November 2, 2017

The UK central bank raised interest rates by 25bps today. Big deal. Because GBP fell and stock markets rose, we have just witnessed a dovish rate rise. In achieving this feat, the BoE has had the same success as Draghi on the expected tapering of the ECB’s QE announced late last month. Hats off to both the ECB and the BoE How is a dovish rate rise or QE taper achieved? By convincing markets that their expectations of further rate rises or faster tapering of QE or reductions in central bank balance sheets were too hawkish. The key to this particular dovish rise was not Carney, He is… Read More

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The meaning of “Solid” is elastic

From the Statement: “Economic activity has been rising at a solid rate despite hurricane-related disruptions.” The chart shows annualized growth during this “expansion”. Average growth since 2015 is the same as average growth from 2010 to 2014, about 2.1%. Since 2014, what has changed is the volatility of growth, which has dropped by almost half. The only thing that has remained inelastically “solid” is the deepening of the economic contraction!...

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NGDP Forecast Update: First Q3 Print

During the first month of every quarter we are flying, even if not quite blind, not as well informed as we might like.  This is because we don’t get official statistics on the previous quarter’s GDP until a month in. As a result, we have to use an estimated GDP number, which means we usually have a bit of a ‘correction’ when the first estimate comes in. For 2017Q3, the first GDP estimate was released on Friday, October 27. The new GDP number has US final nominal spending at a yearly pace of 19.495 trillion USD, which is up an…...

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