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Browsing Category
Monetary System
Countercyclical capital buffers as the Fed’s third tightening channel
Last week, Lael Brainard gave an important speech on financial stability. In effect, she said the Fed is likely to require increased capital buffers in the future. The key to if and when is in how large mitigating factors are in keeping…
Inflation is building and the Fed will react: DiMartino Booth
Former Fed insider Daielle DiMartino Booth knows the Fed will be out of bullets at the next recession. Even so, its Chairman Jay Powell is now desperately trying to create as much runway as possible.
Brainard: Fed rate policy is not for financial stability
Federal Reserve governor Lael Brainard gave a speech on financial stability yesterday afternoon. The big takeaway is that the "Powell Put" is not very strong. The Fed will stress economic tailwinds and inflation concerns. And it will not…
Cleveland Fed President Mester: Flat yield curve does not signal weakness
Cleveland Federal Reserve President Loretta Mester has joined the chorus of Fed officials trumpeting hawkish views. Note her comments about financial stability and reloading the Fed's interest rate gun. At the margin, these variables…
Jerome Powell affirms Fed commitment to rate hikes through 2020
Inflation is the controlling variable from here on out. Two rate hikes are effectively off the table for 2018 as a likely outcome. Fed projections will rise to four rate increases if inflation rises. And beyond 2018, expect Fed projections…
The three things to look for in these Fed projections
The FOMC is scheduled to release a policy statement tomorrow, with a press conference to follow. A quarter percent increase in the Fed funds target is guaranteed. But future Fed policy will depend on three Fed projections: the dot plot,…
Hyman Minsky and asset price inflation versus consumer price inflation
Hyman Minsky's financial theory of investment is unique. He looks at an economy as having two inherently different price systems. There's one price system for goods and services. And there's another one for assets. The econometrics that…
Questions about the bond bear market and ‘Trump unchained’
In March, signs of inflation have subsided and bonds have rallied. Maybe the bond bear market Gross and Dalio foresee isn't actually going to happen. A lot of the future price action hinges on future monetary policy.
More on renewed curve flattening and Fed overtightening
The US Treasury yield curve has resumed the flattening that caused bond markets worry last Fall. This is a negative signal for future growth. Curve flattening signals Fed tightening. With the primary risk overtightening. I expect a…
Pre-market: Goldman on how the Fed creates the next recession
Right now, many economists are talking about US growth through 2019 and a 3% unemployment rate. Goldman Sachs chief economist Jan Hatzius is one of them. The fly in the ointment is the Fed and its accelerated rate hike timetable.