Category Archives: exchange rates

50 it is

For the first time in 5 years, markets were actually unsure what the Fed was going to do, with yesterday’s fed funds options calling it an even chance that the Fed would settle for a 25-basis-point cut or go all the way to 50. Capital Chronicle had prepared amusing posters as to just how to interpret a 25-basis-point as opposed to a 50-basis-point cut. Fifty it was, disappointing perhaps knzn who wanted a 175-basis-point cut, but delighting economic researchers like Refet Gurkaynak and Eric Swanson who both emailed me their high spirits at finally getting another data point for what happens when the Fed surprises the markets.

Continue reading

US Economic Growth: Retrospect and Prospect

Some interesting tidbits can be gleaned from the BEA’s recent release. First, despite the acceleration in growth in 2007Q2, the level of output in 2007Q2 is less than what we thought — as of 28 June — it was in 2007Q1. Second, q/q consumption growth now looks weaker than it did before. Third, while net exports provided a big boost to GDP growth, a large chunk of that effect is attributable to import compression, rather than export acceleration. How one views the durability of the net export effect depends in large part upon how one views the sources of import and export trends.

Continue reading