A Narrowly Democratic Congress Could Boost Spending and Growth
With a narrowly Democratic Congress, U.S. fiscal spending is likely to increase on economic relief from the pandemic, infrastructure, and healthcare, boosting the economic rebound.
Europe’s Labor Measures: Short-term Gain, Long-term Pain?
European measures applied to mitigate the effects of the pandemic have contained the unemployment rate in Europe more than in the U.S. While recognizing economic risks from the rising number of COVID-19 cases in the U.S., our forecast sees this success ratio reversing before the end of the year.
Fed Shifting Focus From Crisis Management to Easy Financial Conditions
We expect the Federal Reserve will continue to conduct asset purchases at its current pace through year-end, and eventually commit to keeping interest rates on hold through 2022. This should help ensure easy financial conditions and support the economic recovery.
Core CPI May Tick Up Before Moderating in the Second Half
The decline in oil prices continues to weigh on headline Consumer Price Index (CPI) inflation, which fell 0.3 percentage point to 1.6% year-over-year in January. However, core CPI (which excludes energy and food prices) held steady at 2.2% year-over-year, with support from normalization in retail prices after holiday discounting late last year.
How Durable Is the Fed’s Dovish Turn?
The Federal Reserve’s recently communicated change in its outlook for monetary policy has led to concerns that the Fed is overreacting to market volatility, or worse, succumbing to political pressures. However, we believe there is a more compelling reason for the dovish shift.
The Fed: Patient Amid Rising Uncertainty
Following this week’s meeting of the Federal Open Market Committee (FOMC), the Fed issued a statement that more forcefully signaled its intention to be cautious in the face of a more uncertain outlook. Policymakers also signaled that they view the current stance of monetary policy as more or less neutral. Therefore, investors should expect the Fed to keep rates steady, for now.
The Fed: Poised to Pause in March
With the effective fed funds rate now only slightly below the range of estimates for neutral monetary policy and few signs of economic or financial market overheating, we believe that the Federal Reserve is likely to hold rates steady in March, interrupting its pattern of quarterly interest rate hikes.
Another Hike: When Will the Fed Pause – or Stop?
Tighter financial conditions and slower global growth have weakened arguments that U.S. monetary policy will be restrictive in the coming years to alleviate the risk of economic overheating or growing financial imbalances.
Core CPI Rebounds on Used Car Bump, While Tariffs’ Impact Is Mixed
Core U.S. Consumer Price Index (CPI) inflation rebounded in October, though not as much as expected, driven largely by a bounce in used car prices. The year-over-year rate ticked down to 2.1%, and evidence of tariff-related price increases was mixed.
No September Surprise: U.S. Economic Strength Prompts Fed to Raise Policy Rate
The Federal Reserve’s September statement, projections and press conference were in line with our expectations and support our view that the Fed will continue on a gradual trajectory of interest rate hikes.
The Uncertainty Principle: Fed Weighing Policy Risks
Federal Reserve Chairman Jerome Powell’s remarks at the annual Jackson Hole Symposium emphasized several important uncertainties about the structural aspects in the U.S. economy that greatly complicate the central bankers’ medium-term job of setting monetary policy.