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
Tag: quantitative easing
The Eurozone economy is doing really well. Some data points to 3% growth. The German economy is doing even better – with some data pointing to 5% annualized growth. But there’s a downside – overheating. And with the ECB at negative rates and engaged in 60 billion Euros of QE to boot, overheating in Germany is a reasonable fear. Some thoughts below
The consensus for the March jobs report is for an addition of 178,000 jobs. The unemployment rate is expected to remain unchanged at 4.7%. Other data show the risk is to the upside here.
What about running down the balance sheet — reverse QE if you will? I think this is where the Fed minutes offered some new thinking.
I think I have the answer to at least one question: why was the Fed talking to big money investors in the first place. My thoughts follow below.
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.
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.
The Bank of England has cut interest rates and started a quantitative easing program that includes both government and corporate bonds. This approach was enough to send the pound Sterling down to $1.31 and 10-year gilt rates to a record low of 0.677%. While I reiterate my previous bullish views on […]
The abrupt spike in interest rates from mid-April to mid-May is very unlikely to be the beginning of something much bigger and much more likely to be the sort of occasional panic attack that Japan has seen so many of in recent years.
Over the past couple of years, there has been a decent amount of chatter about the Fed’s not being able to ‘reload’ in order to have enough tools to deal effectively with the next cyclical trough. And while the fear of running out of runway during the next downturn should not effect present policy, it likely is as it is a background consideration for the Fed as it thinks about liftoff. Below, I want to talk about this reload process. But I also want to move forward to the end of the cycle and give some thought to what happens to monetary policy when the cycle turns down with rates pinned near zero percent. I believe unconventional policy actions like quantitative easing – potentially including short-term municipal debt – will be used.
One thing to keep in mind regarding both politics and shares in Europe is that upgrades to the growth outlook are coming and more should be expected. I see Germany doing particularly well given the decline in the euro. This is positive for shares but negative for Greece. Some thoughts below
Tiger 5 – Grexit is inevitable