2017

August 22 NGDP Update: Forecast lifts higher

August 22 NGDP Update: Forecast lifts higher The NGDP forecast has hiked from under 3.8%, up to 3.9% in dramatic fashion through late July. Well maybe not so dramatic, and the change is not so big, it is at least a consistent movement. What’s more, the forecast has mostly held at this level for the

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The flattening yield curve: What it means

In an economy with an interest rate policy target (most countries, including the US), rates, in general, give us a straightforward forecast of the most likely value for future policy rate level. We currently have a situation in the US Treasury market where yields are compressing together across maturities, i.e. the yield curve is flattening.

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Week ending Friday August 18th 2017 Two weeks ago here we suggested that the ECB would have to follow the Bank of England in calling a halt to the weakness in the USD. Last week they did. All western central banks need easier monetary policy, not by beggar-thy-neighbour currency weakness, but by altering their targets

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Faster wage growth is not in the cards

Tim Duy tries, unsuccessfully, to justify the Fed’s tightening bias: …The Fed can always fall back on the unemployment rate to claim that although inflation is low now, it will creep back up to its 2 percent target with the economy operating at full employment. The minutes of the July FOMC meeting made clear that central bankers
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Industrial Production also dances to the Fed´s beat

When the Fed tightened monetary policy (falling nominal spending (NGDP) growth) from mid-2014 to mid-2016, manufacturing production growth faltered, picking up when monetary policy was “eased”. Since the start of the year, the Fed has again slipped into tightening mode and NGDP growth turned down. Manufacturing output growth follows suit. That´s one more sign of

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Recently the question has been raised in the econo-blogosphere whether the Fed has been effectively suffocating productivity gains, by crimping demand and cheapening labor whenever businesses—viewing a strong economy and outlook—might think it worth the risk to invest in labor-saving plant and equipment. J.W. Mason, citing the work of economic historian Gavin Wright, notes productivity
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Low inflation in the face of low unemployment (low resource slack) and easing of financial conditions is fostering disagreement at the FOMC. FOMC Minutes: Participants commented on a number of factors that would influence their ongoing assessments of the appropriate path for the federal funds rate. Most saw the outlook for economic activity and the

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Retail Sales in July

After experiencing declining growth during the first half of the year, in July retail sales posted above expected growth. Unfortunately, that´s not a prelude to any sort of improvement. Like all other measures of the nominal economy, retail sales, here depicted by the core version, which excludes auto sales, has remained depressed. And when you

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