It’s official: Instead of policy doves on the U.S. central bank’s Federal Open Market Committee, there are now only “non-hawks.” A research note from Thomas Lam at OSK-DMG used the term in referring to recent remarks from once more dovish officials like Charles Evans of the Chicago Fed and San Francisco Fed President John Williams.
It’s nice to know Federal Reserve officials have a sense of humor about their own forecasting errors. Chicago Fed President Charles Evans was certainly humble enough to admit to some recent misses in a speech on Friday .
It turns out people are better employment forecasters than economists. A report from New York Fed economists finds that confidence measures gleaned from consumer surveys are very tightly correlated with the path of U.S. employment.
Not to mix too many animal metaphors but, generally speaking, monetary policy hawks also tend to bulls on the economy. That is, they are leery of keeping interest rates too low for too long because they believe growth prospects are stronger than economists foresee, and therefore could lead to higher inflation.
If there was ever a time to be worried about whether the Federal Reserve’s bond-buying stimulus is having a positive effect on the economy, the last few months were probably not it. Everyone expected government spending cuts and tax increases to push the economic recovery off the proverbial cliff, while the outlook for overseas economies has very quickly gone from rosy to flashing red. But the American expansion has remained the fastest-moving among industrialized laggards, with second quarter gross domestic product revised up sharply to 2.5 percent.
The euro zone is growing again and while its weaker constituents face plenty of tough times yet, it seems less and less likely that the European Central Bank will cut interest rates from their record low 0.5 percent. That illustrates the problems of the new fad of forward guidance.
With all the QE-bashing that went on at the Federal Reserve’s Jackson Hole conference this year, it was difficult not to get the sense that, barring a major economic disappointment before its September meeting, the central bank is on track to begin reducing the monthly size of its bond purchase program, or quantitative easing.