Correspondent, Washington, DC
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Aug 7, 2013
via MacroScope

Obama’s second chance to reshape the Fed

Lost in the bizarre Yellen vs. Summers tug-of-war into which the debate over the next Federal Reserve Chairman has devolved, is the notion that President Barack Obama is getting a second shot at revamping the U.S. central bank.

The perk of a two-term president, Obama will get to appoint another three, potentially four officials to the Fed’s influential seven-member board of governors in Washington. This may buy the president some political wiggle room when it comes to his pick for Fed chair, since he might be able to placate Republicans with one or two “concession” appointments. Every Fed governor gets a permanent voting seat on the policy-setting Federal Open Market Committee.

Aug 5, 2013

Shrunken workforce gives Fed added policy headroom

WASHINGTON (Reuters) – So many workers have left the job market in recent years that the decline in the official unemployment rate to 7.4 percent last month may understate the extent of weakness in employment prospects.

This gives Federal Reserve officials considerable room to keep interest rates near zero, potentially well beyond current expectations of rate increases beginning in 2015.

Aug 1, 2013
via MacroScope

St. Louis blues: Fed’s Bullard gets a sentence

Ellen Freilich contributed to this post

Talk about getting a word in edgewise. St. Louis Federal Reserve Bank President James Bullard got almost a full sentence in the central bank’s prized policy statement.

Some background: Bullard dissented at the Fed’s June meeting, arguing that, “to maintain credibility, the Committee must defend its inflation target when inflation is below target as well as when it is above target.” The latest inflation figures show the Fed’s preferred measure at 0.8 percent, less than half the central bank’s target.

Aug 1, 2013
via MacroScope

U.S. GDP revisions, inflation slippage tighten Fed’s policy bind

Richard Leong contributed to this post

John Kenneth Galbraith apparently joked that economic forecasting was invented to make astrology look respectable. You were warned here first that it would be especially so in the case of the first snapshot (advanced reading) of U.S. second quarter gross domestic product from the U.S. Bureau of Economic Analysis.

Benchmark revisions to U.S. gross domestic product made for a bit of a mayhem for forecasters, who were way off the mark in predicting just 1 percent annualized growth when in fact the rate came it at 1.7 percent. Morgan Stanley had predicted a gain of just 0.2 percent.

Jul 25, 2013

A failure to communicate – Fed ‘guidance’ fails early test

WASHINGTON (Reuters) – Watch what Federal Reserve officials do, not what they say. That was Wall Street’s reaction to the U.S. central bank’s hints that it could soon begin to wind down its bond-buying stimulus.

Rather than heed Fed Chairman Ben Bernanke’s reassurance that the end of quantitative easing would not presage an imminent rise in interest rates, the bond market pushed borrowing costs sharply higher, a sign the central bank’s reliance on “forward guidance” may not be working as intended.

Jul 25, 2013

A failure to communicate: Fed ‘guidance’ fails early test

WASHINGTON (Reuters) – Watch what Federal Reserve officials do, not what they say. That was Wall Street’s reaction to the U.S. central bank’s hints that it could soon begin to wind down its bond-buying stimulus.

Rather than heed Fed Chairman Ben Bernanke’s reassurance that the end of quantitative easing would not presage an imminent rise in interest rates, the bond market pushed borrowing costs sharply higher, a sign the central bank’s reliance on “forward guidance” may not be working as intended.

Jul 22, 2013
via MacroScope

Fed on guard over low U.S. savings rate

As Federal Reserve Chairman Ben Bernanke delivered what may have been his last testimony on monetary policy before Congress, most of the world’s attention was focused on what hints he might give about the timing of an eventual reduction in the pace of asset purchases.

Tucked in the actual semi-annual monetary policy report Bernanke delivered to lawmakers on Capitol Hill was a little-noticed reference to growing worries about the potential for an extended period of low savings, associated in part with long-stagnant wages, to thwart long-run economic progress.

Jul 11, 2013

Argentine soyoil price plummets due to EU biodiesel duties

BUENOS AIRES, July 11 (Reuters) – The export price of
Argentine soyoil has plummeted 21 percent so far this year, due
to new European biodiesel tariffs, putting one of the country’s
key industries at risk at a time of uncertainty in Latin
America’s third biggest economy.

With annual inflation running at 25 percent and investment
flows reduced by confidence-sucking foreign exchange and import
controls, the government needs all the farm-related tax revenue
it can get.

Jul 10, 2013
via MacroScope

Raskin’s warning: ‘Shouldn’t pretend’ Fed capital rules are a panacea

Post corrected to show Brooksley Born is a former head of the Commodity Futures Trading Commission (CFTC) not a former Fed board governor.

Underlying the Federal Reserve recent announcement on new capital rules was a general sense of “mission accomplished.” The U.S. central bank, also a key financial regulator, has finally implemented requirements that it says could help prevent a repeat of the 2008 banking meltdown by forcing Wall Street firms to rely less heavily on debt, thereby making them less vulnerable during times of stress.

Jul 5, 2013
via MacroScope

Fear the Septaper

Credit to Barclays economists for coining the term ‘Septaper’

A solid U.S. employment report for June appears to have cemented market expectations that the Fed will begin to reduce the pace of its bond-buying stimulus in September.  Average employment growth for the last six months is now officially above 200,000 per month.

Never mind that, even at this rate, it would take another 11 months for the job market to reach its pre-recession levels – and that’s not counting the population growth since then.

    • About Pedro

      "Pedro da Costa has been covering economics and financial markets since 2001. He is currently based in Washington and focuses on the Federal Reserve and macroeconomic policy. Da Costa earned a Master's in international relations at the University of California San Diego and studied sociology and political science as an undergraduate at the University of Chicago and the London School of Economics. He grew up in Rio de Janeiro, Brazil."
      Joined Reuters:
      2001
      Languages:
      English, Portuguese, Spanish, French
      Awards:
      2011 Deadline Club Award from the Society of Professional Journalists' New York Chapter
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