The Fed isn’t as dovish as markets think
Three things have come together (somehow it is always three that make people feel certain) to give the impression that a September rate cut is a done deal; priced at an 88% chance in the Fed funds futures market. They are the weak July jobs…
Powell’s speech found the middle
Jerome Powell gave a much-awaited speech at the Kansas City Fed symposium at Jackson Hole this morning. Because of rising/hotter economic data, and a hawkish tone to the Fed lately, I thought he would lean hawkishly. He didn’t, but he wasn’t dovish either. Overall, the…
Treasury yields will likely rise until weak data become prominent again
After the July payrolls report was released on August 1st, dovishness was in the air as regional Fed bank presidents Mary Daly and Neel Kashkari leapt to support the idea of near-term cuts because the labor market had weakened to a recessionary level (see chart…
Kashkari makes four
I wrote in last Friday’s LDEI update regarding the large downward revisions for non-farm payrolls, From this data, I expect more FOMC members to defect to Waller and Bowman’s dovish camp. And within a few days it happened. San Francisco Fed President Mary Daly made…
The Fed gave half an inch
After the last FOMC meeting, I wrote, “Powell didn’t give an inch”, referring to his avoidance of acknowledging economic weakness. In this meeting, there were some acknowledgements of economic weakness (half an inch, let’s say), but Powell did his best to be dismissive of them…
Five reasons to expect some softening from the Fed tomorrow
Last month, with economic data weakening quickly and Federal Reserve Governor Christopher Waller lobbying for a cut, I expected the Fed to cut rates at the FOMC meeting this week. But upon the strong payroll report on July 3rd, I wrote in my semi-weekly LDEI…
Don’t fall for the Q2 growth mirage
Stock bulls have something of a mantra now, “the recession is cancelled” from forecasts of GDP to rise significantly in Q2, tariffs coming down, and the Fed’s characterization of the economy as “solid.” These three pillars have reinforced each other to create an optimistic narrative…
The US Dollar is fine
News stories abounded in the last two days reporting that the US Dollar (DXY index) had the worst first half since 1973. See examples below: Financial Times: Bloomberg: The New York Times: The Wall Street Journal: Also, stories from the New York Post, The Guardian,…
Five of six NBER recession indicators are negative
The National Bureau of Economic Research (NBER), the official arbiter of recessions, uses six monthly indicators to determine recessions. It looks for a contemporaneous peak across them to know that a downturn is sufficiently spread across the economy (diffusion). The NBER looks for three qualities…
Waller keeps it real like Martha Seger did in 1990
After months of the Fed avoiding any discussion of the economy weakening (see here and here), Federal Reserve Governor Christopher Waller, in a CNBC interview with Steve Liesman on Friday, finally acknowledged what has become stark in the economic data (LDEI), the economy is becoming…