached, the Treasury has a few gimmicks that it can use, such as delaying payments to the pension fund for federal employees, to postpone hard choices regarding which claims on the Treasury are to be paid. However, once … Continue reading The Debt Ceiling Confrontation: Is it Necessary?

At its May 3 meeting, the Federal Reserve (Fed) raised the target for the federal funds rate ¼ percent and signaled that it would be watching incoming data to determine whether any further increases would be needed to place inflation on a downward trajectory toward the Fed’s 2 percent target. As shown in the chart … Continue reading Has Fed Tightening Come to an End?

The high-profile closing of Silicon Valley Bank (SVB) on March 9 and the subsequent closing of Signature Bank, the rescue package for First Republic, and the resolution of Credit Suisse have raised concerns about the health of regional commercial banks in the United States and certain big foreign names. Some have claimed that we are … Continue reading Recent Banking Disturbances and Implications for Fed Policy: What You Need to Know

The most recent consumer price data (for January) were a disappointment. As shown in the chart below, headline inflation (the blue line) picked up largely owing to a swing in energy prices. However, even when volatile energy and food prices are removed, core inflation (the red line) ticked higher, raising doubts about whether underlying inflation … Continue reading Stubborn Inflation: Implications for Monetary Policy 

The Federal Open Market Committee raised its target for the federal funds rate ¼ percentage point on February 1 and suggested that a couple more similar-sized increases will be forthcoming. Fed policymakers further indicated that they will be assessing the lagged effects of previous rate increases and whether those effects are unfolding in line with … Continue reading Fed Policy: The Importance of Vigilance