The sense I get is that Powell is a closet Taylor Rule devotee. If I'm right, then the neutral rate is quite a bit higher than where we are now.
These are conflicting narratives, yes. But they don't have to be because, as Minsky quipped, stability breeds instability.
The yield curve has flattened to the point where two-year yields are only 25 basis points lower than 10-year yields. I have been predicting this outcome for several months and see this as a level to worry about the Fed's ability to engineer…
Turkish bond yields are skyrocketing as the Turkish lira plummets. The question, though, is whether Turkey is an outlier or a sign of more to come.
The Fed is likely to continue to talk up the US economy. And I believe markets will react. With the yield curve at 32 basis points spread between 2- and 1-year Treasuries, we still have scope for further curve flattening.
Note: This post first appeared on Patreon on 2 Jul 2018 I saw a Twitter exchange this morning that reminded me that the Fed is facing a political crisis due to its quantitative easing program. And I think this will limit the Fed's…
GDPNow for the second quarter is still at a breathtakingly high 4.5%. And it's beginning to look like we are going to come in well above 3% growth for the quarter. Consensus estimates are at 3.5%. Meanwhile the yield curve continues to…
Increasing the pace of quantitative tightening in lieu of raising rates would give the Fed the opportunity to test what impact this has on the slope of the yield curve.