RBC economist Tom Porcelli is such a curmudgeon these days. Still, given that he was one of the few economists that accurately predicted the possibility of a negative reading on fourth quarter GDP, maybe it’s not a bad idea to listen to what he has to say.
This week, he expressed concern about a rapid decline in U.S. productivity – and that was before data showing U.S. nonfarm productivity fell in the fourth quarter by the most in nearly two years.
WASHINGTON, Feb 7 (Reuters) – An extended period of low
interest rates could create risks to financial stability, and
policymakers should keep an eye on junk bond and leveraged loan
markets for signs of excess risk-taking, a top Federal Reserve
official said on Thursday.
Jeremy Stein, a member of the U.S. central bank’s powerful
board of governors, said the current evidence is inconclusive.
In the wake of a historic housing crisis that has just recently begun showing signs of a turnaround, foreclosure counseling services are coming under strain. The foreclosure mess may be over for big banks, which recently settled with regulators for $8.5 billion.
Not so for homeowners, who continue to face a bureaucratic morass in dealing with lenders and servicers. According to a new report from the Philadelphia Fed, the city of Philadelphia’s already weak infrastructure for dealing with the fallout from the foreclosure crisis is fraying at the edges.
Tim Ahmann contributed to this post
Suddenly top Wall Street firms are talking about the possibility that the Fed might adopt numerical thresholds for asset purchases, in the same way it has done with interest rates more broadly.
Writes Mike Feroli, chief economist at JP Morgan and a former NY Fed staffer:
Perhaps the most interesting element of Fed policy at the current juncture is how they communicate the conditions that will lead to a slowing or a halt in asset purchases. The speed with which the Committee produced the numerical threshold rate guidance is a reminder that the Bernanke Fed can get their homework done early, but even so we do not look for any news on this front next week.
It’s that time again: Fed watchers are already parsing possible changes to the January policy statement, even before it is released. Goldman Sachs economists in particular have identified one passage ripe for some type of tweak — one that could signal the appetite for continued bond buys:
With Treasury purchases under the new regime already underway, the statement that Treasury purchases would ’initially’ occur at a pace of $45 billion per month will have to be adjusted. If ‘initially’ is replaced with another modifier such as ‘at the present time’ rather than deleted, it would suggest downside risks to the size of the Treasury program later this year.
ATLANTA, Jan 14 (Reuters) – The Federal Reserve’s
unconventional monetary stimulus has its limits, and could pose
threats to market functioning and financial stability if pushed
too far, Atlanta Fed Bank President Dennis Lockhart said on
In another sign of growing reticence about the Fed’s
bond-buying quantitative easing program within the central bank,
Lockhart, seen as a policy centrist who tends to fall in line
with Chairman Ben Bernanke, said the open-ended approach to bond
buys does not mean there are no constraints on the policy.
ATLANTA (Reuters) – The Federal Reserve’s unconventional monetary stimulus has its limits, and could pose threats to market functioning and financial stability if pushed too far, Atlanta Fed Bank President Dennis Lockhart said on Monday.
In another sign of growing reticence about the Fed’s bond-buying quantitative easing program within the central bank, Lockhart, seen as a policy centrist who tends to fall in line with Chairman Ben Bernanke, said the open-ended approach to bond buys does not mean there are no constraints on the policy.
It doesn’t sound sustainable but, at least in coming months, businesses look set to keep booming even as consumers come under pressure – in line with the recent trend. That’s because the economic hit from the partial deal on the fiscal cliff will hurt salaried workers disproportionately, says Steven Ricchiuto, chief economist at Mizuho.
Although the worst of the fiscal cliff has been avoided, the compromise is not macroeconomic neutral. Our calculations, in fact, suggest that the drag created by the reversal of the payroll tax cut and the various tax hikes on upper income households will cut real GDP by upwards of 0.5% to 1% from our preliminary 1.5% to 2% forecast.
David Levy says he is bullish on the U.S. economy long term. But for now, the country is effectively stuck in a “contained depression,” the chairman of the Jerome Levy Forecasting Center told Reuters during a recent visit to our Washington bureau.
Still, things could have been much worse, says the third generation economist. For Levy, the interventions of a large and proactive federal government prevented a repeat of the 1930s.
This post was based on reporting by Leika Kihara in Tokyo
Japan has crossed the monetary rubicon: the government is actively intervening in the affairs of the central bank, pressuring it to more aggressively tackle a prolonged bout of deflation and economic stagnation. The Bank of Japan is expected to discuss raising its inflation target from the current 1 percent level during its next rate decision on January 21-22.
Overnight, a Japanese newspaper reported the finance ministry and the central bank were considering signing a policy accord that would set as a common goal not just achieving 2 percent inflation but also steady job growth.