I really like Joe Calhoun’s theoretical framework in explaining what we try to do here. Like a game of Poker, we are playing against everyone else at the table unlike Black Jack where you are largely playing yourself. It helps explain why I can say the FOMC is irrelevant while at the same time I spend so much time (all [...]
And like that, it’s all different. For more than a year, two years, really, we’ve heard constantly about wage pressures. The US economy buoyed by several domestic factors as well as globally synchronized growth was in danger of getting too far out of hand. The unemployment rate said it was time – three years ago in 2015. The lower the [...]
Clothed in immense self-denial, hung up on absurd self-confidence, Federal Reserve officials gathered on August 7, 2007, to discuss how things really weren’t as bad as everyone seemed to think. There were several key conversations taking place at the FOMC meeting held then all leading nowhere. Policymakers would literally laugh off obvious distress in crucial markets. Here’s one example: MR. [...]
They didn’t make a big deal out of it, tucked away in an attached note to the last FOMC statement was a second “technical adjustment.” The Fed says it wants to raise rates but not like this. IOER was moved another 5 bps lower within the approved policy range (now 2.25% to 2.50%, federal funds). The reason they gave: Setting [...]
The FOMC had voted to taper the final purchasing levels of its third and fourth QE programs at the end of October 2014. Just two days later, the Bank of Japan’s policy committee would vote to expand theirs (already with the extra “Q”). The diverging outlooks punctuated a period of high uncertainty. No more so than global asset markets. When [...]
When the FOMC published the minutes for its November policy meeting, they included an unusually lengthy discussion about federal funds (effective) and IOER. I have no doubt that policymakers would rather have skipped the topic altogether. Demonstrating how little they actually control matters, the plight of EFF has forced them into an almost detailed digression. One thing they wrote with [...]
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” [...]
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 [...]
Paul Volcker caused a minor stir last week releasing a book he has been working on. The aging former Federal Reserve Chairman apparently has a lot to say about the current state of affairs. “We’re in a hell of a mess in every direction,” he told Andrew Ross Sorkin of The New York Times. No kidding; that about sums it [...]
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