GDP was better than 3% in the first quarter, the payroll report was greater than +250k, and the unemployment rate was the lowest in fifty years. The economy in the US must (still) be booming. But: The vast US services sector recorded a surprise slowdown in April, according to the Institute for Supply Management’s latest survey. The group said Friday [...]
When all this federal funds business started, the effective federal funds (EFF) rate was pretty well established at 16 bps above the RRP “floor.” It had been that way, consistently, all throughout Reflation #3, all throughout 2017. So consistent, that dependable spread was a very solid indication of reflation. As of yesterday, EFF was…16 bps above RRP. It’s not at [...]
Yesterday, the FOMC altered its view of household spending and business capex. It wasn’t a huge difference, they never are. Figuratively, these sorts of downgrades are little by little even though if things were ever to go the right way the language upgrades wouldn’t be subject to so much reservation. There isn’t much in the official statements anyway, just a [...]
They will have to be forced into it. There is no voluntary rate cut and there never has been. This idea, however, is what’s being offered today in the wake of another stubborn line in the sand. Central bankers are always, always the last to figure things out. Jay Powell was still talking about inflation and more aggressive monetary policy [...]
In early February 1994, Alan Greenspan’s Fed would begin to raise the federal funds rate target for the first time in five years. Not since February 1989 had the FOMC thought economic conditions warranted an increase. In between, the 1990-91 recession which wasn’t especially bad, certainly not by contemporary standards set by the contractions in the seventies and early eighties. [...]
Federal funds is up again. As of yesterday, the 29th, the effective rate (EFF) is now 5 bps above IOER. That takes it to within 5 bps below the top of the Federal Reserve’s policy range. According to FRBNY, the 1st percentile in yesterday’s session was 2.40%, meaning that almost the entire federal funds market is paying more than IOER. [...]
It’s the most testable of all hypothesis, yet the one which no one wants to test. The central bank is central. All the textbooks say it. You’ve been taught to believe it from your first introduction to Economics and finance. Whatever happens, you aren’t supposed to fight the Fed. The US central bank unleashed powerful, novel liquidity programs, an ultra-loose [...]
It is the shadows what really matter. A big enough problem in them would affect pretty much everything, including far off, out-of-the-way places like federal funds. Thus, if we observe weird things going on there we can infer more serious issues back where it does mean something. In 2013 and 2014, the Federal Reserve was hugely optimistic. FOMC officials didn’t [...]
On August 12, 1985, Japan Airways flight 123 left Tokyo’s Haneda Airport on its way to a scheduled arrival in Osaka. Twelve minutes into the flight, the aircraft, a Boeing 747, suffered catastrophic failure when an aft pressure bulkhead burst. The airplane had been improperly repaired from a tailstrike (the tail of the aircraft actually hitting the runway pavement) seven [...]
Over the last several years, we’ve been bombarded with mainstream stories about how interest rates have nowhere to go but up. Inflation, recovery, and most of all fundamentals. Who in their right mind is going to buy all this government debt! The supply is rising and, according to these people, the demand can only be falling. There is nothing in [...]
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