April 30, 2018

Inflation & Consumer Spending are bouncing back!

Some even think “stagflation”: Rising prices and collapsing confidence could portend that both inflation and slowing growth are looming, a sure recipe for stagflation. For the past quarter century, however, inflation dynamics has been tame, and tamer still post crisis! To others, Consumer Spending Bounced Back in March. However, another headline from the same source says Growth Cooled in First Quarter as Consumers Reined In Spending. Consumer spending has done nothing, let alone “bounce”. Compare and contrast consumer spending growth pre and post crisis! The “doomsday march” continues unabated!

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FOMC Funk

Long-term rates recently crawled up. On rising long-term rates, there are two theories. In the first, they signal an improved economic outlook, which leads investors to anticipate a swifter hike in rates. In the second, they are rising because of a change in investor expectations of a swifter rise in rates, independent of economic conditions. A swifter rise in rates is expected. According to recent views of FOMC members: Chairman Jerome Powell April 6, Chicago “As long as the economy continues broadly on its current path, further gradual increases in the federal-funds rate will best promote these goals.” Governor Lael Brainard April… Read More

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NGDP Outlook Update: First Estimate of ‘18 Q1 NGDP as Expected

We’ve updated the NGDP Forecast for one market day, Thursday April 26, but using the just-updated NGDP data, including the first estimate of 2018’s first quarter. The NGDP report may have looked good if one considers year-over-year growth, but quarter-on-quarter is the only new information truly contained in the report, and this is how it shows up in the forecasting model. The signal is the 4.3% annualized quarterly rate, not the 4.8% year-over-year that Q3 and Q4 ‘17 earned us. The NGDP outlook is lifted a twentieth of a percentage point by the new BLS figures. To get our year… Read More

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