Will they lower their estimate of the NAIRU? Will they raise their estimate of r-star? Will they drop the following two lines from the statement: “The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run” and/or “The stance of monetary policy remains accommodative”? […]
Last week the unemployment rate hit a cycle low of 3.8%, a level that was last seen in April 2000, at the very end of the Goldilocks era. Prior to that you would have to go all the way back to the “golden age” of the late 1960s in order to find rates this low. […]
I have only written a couple times on Europe over the last 18 months. Once in the lead-up to the Dutch election and again in the lead-up to the French election. The titles of those notes were “Trump, the great unifier of Europe” and “Trump, the great unifier of Europe, part deux,” respectively. And as […]
Those folks in the 4 hikes in 2018/4 hikes in 2019 camp are probably not too happy after reading the May FOMC minutes. Here are a couple of excerpts that probably stung a little: “… some participants noted it might soon be appropriate to revise the forward-guidance language in the statement indicating that the ‘federal […]
“With all the crazy monetary experimentation over the last 10 years, how in the world did we not generate excessive amounts of inflation? Surely negative short-term real rates for so long, with a 5x increase in the Fed balance sheet, should have taken us back to something like the 70s, or worse, right? After all […]
[et_pb_section bb_built=”1″][et_pb_row][et_pb_column type=”4_4″][et_pb_text _builder_version=”3.2.2″] The Fed has hiked 6 times this cycle for a total of 150bps. And over the last 5 months the Libor/OIS spread widening has added another 50bps of short rate tightening. Then of course, starting last October, the Fed began contracting its $4.5t balance sheet. As of now it is about […]
With just about four months of 2018 under our belts, spoos are down about 1.5% while 10-year Treasuries are up about 60bps in yield. If you had not been watching the daily price action since January, you might think the VIX would be sub-10 and the MOVE would be north of 80. But it ain’t […]
I received a number of very similar responses to this past Monday’s note on the Libor/OIS spread. It seemed a group of readers felt I was completely dismissing ANY importance of the recent move. That couldn’t be further from the truth – so let me clarify. The point of Monday’s piece was to state that […]
While a return to 1970s-style wage inflation and 1930s-style trade wars is all the rage across the hater community, another brick in the 2018 wall of worry that comes up consistently when speaking to clients is Libor. The old 2007-09 proxy for funding market stress, the Libor/OIS spread, has been ratcheting higher in recent months. […]
Fiscal policy, regulatory policy, and even Fed policy have taken a back seat to the new driver of daily swings in financial markets: trade policy. I have spent a bit of time in recent notes over the last month trying to dissuade folks from getting too bent out of shape about the recent escalation in […]