Can the Federal Reserve engineer a soft landing, in which it defeats excessive inflation without tipping the US economy into recession? This week, Fed officials will offer important clues as to whether that’s achievable.
US banking regulators are back to their old tricks. In the wake of a crisis — this time the March demise of a handful of regional banks — they want banks to fund themselves with more loss-absorbing equity capital.
Who knew that the subject of US Treasury bond yields could inspire such passion? When, in late June, I argued that they were likely to move considerably higher than the then-prevailing 3.75%, I attracted some vehement pushback.
After a string of encouraging data, markets are displaying increasing optimism that the Federal Reserve might be done with its battle against inflation — and that the US will experience a rare “soft landing,” in which inflation falls back to 2% and the economy cools without dipping into recession.
The recent demise of Silicon Valley Bank and a few other regional lenders is forcing policymakers to revisit a difficult question: What should the government do to prevent such damaging bank runs? Should it yet again expand deposit insurance?
Yields on long-term US Treasury securities have risen, and prices have fallen, farther and faster over the past few years than at any time since the 1980s. This has wreaked no small amount of havoc — contributing, for example, to the recent demise of several regional banks.
Having presided over America’s first banking crisis since 2008, Federal Reserve officials are rightly focused on reforming regulation. That said, they should keep in mind some lessons for monetary policy, too.
The once-burgeoning realm of crypto and decentralized finance keeps imploding, presenting policy makers with a quandary: Should they just let it burn, or step in to address its now-obvious flaws?
The US is headed for yet another standoff over the federal debt limit. House Republicans say they won’t raise the arbitrary cap on total borrowing unless President Joe Biden agrees to budget cuts.
In some ways, the 2023 economic outlook for the US is locked in. The Federal Reserve’s goal is to push the rate of inflation back down to 2% over the next few years.
Some people are suggesting that the Federal Reserve consider a compromise in its battle with rising prices: Instead of imposing the full monetary tightening required to get inflation back down to its 2% target, why not increase the target a bit?
All financial manias have some features in common.
Federal Reserve officials have been getting an earful about the economic threat that the US central bank’s rapid monetary tightening presents to the rest of the world — complaints that will no doubt be amplified at this week’s meetings of the International Monetary Fund and the World Bank.
Could a disruptive cash crunch ensue, along the lines of what happened in money markets a few years ago?
Nearly a year ago, when US Federal Reserve Chair Jerome Powell delivered his speech at the annual economic conference in Jackson Hole, a global audience was hanging on every word for insights into the outlook for growth, inflation and monetary policy in an extremely uncertain environment.
If you’re still holding out hope that the Federal Reserve will be able to engineer a soft landing in the US economy, abandon it.
Digital finance is booming, with the value of cryptocurrencies outstanding reaching more than $2 trillion from almost nothing a decade ago – almost entirely without regulatory oversight to protect investors and the broader financial system. This is not likely to end well, unless officials intervene in a thoughtful way.
The U.S. Federal Reserve has bitten the bullet: At their policy-making meeting next week, in recognition of persistent high inflation, officials will announce a speedier tapering of asset purchases that have been supporting economic growth.
Investors are increasingly betting that the Federal Reserve will have to raise interest rates sooner than previously expected to keep inflation in check. A few months ago, futures prices implied that “liftoff” from the current near-zero level wouldn’t occur until 2023 or later; now they suggest it’ll happen near the middle of next year.
