Post Tagged with: "monetary policy"

How monetary policy entrenches secular stagnation






Recent statements by monetary authorities in Canada, the United States and the United Kingdom tells us rate hikes are possible in all three this year. This trio of English-speaking G7 nations is at a different phase of the monetary policy cycle than Europe or Japan. The implications are unclear though.

Read more ›
How Brexit makes Britain poorer, forcing Carney to stay his hand

How Brexit makes Britain poorer, forcing Carney to stay his hand






The risk in the UK is an inflationary recession. For now, Mark Carney is resisting a rate hike. But how long will the Bank of England hold out? And how long can British consumers keep spending if real wages are falling? Two things would ease this pressure. One is some sort of fiscal support for real wages. The second is the fall in oil prices. As in the US, I see oil prices as key.






Read more ›
Is the new rout in oil getting worrying?

Is the new rout in oil getting worrying?






Earlier this morning, the New York Mercantile Exchange was quoting delivery for light sweet crude in July at $43.30. That’s a far cry from the $55 average that analysts had expected for 2017 as recently as last month. And all indications are that this price deflation is not transitory, but lasting. The selloff in oil brings year-to-date losses to some […]

Read more ›
The Fed’s financial stability concerns before its June hike

The Fed’s financial stability concerns before its June hike






Hiking rates now after a monster commercial real estate cycle has already developed is akin to closing the stable doors after the horse has already bolted. But this may be a concern of the Fed. Let’s see what the Spring 2017 OCC Risk Assessment says when it comes out.






Read more ›
Secular stagnation is a policy choice

Secular stagnation is a policy choice






In my most recent posts, I have been saying that bond markets are pricing in secular stagnation scenarios based on how shallow the yield curve is. But secular stagnation is a policy choice. And that is something I thought I should highlight in view of UK Prime Minister Theresa May’s change of heart in pursuing austerity. Some comments below






Read more ›
What are credit markets signalling about the US economy?

What are credit markets signalling about the US economy?






The US economy has been very resilient during this post-crisis business cycle, as we are now into our ninth year of economic expansion. Soon we could hit a record for the length of an expansion. Yet, with that backdrop, 10-year Treasury yields were at 2.13% this morning – even as the Fed signals more hikes to come in 2017 as well as reverse QE. I think the bond market is signalling continued low growth and low inflation. Some thoughts below






Read more ›
On the Fed’s pause due to dual-barrelled monetary tightening

On the Fed’s pause due to dual-barrelled monetary tightening






Fed Governor Jerome Powell recommended a June hike and 2017 balance sheet reductions, in one of the last public speeches by a Fed official before the June FOMC meeting. When the Fed follows Powell’s game plan, we will be in the unchartered waters of dual-barrelled tightening, with the attendant risks that entails. Some comments below






Read more ›

UK interest rate dissenter signals policy divergence may be coming to an end






As expected, the Bank of England left rates unchanged at a record low 0.25% in today’s Monetary Policy Committee decision. There was a dissent, however, with soon to be departing MPC member Kristin Forbes wanting a quarter-point rise.






Read more ›

Some thoughts on systematic central bank policy errors






A recent post by Matthew Klein on central banks over at FT Alphaville that dovetails with some of the themes I have been writing about here at Credit Writedowns for the past decades is what preciputated this post. Let me summarize my thesis and tell you why it matters. Here are the bullet points – focused here mostly on the US.






Read more ›
The yield curve is still flatter than at anytime since the last recession

The yield curve is still flatter than at anytime since the last recession






If you look at the difference in yield between 2 and 10-year treasuries, the numbers in the last year are the lowest since 2008, when the US economy was in a recession.






Read more ›

Underconsumption and the end of excess demand






Yesterday’s post on the failure of Japan’s monetary policy experiment drew some favourable commentary from a prominent macroeconomist that I want to run by you. The gist of his insight is that we have long been living in an age of an excess supply which is only now being made plain. Let me run the tenor of his comments by you and make some additional ones of my own.






Read more ›

Why Japan’s monetary experiment has failed and what it means for everyone else






Yesterday’s most interesting headline in the Wall Street Journal was “The World’s Most Radical Experiment in Monetary Policy Isn’t Working”. After reading it, the right questions to ask are “why isn’t the policy working?” and “what does this mean for the global economy?”. Here are my answers.






Read more ›