Back in normal times, the following question would have seemed peculiar: Which Fed chair candidate would choose highly accommodative policy if a large fiscal stimulus hits an economy in which the unemployment rate is already at historic lows? The question becomes stranger when we add that the Republicans in power might prefer that Chair. What […]
Category: CFE Analysis
Yellen for Fed Chair?
I received several comments regarding the post on Jay Powell, asking whether I was implicitly stating a preference for Powell over Janet Yellen. Nope. I clearly should have been less obtuse, but I meant only to be commenting on Powell, who had become a strong favorite according to the betting pundits. The Powell piece started […]
Powell for Fed chair?
According to the folks who bet on such things, Jerome (Jay) Powell is a heavy favorite to become the next Fed chair. I have no special insights into the likely pick, but I do have a pretty good sense of Powell. I was working as a special advisor to the Fed governors when Powell arrived […]
Mid-Summer Review: Mr. Phillips and Mr. Trump both Shooting Blanks
There are two parts to forecasting monetary policy: forecasting what picture the economy will present to the Fed, and forming a judgment about how the Fed will react to that picture. The first of these is pure forecasting—what will happen tomorrow? Given a macro forecast, the second mainly requires a view about the Fed’s ongoing […]
How about we settle for a well-run government?
Classroom duties this Spring were spiced up a bit by the steady flow of teachable moments coming from Washington. For economists, one juicy tidbit came when we read that Jared Kushner had been put in charge of an effort to make government run like a business. A final exam question practically writes itself: What does […]
What will the Fed Do? June 2017 edition.
We’ve been reviewing those ‘5 things to watch for’ pieces that often precede FOMC meetings. Our conclusion is that even a Fed groupy is unlikely to find 5 notable things happening at any given FOMC. This is as it should be in an age of transparency. We’re trying a different approach. We’ll try to distill […]
Troubled Fed faces puzzling drop in inflation. And other fake news.
As a holiday sweet in Dec. 2015, we produced an Onion-style Fed watcher analysis of the coming FOMC. One key insight went roughly as follows: Our contacts suggest widespread support on the FOMC for permanently including in the FOMC statement the claim that inflation will run below target due to recent transitory factors. Not Onion […]
Budget Projections, Interest Rate Assumptions, and Preposterous Assertions
Since early 2014, we’ve been lamenting the fact that CBO has persisted in telling the same Armageddon budget story as it was telling 2009-2012, despite the fact that the deficit picture had dramatically improved. We mused aloud that if real debt problems did reappear, they might regret having spent several years crying wolf. If we […]
The Saudis: Thinking clearly and trolling for chumps?
When the news about a possible ARAMCO sale hit about a year and a half ago, we posed a question: What if the Saudis have finally gotten the joke? The real return to holding oil in the ground has been negative over the last 44 years, as a succession of peak oil predictions were met […]
Q&A about Fed portfolio normalization
The best way to predict how the FOMC will react to evolving economic conditions, we at the CFE have been arguing, is to listen almost exclusively to communication on behalf of the consensus, and then to, as best as possible, take that communication at face value. As we’ve documented, this approach has had an excellent […]
What will the Fed do? March 2017 edition
After the December FOMC, I posted that I was sticking with a baseline, near-term-rosy Trump outlook, in which a robust economy is greeted by a Fed happily rising rates three or more times. Then as now, I had no great confidence that the rosy scenario would continue to unfold, but forecasting 3 or more rate […]
Populist policies cause immediate misery. Or not.
As a professional economist, I am quite certain that most readers of this blog could cancel their insurance policies and spend the savings on a pleasant party. And with any luck, the good times could go on for, as the Fed would say, a considerable period. The Wall Street Journal, a few weeks back, described […]