CFE Analysis | Macro

Still Crazy After All These Years

For the past several years, the Congressional Budget Office has been offering frightening forecasts about government debt growing out of control unless strong action is taken. While these forecasts have played a prominent role in policy debates, the CFE’s Jonathan Wright and Bob Barbera have for several years been arguing that those forecasts are, well, […]

CFE Analysis | Fed

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 […]

CFE Analysis | Finance

2016 Starts with a Bang–Or was that a Pop?

When last we posted, we were making the case that a 25 basis point rise in the federal funds rate, paired with a sufficiently gradual tightening thereafter, was a reasonable hawk/dove compromise for the FOMC. Under our outlook, sufficiently gradual was likely to be a good deal more gradual than the FOMC was predicting, however. […]

CFE Analysis | Macro

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 […]

CFE Analysis | Fed

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 […]

CFE Analysis | Fed

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 […]

CFE Analysis | Fed

Happy Anniversary Chair Yellen!

Post-FOMC Press Conference, March 2014 ANNE SAPHIR: Then once you do wind down the bond buying program, could you tell us how long of a gap we might expect before the rate hikes do begin? CHAIR YELLEN:… [S]omething on the order of around six months or that type of thing. But, you know, it depends. […]

CFE Analysis | Fed

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 […]

CFE Analysis | Macro

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 […]

CFE Analysis | Macro

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 […]

CFE Analysis | Fed

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 […]