It would be easy to conclude that with the surprisingly small increase in employment for October and the Fed’s subsequent 25 basis point cut in its target for the federal funds rate that the job market may be on the cusp of weakness, inflation has come under control, and the Fed is on a steady … Continue reading Is It Time for the Fed To Ease Off the Brakes Again?
Has the Labor Market Returned to Balance?
Financial market participants and observers greeted the jobs report for June with enthusiasm. The 206 thousand increase in employment, shown in the chart below, was coupled with a 54 thousand downward revision to employment gains in May. Many analysts saw this as a gradual slowing in hiring. Moreover, the unemployment rate climbed higher in June to 4.1 … Continue reading Has the Labor Market Returned to Balance?
Back On The Soft Landing Path?
The April CPI numbers were in line with the expectations of market participants. This inflation news seemingly confirmed to market participants that underlying inflation is in the process of falling — after three consecutive months of unwelcome upside surprises. Moreover, other news on the economy was viewed as suggesting that growth has slowed, the labor market has … Continue reading Back On The Soft Landing Path?
Inflation Remains Stubbornly High
February's CPI data disappointed market participants, who were hoping to see more evidence that inflation was gliding down to the Fed's 2 percent target amid continued output growth and a good labor market. That is, market participants were looking for further evidence that a soft landing was in sight. Instead, the twelve-month increase in the … Continue reading Inflation Remains Stubbornly High
The Remaining Inflation Problem
The release of CPI for January again dashed optimism for continued disinflation and near-term rate declines by the Fed. Now, market participants foresee the Fed’s first cut in rates coming around mid-year instead of the spring and the cumulative cut in rates of 75 to 100 basis points in 2024 (100 basis points equal one … Continue reading The Remaining Inflation Problem
Further Disinflation?
Economic growth over the second half of 2023 was brisk. Real GDP expanded at a 4 percent annual rate over the second half of 2023, up from a 2 percent rate in the first half and only ¾ percent over all of 2022. Moreover, initial claims for unemployment insurance thus far in January are not … Continue reading Further Disinflation?
The Rise in Long-Term Rates: What Does it Mean for the Fed?
The focus of attention lately has been on the jump in long-term interest rates and whether this jump is doing the work of the Fed. What is behind the increase in long-term rates, and what does it mean for the Fed? It is helpful to note that the long-term Treasury benchmark interest rate—most commonly the … Continue reading The Rise in Long-Term Rates: What Does it Mean for the Fed?
Obstacles to a Soft Landing
A growing chorus of analysts has been reading recent economic news–especially consumer prices--to be suggesting that the economy is on a glide path to a soft landing—inflation returning to the pre-pandemic pace while avoiding a recession. This soft-landing scenario implies that little or no further Fed tightening will be needed. Indeed, federal funds futures prices … Continue reading Obstacles to a Soft Landing
Time for the Fed to Pause?
The issue: The Fed has sent out signals that it is inclined to pause rate hikes at its upcoming June meeting after successive increases over the past ten FOMC meetings dating back to March 2022 (see chart below). The cumulative increase in the target for the federal funds rate has been 500 basis points (100 … Continue reading Time for the Fed to Pause?
Chair Powell’s Remarks: What Did He Say—and Why?
On August 26, Fed Chair Powell sent a jolt through financial markets with his remarks delivered to the Federal Reserve Bank of Kansas City’s annual central banking conference in Jackson Hole, Wyoming. What did he say and why did he say it—and is there anything more to be said? The Powell speech was focused on … Continue reading Chair Powell’s Remarks: What Did He Say—and Why?
Thomas D. Simpson, PH.D. 