Monetary Policy

16 June 2016

Searching for Equilibrium

The Federal Reserve modified its stance yesterday without changing rates.  It is not just about how fast the Fed sees itself normalizing monetary policy but also where the level of the equilibrium rate. The Federal Reserve modified its stance yesterday...

16 June 2016

Now Can We Expected a Slower Tightening Cycle?

The Federal Reserve anticipated a more gradual tightening path going forward.  This weighed on the dollar and lifted equities.  August Fed funds futures imply less of a chance of a hike next month.  It is now consistent with an 8% chance...

15 June 2016

Japan’s Kuroda and the BOJ are in a Corner

Following today's FOMC meeting, the central banks of Japan, Switzerland, and the UK meet tomorrow.  The SNB will keep its powder dry to be able to respond to the results of the UK referendum if needed.  The Bank of England...

15 June 2016

Your FOMC Primer

The FOMC meeting later today, with updated economic projections and a press conference, is the key event of the day, even though three other central banks meet over the next 24 hours.  Investors should know four things before the FOMC...

9 June 2016

When Unconventional Monetary Policy Becomes Conventional

One of the most significant new developments in the global post-global financial crisis (GFC) economy is the enormous asset purchase programs implemented by central banks in the industrial world to stimulate their economies. Widely known as quantitative easing (QE) programs,...

8 June 2016

Can the Fed Hike Rates in an Election Year?

The most important element in next week's FOMC meeting may come from the dot plot and whether the Fed officials are backing away from the two hikes thought appropriate in March. When looking the schedule of FOMC meetings, and understanding...

6 June 2016

So Now the ECB is Buying Corporate Bonds

In March, the ECB decided to increase its asset purchases from 60 to 80 bln euros a month and to include corporate bonds.  The corporate bond-buying program begins this week.  We use an FAQ format to discuss the key issues....

5 June 2016

June or July Now Looks Like July

Through the first part of the year, the swinging pendulum of expectations for the trajectory of Fed policy has been a major driver in the foreign exchange market.  This is true even though the ECB and BOJ continue to ease...

24 May 2016

Does it Matter When the Fed Raises Rates?

The US dollar lost momentum yesterday but has regained it today.  The euro has been pushed through last week's lows near $1.1180.  The next immediate target is $1.1145, which corresponds to the lower Bollinger Band today, though the intraday technical...

23 May 2016

Interest Rate Differentials Widen and the Dollar Benefits

The US dollar’s weakness in recent months, despite negative interest rates in Europe and Japan likely had many contributing factors.  These factors include shifting views of Fed policy, weaker US growth, the recovery in commodity prices, including oil, gold and...

19 May 2016

Not Seeing the Leadership for the Minutes

We felt strongly that the FOMC minutes would be more hawkish than the statement that followed the meeting, and we were not disappointed.  However, our caveat remains the minutes dilute the signal that emanates from the Fed's leadership, Yellen, Fischer,...

13 May 2016

And Now for Something Completely Different

The Great Financial Crisis has exposed a deep chasm in economics and economic policy.  In no single institution is this crystallized more than at the Bank of Japan.  The former Governor, Shirakawa brought policy rates to nearly zero to combat...

2 May 2016

Memo to the FOMC: Stay in Your Lane

This Great Graphic was posted by Hale Stewart on Seeking Alpha. It draws on US government data to show the increase in the median asking rent for vacant units since 1995.  There are other measures of rent, including rent on...