So, wait... there's a downward revision of the March 2023 employment levels? So, if the data had come in accurately in March of 2023, the Fed likely wouldn't have felt the need to raise rates?
A really great analysis founded in current data and context. It is really refreshing to see the whole analysis put forward on its own intrinsic economic analysis with reference to current politics. It goes without saying that any cut in the rate may accrue to the benefit of the Democrats in the current election cycle. Hopefully this is not a consideration at the Fed. One should note that this is in marked contrast to the other most important "independent" federal democratic institution - the Supreme Court - which has been so extremely partisan that it will be tainted for a long time.
"Since the Fed ramped up communication policy under Bernanke, it is unusual for markets to be so uncertain about the vote's outcome within days of the meeting. The market odds have been shifting around. Normally, Fed officials, especially the Chair, telegraph the decision with a high likelihood ahead of time."
This kind of "forward guidance" is pernicious. It only serves to reduce Fed's ability to respond to changing circumstances, to be data dependent. Uncertainty about future decisions of the Fed is normal and desirable. The certainty should be that the Fed is aiming for 2% PCE. Market participants will have different ideas about what the Fed ought to do (=about what the Fed WILL do) to achieve that.
" Normalizing the funds rate will be tricky when the neutral rate is unknown, the data are noisy, and historical relationships remain less relevant. "
Normalizing implies a static level. There should be no presumption that maintaining the taregt inflation rate implies a static EFFR. THAT depends on savings investment behavior, especially whether deficits will be slightly irresponsible under Harris or wildly irresponsible under Trump.
I agree that 50 is better but only becasue the Fed failed to start cutting much earlier.
What about the tri-mandate? Ensuring a liquid and functioning treasury market? We all saw what happened when carry trade collapsed, would 50 bps hurt global Eurodollar liquidity?
I've lived in community's with a single daily newspaper (yup, this dates me--but it's just a fable)
and many local citizens have a very dim view of their paper's editorial points of view--especially when it comes to endorsing a candidate for election. Indeed, many may think that the endorsement can be a "kiss of death."
This story, as you might guess, involves Claudia Sahm's endorsement of "50" and I wonder, Claudia, if it may not be the ol'kiss of death given your past history with the Fed.?
I'm a very long term fan with great respect for you so--for goodness sake--don't take this wrong.
So if the army is operated by the state it would be a communist army?
Fed has a mandate to maintain full employment and a stable currency, those are good, worthwhile goals to strive for. Our country is better off when people who want to work are working.
my pov , the major global economic, political issue is social democracy vs liberal democracy, ie community rights vs individual rights... per the urantia papers, god values community rights vs not respecting as much invidual rights
ub says boatloads,... god doesn't respect persons... vs the greater good, my interpretation god cares about we the people, not i the invidual as such. god cares about the greater good not the Invidual good, my pov
Thanks for another clear and informative letter. (Also, the latent grammarian in me repects the use of the plural verb-form with "data.")
As always, clear, nuanced, and illuminating. SO rare in the current discourse. Thank you, thank you.
Thank you!
So, wait... there's a downward revision of the March 2023 employment levels? So, if the data had come in accurately in March of 2023, the Fed likely wouldn't have felt the need to raise rates?
A really great analysis founded in current data and context. It is really refreshing to see the whole analysis put forward on its own intrinsic economic analysis with reference to current politics. It goes without saying that any cut in the rate may accrue to the benefit of the Democrats in the current election cycle. Hopefully this is not a consideration at the Fed. One should note that this is in marked contrast to the other most important "independent" federal democratic institution - the Supreme Court - which has been so extremely partisan that it will be tainted for a long time.
I sort of missed the bandwagon on finding a good dividend via equities. I was pretty happy with 5% on my cash, down 50 so soon kinda makes me sad.
Brilliant!
"Since the Fed ramped up communication policy under Bernanke, it is unusual for markets to be so uncertain about the vote's outcome within days of the meeting. The market odds have been shifting around. Normally, Fed officials, especially the Chair, telegraph the decision with a high likelihood ahead of time."
This kind of "forward guidance" is pernicious. It only serves to reduce Fed's ability to respond to changing circumstances, to be data dependent. Uncertainty about future decisions of the Fed is normal and desirable. The certainty should be that the Fed is aiming for 2% PCE. Market participants will have different ideas about what the Fed ought to do (=about what the Fed WILL do) to achieve that.
" Normalizing the funds rate will be tricky when the neutral rate is unknown, the data are noisy, and historical relationships remain less relevant. "
Normalizing implies a static level. There should be no presumption that maintaining the taregt inflation rate implies a static EFFR. THAT depends on savings investment behavior, especially whether deficits will be slightly irresponsible under Harris or wildly irresponsible under Trump.
I agree that 50 is better but only becasue the Fed failed to start cutting much earlier.
Time to find out whats possible
Cut the policy rate to expected zero real
Where it was in 2019 and oughta be always
Control credit flow overtly
With an explicit target
Credit ration system
Police portfolios to
Keep standards in line
with expect credit outcomes not expectation price level movement
Price level needs direct stand by
Floor and ceiling regs
Until we reclaim our natural resources, then commodities will continue to be piss ants
What about the tri-mandate? Ensuring a liquid and functioning treasury market? We all saw what happened when carry trade collapsed, would 50 bps hurt global Eurodollar liquidity?
" the data suggest the funds rate pushed the labor market away from maximum employment, even as disinflation was underway"
That was avoidable
And should never happen
I've lived in community's with a single daily newspaper (yup, this dates me--but it's just a fable)
and many local citizens have a very dim view of their paper's editorial points of view--especially when it comes to endorsing a candidate for election. Indeed, many may think that the endorsement can be a "kiss of death."
This story, as you might guess, involves Claudia Sahm's endorsement of "50" and I wonder, Claudia, if it may not be the ol'kiss of death given your past history with the Fed.?
I'm a very long term fan with great respect for you so--for goodness sake--don't take this wrong.
I don't know @mmb-phx, seems like she nailed it to me!
The neutral rate
Is a unicorn.
A poetic license
No policy rate of interest
can settle price level change to zero
or any other steady rate of change
Just as no rate of unemployment
Is neutral
And yet
The Laissez faire fantasy machine
Never sleeps
I’m sick and tired of hearing dumb and stupid people talk about communism. The federal reserve board is communism by any definition.
No its the state
operating the credit system
on behalf of finance capital
State operation sounds like communism to me, brother
Bravo higher powers
Apparently not powerful enough however
Need some bottom up help
Lets organize community actions
Ps job sites are communities
too of course
And there
Job holders self organization
Faces a cyclops
So if the army is operated by the state it would be a communist army?
Fed has a mandate to maintain full employment and a stable currency, those are good, worthwhile goals to strive for. Our country is better off when people who want to work are working.
Yes
Terms require sorting and careful deploying to clarify not muddle
A subject
A community
Orientation
Over and against
An individualist orientation
Is not what we call communism
Ie
The absence
Of
Household / individual property rights
my pov , the major global economic, political issue is social democracy vs liberal democracy, ie community rights vs individual rights... per the urantia papers, god values community rights vs not respecting as much invidual rights
ub says boatloads,... god doesn't respect persons... vs the greater good, my interpretation god cares about we the people, not i the invidual as such. god cares about the greater good not the Invidual good, my pov