The first central banker to blink wasn’t Jay Powell it was Stephen Poloz. The Bank of Canada has been steadily raising its policy rate like the Fed, or had been. It was widely expected that Canada’s central bank would skip this last meeting but there was no doubt about another 25 bps increase next month. Instead, things are a little [...]
R-star is a fiction which like term premiums for interest rate decomposition allows Economists to skate past reality and onto their econometric blackboards. If there was a neutral rate, which R-star (or R*) proposes to be, why would there be only one and what good would knowing its level today do? In a dynamic world, if you figure out where [...]
On August 30, 2006, the Bureau of Economic Analysis (BEA) reported preliminary estimates for US Gross Domestic Product (GDP) in the second quarter. It was figured back then that domestic output increased 2.9% over the first quarter, seasonally adjusted, somewhat of a decrease from the robust start to 2006. Final estimates for Q1 thought the economy had advanced 5.6% during [...]
By the time things got really bad, China’s economy had already been slowing for a long time. The currency spun out of control in August 2015, and then by November the Chinese central bank was in desperation mode. The PBOC had begun to peg SHIBOR because despite so much monetary “stimulus” in rate cuts and a lower RRR banks were [...]
We can add this to the list of all the things going wrong in October. If it felt like a wave of renewed deflation built up and swept over markets and the global economy, it’s because that’s just what had happened. I don’t think it random coincidence the WTI curve went contango and oil prices globally crashed when they did. [...]
It is definitely one period that they got wrong. Still, IHS Markit’s Composite PMI for the US economy has been one of the better forward-looking indicators around. Tying to real GDP, this blend of manufacturing and services sentiment has predicted the general economic trend in the United States pretty closely. The latter half of 2015 was the big exception. For [...]
Maybe blame the ECB. On June 5, 2014, Europe’s central bank announced a change in monetary policy. Beginning June 11, their deposit account mechanism that acts as a hard floor for European money rates would be set below zero for the first time. It would mean any funds left on deposit with the ECB in this account would be “paid” [...]
What a difference a year makes. As 2017 finished up, the Federal Reserve was widely seen as turning “hawkish.” Inflation in the US, many believed, was about to be unleashed by a blistering labor market so tight we’ve not seen anything like it in decades. The central bank would be forced into a quickened pace of “rate hikes” attempting to [...]
Last December, something clearly broke. The global basis had swept far under zero again, an ominous sign that eurodollar banks were having trouble creating, finding, and redistributing global funding. A cross currency basis swap is one way to do it, the negative basis indicating a desperate shortage of dollars offshore (eurodollars). The negative basis wasn’t the only thing suggesting dramatic [...]
The term “overseas turmoil” didn’t ever make into the official language, it was only through careful innuendo that things like FOMC meeting minutes would ever refer to the idea. It was a different story in the media, where the phrase gained its own currency. Ironically, it was the US currency behind it, which nobody could explain at the time. The [...]
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