Post Tagged with: "Federal Reserve"

Monetary offset, the strong dollar and China’s currency manipulation

Monetary offset, the strong dollar and China’s currency manipulation

With the Fed talking up the likelihood of three rate hikes in 2017 while other central banks are still in easing mode, the potential for a US dollar rout and a concomitant closing of the US trade deficit is pretty low. Therefore, given Donald Trump’s hawkish rhetoric on China, the potential that the US government labels China a currency manipulator for the first time since 1994 is high.

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In defense of the Fed’s rate hike campaign

Thought I have been on recession watch for nearly all of 2016, I want to write this post as a reminder that there are upside scenarios for the US and global economy. The Federal Reserve looked forward and felt it could tighten into a slowing economy and rising dollar without the economy falling into recession. And so far, they have proved correct. Thinking of this business cycle in comparison to the last two, let me outline my thinking on what are upside scenarios here.

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Upbeat macro thoughts as Fed’s Jackson Hole Symposium begins

Upbeat macro thoughts as Fed’s Jackson Hole Symposium begins

I haven’t posted much recently – mostly because there haven’t been many developments economically that change my macro view. We still live in a slow growth world, where recession is not the base case n the US, the UK, or the eurozone. And none of the data we have seen in the last few weeks has changed that path.

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Re-calibrating our thinking about Brexit after MPC rate cut

Re-calibrating our thinking about Brexit after MPC rate cut

The Bank of England has cut interest rates and started a quantitative easing program that includes both government and corporate bonds. This approach was enough to send the pound Sterling down to $1.31 and 10-year gilt rates to a record low of 0.677%. While I reiterate my previous bullish views on Anglo-Saxon long rates, US dollar strength and on the UK […]

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Multiple Fed officials now signalling rate hikes

Perhaps we are misreading the Fed’s intentions going forward because multiple Fed officials are signaling the Fed’s intention to raise interest rates multiple times in 2016 and 2017. And while rate hikes are usually considered tightening, to the degree financial market volatility and energy sector debt stress have diminished, rate hikes could be a wash given the interest income they add to the US private sector.

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Job growth is slowing, so when will the Fed hike rates?

Job growth is slowing, so when will the Fed hike rates?

The latest jobs report came in at 160,000 jobs added to US non-farm payrolls. As this number was below expectations, it effectively sidelines the Fed in June. And given we are in an election year, the chances of two rate hikes occurring are lower than they otherwise would be. Meanwhile, the US economy’s growth trajectory has slipped below the 2% stall speed level. And we will have to continue to wait for more evidence regarding its future direction.

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The Bank of Japan’s inaction and the Fed’s tightening bias with GDP slowing

The Bank of Japan’s inaction and the Fed’s tightening bias with GDP slowing

Soft data in the US and Japan was not enough to spur central banks in either country into action over the last two days. For me, it highlights first how vulnerable the global economy is. But, more than that, it points to the ineffectiveness of present monetary policy as a way of delivering sustainable economic growth. Some thoughts below Before I […]

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Fed policy in an election year of slowing growth

Fed policy in an election year of slowing growth

US and global economic growth is slowing. And this has caught the Fed out given its rate hike in December. The question, now, therefore is whether the Fed continues to hike in the face of this slowing, given the election looming in November. I believe the window for hikes is so limited that the data in May and June will determine what happens for the rest of the year. Let me add some thoughts on these issues and on policy divergence below.

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Is the Fed panicked about the downshift in the US economy?

Is the Fed panicked about the downshift in the US economy?

The minutes from the Federal Reserve Board’s last meeting have come out and they are dovish. While on the one hand, we should praise the Fed for showing it is data-dependent as it has professed to be, on the other hand the abrupt change in is somewhat alarming. I would suggest the Fed is not necessarily panicked but it is certainly worried that it tightened into weakness in December and that future data will be much weaker than it previously anticipated. Some more thoughts follow below.

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How the US economy is shaping up in 2016 and how the Fed will react

How the US economy is shaping up in 2016 and how the Fed will react

The US economy – while still far from recession – is still downshifting. At the same time, the Federal Reserve – while less hawkish than in December – is still in tightening mode. This combination still makes recession a reasonable worst case scenario, though not a base case. Below I want to review how the recent data stack up still in the 2%ish range and why that will compel the Fed to raise interest rates multiple times until that growth rate declines into the 1%ish range.

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How the Fed could cause recession in 2016

How the Fed could cause recession in 2016

The Fed began to tighten monetary policy in May 2013, when it announced its intention to taper large scale asset purchases. Despite Fed chair Janet Yellen’s recognition in recent testimony before Congress that financial conditions had become less favorable, her remarks demonstrate that the Fed is still tightening policy today. And because this policy stance is inappropriate for the stall speed US economy, the Fed is now at risk of tipping the economy into recession. Full commentary follows below.

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My thoughts on the US Q4 2015 GDP numbers

My thoughts on the US Q4 2015 GDP numbers

The US economy is not in a recession right now and the latest numbers on US GDP confirm this view. And while the headline growth number was weak, the consumer spending and personal income numbers are supportive of 2%ish growth into 2016. Some brief comments below U.S. GDP growth came in at a very weak 0.7% annualized pace for Q4 […]

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