Interest rates hikes are not done and dusted

July 20, 2015

U.S. Federal Reserve Board Chair Yellen talks with Carney, Governor of the Bank of England, during the G20 finance ministers and central bank governors meeting in Istanbul

The U.S. and British central banks are scrambling to be the first of the majors to raise interest rates after a long period of unprecedented monetary generosity. It won’t happen immediately but both Janet Yellen, who chairs the U.S. Federal Reserve, and Bank of England Governor Mark Carney say there will be a hike this year (Yellen) or around the end of the year (Carney). Might this be a bit of a rush? Not everything in the world economy is as sanguine as the U.S. and British economies purport to be.

Fed: behind the curve, or too trigger happy? Neither

July 15, 2015

?????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????As the U.S. Federal Reserve edges closer to its first interest hike in nearly a decade, its critics are lining up into one of two camps: either the Fed is hopelessly behind the curve, and will have to grapple with runaway inflation very soon; or the Fed seems overzealous in wanting to get interest rates back to what it would call a normal level and instead should wait until late this year or next before hiking.

UK pay may be taking off but rates will stay grounded for a while yet

July 2, 2015

The Bank of England is seen through columns in LondonBritish wage growth will outstrip the Bank of England’s forecast this year but that doesn’t mean the first rate hike will come sooner.

UK pay finally on the rise?

June 17, 2015

We’ve been told for years that a meaningful pickup in wages – usually the primary driver of domestic inflation – was required to set the stage for interest rate hikes both in the UK and the U.S.

Still waiting for the great wage rebound

May 7, 2015

AIt’s now been well over a year since the two major central banks most likely to raise interest rates in the near future warned us we should pay attention to pay.

Is the dollar taking over the Fed’s job?

May 5, 2015

US trade

 

 

 

 

 

 

 

 

 

While the surge in the greenback since July has turned up in all sorts of economic data, much of it not good, the big one may have just landed.

Monetary policy: New T-shirt needed?

May 1, 2015

San Francisco Fed President John Williams  believes deeply that monetary policy is data-dependent, so much so that he has printed the mantra on T-shirts that he is giving away coast to coast. On Friday at Chapman University in Orange, Calif., however, he didn’t discuss the current state of U.S. economic data or the stance of monetary policy. Instead, he focused on why forcing the Fed to follow a strict monetary policy rule to make interest rate decisions would be, well, a problem (http://reut.rs/1bmCfvB). It’s a view that a number of his colleagues, including Fed Chair Janet Yellen, have publicly embraced. Monetary policy — it’s independent. Sounds like something you could put on a T-shirt.

As Fed’s statement shrinks, data looms larger

April 29, 2015

Perhaps the most notable aspect of the Federal Reserve’s April statement is its brevity: at just 560 words, it’s the shortest post-Fed-meeting statement since October 2012.  In saying less about its much-anticipated first interest-rate hike, the Fed is nudging markets to pay attention to other stuff. Like, for instance, the April jobs report next Friday, and the May jobs report one month later. “The Fed is data dependent,” says Eaton Vance portfolio manager Eric Stein. “They’d like to get to a world where the market will react more to numbers rather than Fed meetings and statements.”

U.S. growth outlook snowed under yet again

April 29, 2015

SFor many years in a row, since a form of feeble recovery began from the worst financial crisis in more than 80 years, a similar pattern of déjà vu has set in for the U.S. economy.

Data isn’t as objective as the Fed might have you believe

April 28, 2015

SFFedTshirt.jpgFed officials say they will be “data-dependent” when it comes to making monetary policy. San Francisco Fed President John Williams feels so strongly about it, he’s even printed up a T-shirt to get that message across. But truth be told, data-dependency is not as objective as it sounds. Data doesn’t dictate policy; it’s the interpretation of data that’s key. What is rate-hike-worthy data to one policymaker is keep-the-pedal-to-the-metal data for another. Take, for instance, U.S. GDP growth. Richmond Fed President Jeffrey Lacker says he expects GDP growth to average 2 percent to 2.5 percent this year, a pace that would justify a Fed rate hike in June. Chicago Fed President Charles Evans expects 3 percent growth this year, and does not believe even that would justify a rate hike until the first half of 2016. So what does it tell you about monetary policy if you see GDP growth of 2.5 percent? Not a whole lot, judging from these two. And the statements of other Fed officials are hardly more helpful. Indeed, as Atlanta Fed President Dennis Lockhart said recently, “I don’t think it is advisable to approach such a decision with rigid quantitative triggers in mind.” Watch the data, sure. But don’t assume the data will tell you much about the exact timing of the rate hike. Monetary policy – it’s subjective. Maybe some policymaker will print that on a T-shirt.