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 [...]
We can add realtors to the list of those who are angry with Jay Powell. The housing market continued its perplexing slump in October, according to a broad section of data encompassing everything from construction to sales of existing homes. We have been told since Economics 101 that the central bank is, well, central, therefore it is easy to infer [...]
The effective federal funds (EFF) rate actually dipped 1 bp last Friday. Having spent the prior eight trading days equal to IOER at 2.20%, it might’ve been heartening for US central bankers under siege. After all, they adjusted that particular policy tool back in June and then in July said this whole EFF thing was due to “special factors” that [...]
It used to be that if the US sneezed, the whole world would catch cold. Placed in terms of how the global economy worked, the point was easily made that US demand pretty much directed how it would fare for everyone else. Without US economic growth, the world would surely stumble as it had throughout modern history. Apparently, this is [...]
June 13 sticks out for both eurodollar futures as well as IOER. On the surface, there should be no bearing on the former from the latter. They are technically unrelated; IOER being a current rate applied as an intended money alternative. Eurodollar futures are, as the term implies, about where all those money rates might fall in the future. Still, [...]
There had been whispers that the FOMC would have to undertake a second “technical adjustment” this year. Is it coincidence that the eurodollar futures curve inverted on the same day, June 13, Jay Powell announced the first one? Perhaps, but given what we are talking about here there is a fair chance they are related, especially in the close aftermath [...]
In June 2003, while discussing the vote that would take the federal funds rate to its then-lowest point, 1%, Alan Greenspan committed what may have been the greatest monetary sin of modern times. The focus for much of the discussion was Japan, that country’s central bank pioneering at that early date all the things the Fed and other majors would [...]
Effective federal funds (EFF) was 1.92% again yesterday. That’s now eight in a row just 3 bps underneath the “technically adjusted” IOER. If indeed the FOMC has to make another one to this tortured tool we know already who will be blamed for it. The Treasury Department announced yesterday that it will be auctioning off $65 billion in 4-week bills [...]
On June 13, the day the eurodollar futures curve inverted, Federal Reserve Chairman Jerome Powell was at his regularly scheduled press conference following the regularly scheduled FOMC meeting. Nobody asked him about eurodollar futures, of course, because why bring that up? The press did inquire about IOER, though. The Fed had decided to make a “technical adjustment” in its policy [...]
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