Initial market (and Finance Twitter) reaction to the FOMC decision and subsequent press conference last Thursday seemed pretty unequivocal – this was a dovish hold. The one combination that was likely to lead to the most investor pain. A hawkish hold, or even a hike would have been preferred. But I am once again left … More FOMC review: was it really that dovish?
You know when “how to understand the Fed” guides appear in the mainstream press that the policy decision tonight has become the most over-analysed ever. So I am not going to add much to the debate here, other to give a short summary of my views. At the start of the year I expected the Fed to hike … More FOMC: a finely balanced decision
In the IMF’s most recent Article IV on the US (here), they made the case for the Fed to hold off on raising rates until 2016. One of the factors that they pointed to was the experience of Sweden in recent years, who raised rates, only to have to cut them again even more more … More FOMC: The US is not Sweden
Following on from the first part of my June FOMC preview yesterday (here), this post looks at the likely changes to the statement, economic projections and interest rate ‘dot’ plot. Now that the Fed are in more traditional data-dependency mode, I expect only the first paragraph of the statement to change, reflecting the data developments over … More FOMC: June meeting preview; Part 2 (statement, projections and dots)
Earlier this year (indeed since about Q3 last year) I had expected that the Fed would start the process of policy normalisation in June. That was predicated on the idea that the headwinds to growth were abating, the neutral real rate of interest was rising, and without a policy response we would see growth accelerate, unemployment … More FOMC: Preparing for lift-off
The FOMC meeting today will be accompanied by just a short statement. Outside the quarterly press conferences, the meetings tend to be less market-moving, and this one shouldn’t provide any surprises in of itself, as the March statement made clear that April was not on the cards for lift-off. However, unless the Committee choose to … More FOMC: let’s see how the market responds to pure data-dependence
I have spent a bit of time – over an otherwise very enjoyable Easter long weekend – thinking about the US non-farm payrolls print last Friday. Once again the market reacted strongly to a surprise, but this time it was to the downside. Front-end FI rallied, the dollar sold off and equities kind of went meh, so … More US data primer: the folly of non-farm payrolls; signal vs noise
So I have spent the past day or so trying to get my head around what Yellen and the FOMC were trying to achieve on Wednesday. It certainly wasn’t the massive volatility that followed in the FX market after the announcement and into Thursday. Once again, lack of liquidity and extreme positioning seems to have … More FOMC: looking to the BoE playbook of ‘gradual and limited’?
All eyes this week will be on the FOMC statement, forecasts and press conference on Wednesday. While the first quarter has been a little disappointing on the activity front, the labour market continues to power ahead (although wages growth remains sluggish), and both core inflation and survey measures of inflation expectations have remained fairly stable. In … More FOMC: the path to policy normalisation
A very interesting paper by Hamilton (et al.) out last week looked at the question of neutral real rates in the US (and elsewhere), and how they compared over time with average or ‘trend’ growth rates. Also out last week, was a really important speech by John Williams of the SF Fed, “The Economic Outlook … More FOMC: neutral real rates, accelerating growth and policy normalisation