Just an observation regarding the impact of the employment “news” (see [CR]) and inferred expectations of a rate hike in December, and the announcement effect on the dollar’s value.
Category Archives: Federal Reserve
How Are Emerging Markets Responding to Anticipated US Tightening?
Just back from England and a couple of presentations, one at the CCBS on the Trilemma and monetary policy spillovers. Here are three graphs, related to the presentation, which illustrate how policymakers in different emerging market countries are responding to the stresses their economies are undergoing.
Outsourced Monetary Tightening
From Zeng and Wei in the Wall Street Journal today:
Central banks around the world are selling U.S. government bonds at the fastest pace on record, the most dramatic shift in the $12.8 trillion Treasury market since the financial crisis.
Forecasting interest rates
There was lots of action in financial markets last week, with much of the attention focused on the U.S. Federal Reserve. The interest rate on a 10-year U.S. Treasury bond edged up 10 basis points early in the week in anticipation that the Fed might finally raise its target for the short-term interest rate. But it shed all that and more after the Fed announced it was standing pat for now.
Price of CBOE option based on 10-year U.S. Treasury yield; to convert to the Treasury yield itself divide by 10. Source: Google Finance.
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Liftoff: Empirical Assessment of the Implications for the Dollar
I have been stressing the international implications of a potential interest rate increase as a rationale for deferring monetary tightening. Export growth is slowing and economic activity in the tradables sector (manufacturing output, manufacturing employment) as the dollar has appreciated. [1] [2] How much more appreciation should we expect should the Fed tighten?
Government Debt Crowding Out Watch, Fall 2015
As I updated my slides for teaching an economics course on the financial system at UW-Madison, I recreated this graph, which depicts the rise in Federal debt as a share of GDP, and the trajectory of real interest rates, as proxied by several measures.
Manufacturing, the Dollar and Implications for Monetary Policy
One of the bits of information in the employment release was a decline in manufacturing employment. When added to declining exports and stagnant manufacturing output growth, the case for near-term monetary policy tightening seems more tenuous to me.
On China, and Preventing the Financial Runs of August
Reasoned analysis and careful decisionmaking is required.
Evaluating the Chinese Devaluation
The 2% devaluation of the Chinese yuan on Monday, and subsequent 1.6% weakening on Tuesday, was variously described as surprising and stunning. I think it was to be expected, given China’s slowing growth, although there was no particular reason to believe Monday would be the day. In evaluating the effects, one has to first place the drop in context.
“Spillovers of conventional and unconventional monetary policy: the role of real and financial linkages”
That’s the topic of a conference sponsored and hosted by the Swiss National Bank and co-sponsored with the Bank for International Settlements (BIS), the Dallas Fed, the Centre for Economic Policy Research (CEPR), and the Journal of International Money and Finance.