CFE Analysis | Fed

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 […]

CFE Analysis | Macro

Today's CPI release: If you just squint, you'll see …

The FOMC minutes released yesterday and today’s CPI data release underscore a remarkable shift. Over the past five years, the state of the labor market has dominated monetary policy discussions, but for the first time since the crisis inflation is now taking center stage. All through the recovery, of course, inflation hawks have warned that […]

CFE Analysis | Fed

Hawks, Doves, and Tea Leaves

In its most recent policy statement, the FOMC removed the phrase, “there remains significant underutilization of labor resources” and substituted that the “underutilization of labor resources is gradually diminishing.” Fed watchers have pronounced this hawkish. I have a different reading, resting on my perception of two recent changes I perceive in Fed communications. Having been […]

CFE Analysis | Macro

Nice weather we're having? Seasons and jobs

When macroeconomic data such as today’s employment report are released, we often focus on seasonally adjusted numbers.  Seasonally adjusted employment numbers smooth through changes in employment that are judged to be part of some annual cycle such as the jump in retail employment every year as the Christmas buying season ramps up.  Of course, there […]

CFE Analysis | Fed

A Farewell to QE?

The FOMC has long communicated that, if something like its modal outlook played out, it would likely make one final $15 billion reduction in the pace of asset purchases at its October FOMC meeting, which is now taking place.  This would put an end to the purchase program known as QE-infinity.  In essence, we may […]

CFE Analysis | Fed

Is the Fed Behind the Curve or Jumping the Gun?

Part of my job the last three years on leave at the Fed was following public commentary on Fed policy—both expert and lay commentary. There were at least two reasons for doing so. First, lots of good ideas come in, and given the difficult times we were facing, careful consideration of all reasonable ideas was […]

CFE Analysis | Macro

A Consistent Set of Interest Rate and Real Growth Assumptions Suggests Stable Debt to GDP Ratios in the Out Years

Larry Summers recently raised the possibility of the US economy being in danger of facing a long period of subpar growth. The fear is at least somewhat reflected in several long-run growth forecasts. Table 1 shows the most recent estimates of steady state real GDP growth from the FOMC Economic Projections, Blue Chip Economic Indicators […]

CFE Analysis | Macro

The U.S. Budget Outlook, with Consistent Growth/Real Rate Assumptions, Looks Much Less Dire!

The CBO’s recent projection of a federal-debt disaster rests critically on the combination of two projections: 1. Real interest rates will rise substantially, increasing the cost of debt service. 2. Real GDP growth will remain tepid, resulting in tepid growth in tax receipts. Either of these outcomes might plausibly occur. But both history and basic […]

CFE Analysis | Macro

The Euro Crisis: Four Hard Truths

German voters go to the polls on Sunday to determine the future leadership of their country – and perhaps the future of the Eurozone, as well. With the continent’s largest economy, and the political clout to match, Germany is a central player in the Euro crisis. Odds are good that Chancellor Angela Merkel, who has […]

CFE Analysis | Finance

Exit Keynes, the Friedmanite, Enter Minsky’s Keynes

Last week Brad Delong reposted his 1996 review of A Tract on Monetary Reform. Delong makes the case, quite compellingly, that Keynes, in this book, provides us with the best monetarist monograph ever written. Delong leads, however, with a sentence that, in 2013 as contrasted to 2006, I think he might want to alter. “This […]

CFE Analysis | Macro

Real GDP Revisions: A Better 2012, Front Loaded

The Q2:2013 rise for real GDP, 1.7%, was better than expected and much better than feared. The two big misses, relative to expectations, were a contribution from inventory investment and only a modest drag from government spending. Raw data on stockpiling suggested a big drag from inventory investment. Not so. In addition, the drag from […]

CFE Analysis | Fed

2014: The Year of the Hawk

Fed Chairman Bernanke commented on the monetary policy outlook at a speech at the NBER a couple of weeks ago, and then again in Congressional Testimony. He gave a clear signal that the current voting members of the FOMC plan to maintain a highly accommodative overall stance of monetary policy for some time. These remarks […]