Market participants expect the Fed to lower its target for the federal funds rate by 25 basis points on December 18, aided by some signals from Fed policymakers that they are inclined toward such a move. Do recent data support such an action? The recent behavior of consumer prices and developments in the labor market … Continue reading Is Another Rate Cut by the Fed Warranted?
AI, Growth, and Implications for Fed Policy
Few developments have received the attention that artificial intelligence (AI) has received in recent years. Much of that attention has been focused on concerns about job losses, invasions of privacy, and the dangers of self-driving cars, trucks, and buses. Although often forgotten, AI has been around for some time. Computers have been performing highly complex … Continue reading AI, Growth, and Implications for Fed Policy
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?
Did the May CPI Seal the Deal for Fed Rate Cuts?
The CPI for May prompted euphoria in financial markets and restored expectations of rate cuts by the Fed in the months ahead — the first in September and another by year-end. The S&P 500 stock index rose nearly 1 percent on the day and tacked on another ¼ percent gain the following day. May CPI … Continue reading Did the May CPI Seal the Deal for Fed Rate Cuts?
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
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?
Thomas D. Simpson, PH.D. 