If you had your TV set tuned to CNBC… August 21, 2001, two commentators were watching Alan Greenspan get out of a car and head to his office. They discussed the color of his tie (maroon) and the brand of shoes he appeared to be wearing (Rockports).’ Danny Hakim, New York Times[1] Yesterday, I had […]
News & Announcements Archive
The Pause that Refreshes
How will the Fed respond to the recent drops in the stock market? We might get a hint from the Fed’s conduct after last August’s turbulence, which now looks like a dress rehearsal for the current problems. In that event, the Fed chose to forgo the widely-signaled liftoff in September, but then implemented liftoff amid […]
China's economic performance and other puzzles
Commodity price collapses tend to be a reliable signal of a broad-based global slowdown. For example, drops of 15 to 20 percent in CRB raw industrial commodities index [1] have reliably been associated with significant slowdowns in growth (Fig. 1).[2] The recent fall in commodity prices exceeds any decline since 1980 save the one registered […]
Liftoff? And then…
Early December finds us asking the traditional question on the eve of the holidays: What will the Fed give us for interest rates next year? Holidays past might provide some guidance. The Fed’s policy projections going into the December FOMC last year showed a year-end 2015 median federal funds rate of about 1.5 percent, with […]
Unconventional Lessons for Unwinding Unconventional Policy, I: The Volcker Disinflation
The Fed is (data dependently) on the cusp of attempting to engineer something unprecedented—a relatively benign liftoff of short-term interest rates after an extended period with those rates near their lower bound. Many analysts have been carefully analyzing past tightening episodes hoping to understand the likely Fed behavior, and I am regularly asked what I […]
Dots …
Just before the release of the FOMC’s Survey of Economic Projections (SEP) in December, I posted a piece saying that the dots would reveal nothing and arguing that, by design, the dot plot is not likely to help us understand policy. My main critique is that the dots convey the range of opinions, but shed […]
Two big questions
Simple plots of recent GDP and inflation data highlight two profoundly important questions facing monetary policymakers in the United States. GDP is at a level several percentage points below reasonable estimates of its pre-crisis trajectory (Fig. 1):[1] Will we ever regain that lost output? Inflation had run well below the Fed’s objective for the two […]
Jobs, inflation, and growth in 2015
Recent readings for the U.S. economy are filled with contradictions. Non-farm payroll gains were quite strong. Unemployment fell to 5.7% from 6.1%, last September. Nonetheless, real GDP growth was soft, up only 2.6%. And retail sales were quite weak. Reconciling robust gains for employee hours and a low jobless rate with tepid increases for real […]
Capital controls for Russia?
“The main lesson from international experience is that controls on capital outflows can work—but only if they are associated with a credible policy plan addressing the underlying cause of the confidence crisis.” Olivier Jeanne, of the Center and Peterson Institute, has an interesting op-ed in the Dec. 23 Financial Times arguing that capital controls may […]
Patience and prices
Consensus expectations were off regarding the November estimate for U.S. CPI inflation released yesterday. The 0.3% fall for headline inflation was a larger drop than estimated by 82 of the 84 economists who ventured forth with an opinion in Bloomberg’s survey. No-one offered up a forecast of a greater fall than 0.3%. We suspect that […]
Of dots and (considerable) periods
In a recent post, I argued that the Bernanke and Yellen Fed’s have been striving for a ‘no tea leaves’ approach to policy communications. An astute JHU student responded, ‘How about those dots?’ Good students can be annoying that way. There is a sound reason for publishing the dot plot, but we should not expect […]
What do markets expect the Fed to do?
Matt Raskin, along with several co-authors (Richard Crump, Emanuel Moench, William O’Boyle, Carlo Rosa, and Lisa Stowe), has published a series on measuring policy interest rate expectations on the NY Fed’s Liberty Street Economic Blog. These blog posts provide an excellent discussion of how to interpret market and survey-based indicators of interest rate expectations. For […]