Monetary Policy
The Federal Reserve began the process of normalizing interest rates at the September 18th, 2024 FOMC meeting. While the timing of the first rate cut was telegraphed well in advance, the magnitude—25 or 50 basis points—was not. A week prior to the meeting, market pricing, as well as
We see two individually sufficient conditions for the Fed to proceed with a frontloaded interest rate cut in September above 25 basis points: either (1) the unemployment rate is 4.2% or above, or (2) the prime-age 25-54 employment rate declines in both month-over-month and year-over-year terms. Back when we
Thanks to outperforming supply-side dynamics, the labor market has already rebalanced. At the same time, income growth is still decelerating and the lagging bits of the inflation overshoot are finally normalizing as a result. The August jobs report should shape how much and how fast the Fed should be cutting,
Almost as notable as the things Powell said were the things he did not. Between now and September, Fedspeak should focus on keeping the Committee’s options open to a 50 bps cut in September.
Most of the Personal Consumption Expenditures (PCE) inflation gauges are sourced from Consumer Price Index (CPI) data, but Producer Price Index (PPI) input data is of increasing relevance, import price index (IPI) data can prove occasionally relevant. There are also some high-leverage components that only come out on the day
Today's data largely confirmed what we've known for some time now: the Fed's restrictive policies are restricting the level and growth of homebuilding activity in the US economy. But when we think holistically about the relevance of homebuilding to price stability, the restrictive effects
In this piece, we take a deeper dive into the finer details of the national accounts to gain some insight into how exactly monetary policy is restricting investment.
If the next month delivers either another round of soft inflation data, or a weak jobs report, the FOMC should be prepared to deliver a cut in July. If they continue to delay beginning rate cuts to gain certainty, they should consider a 50 bps cut for their first cut.
