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23 июня, 16:44

Baumol’s cost disease, aging societies and inflation expectations

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Quick hit here. I have been banging on about lowflation, repeatedly suggesting it is here to stay. The Fed, on the other hand begs to differ and is pre-emptively normalizing rates, as a result. No matter how you look at this, there’s a rub though: We all consume different products, so we each experience a different individual inflation rate. Even […] Related posts: How monetary policy entrenches secular stagnation The dollar bull market will eventually break something The Fed will continue to tighten despite inflation below target

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22 июня, 16:17

The wisdom of crowds and government bond markets

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When you look at how markets are positioned, it’s clear that a lot of people see continued low growth for years to come – a veritable Japanification of the US economy. I hope this is one of those times that markets are wrong. But I am not willing to bet on the hope, just the opposite. Related posts: What are credit markets signalling about the US economy? Re-calibrating our thinking about Brexit after MPC rate cut Why the March 2017 jobs report won’t change the Fed’s strategy

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21 июня, 23:35

The oil price cliff dive will end the prospect of double-barrelled tightening

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A pause is being considered at the Fed, even by hawkish FOMC members. The oil price crash now gathering steam makes this pause more likely. Maybe Bullard’s infamous low dot on the Fed’s Summary of Economic Projections is the right way to look at Fed policy. Related posts: What will policy normalization mean for credit markets (wonkish) The Fed will continue to tighten despite inflation below target Trump is just a conventional politician who uses over-the-top bluster, NAFTA edition

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21 июня, 16:43

How monetary policy entrenches secular stagnation

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Recent statements by monetary authorities in Canada, the United States and the United Kingdom tells us rate hikes are possible in all three this year. This trio of English-speaking G7 nations is at a different phase of the monetary policy cycle than Europe or Japan. The implications are unclear though. Related posts: The dollar bull market will eventually break something Secular stagnation is a policy choice UK fiscal and monetary policy offset to kick in, bullish for gilts

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20 июня, 16:35

Abenomics and Japanese growth

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Only during the Great Recession did nominal GDP break out of a tight range – and then, it did so to the downside. We are nowhere near the top of the range now, nor should we expect to be anytime soon. Related posts: Upbeat about the near-term, dubious on the longer-term Jobless claims are at their lowest level in 44 years Tomorrow’s jobs number would have to terrible to prevent a Fed hike

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20 июня, 15:38

How Brexit makes Britain poorer, forcing Carney to stay his hand

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The risk in the UK is an inflationary recession. For now, Mark Carney is resisting a rate hike. But how long will the Bank of England hold out? And how long can British consumers keep spending if real wages are falling? Two things would ease this pressure. One is some sort of fiscal support for real wages. The second is the fall in oil prices. As in the US, I see oil prices as key. Related posts: Leading UK PM Brexit strategies taking shape with May and Leadsom Why Canada is the country to watch on Trump’s trade policy Brexit is more important politically than it is economically

20 июня, 14:50

Is the new rout in oil getting worrying?

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Earlier this morning, the New York Mercantile Exchange was quoting delivery for light sweet crude in July at $43.30. That’s a far cry from the $55 average that analysts had expected for 2017 as recently as last month. And all indications are that this price deflation is not transitory, but lasting. The selloff in oil brings year-to-date losses to some […] Related posts: How Brexit makes Britain poorer, forcing Carney to stay his hand Upbeat macro thoughts as Fed’s Jackson Hole Symposium begins On the Fed’s pause due to dual-barrelled monetary tightening

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19 июня, 16:12

The Fed will continue to tighten despite inflation below target

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New York Fed President William Dudley has reiterating Fed Chair Janet Yellen’s determination to push forward with interest rate hikes despite inflation below 2%. The Fed will continue to have this stance unless and until economic data weakens significantly. Related posts: In defense of the Fed’s rate hike campaign Jobless claims and ADP data positive ahead of jobs report Jobs data: The US will hike in June amid high structural unemployment

15 июня, 15:42

Could the UK be headed for an inflationary recession?

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The Bank of England kept its key policy rate unchanged at a record low 0.25% . Three dissents show how a weak currency and rising inflation are making it harder to keep rates low. The worst case scenario is an inflationary recession, which would topple Theresa May. Related posts: Anarchy in UK politics means lower yields and ends austerity as we know it Why talk of a soft Brexit is misplaced After Juncker-May, Britain as a tax haven is more credible

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14 июня, 15:43

The Fed’s financial stability concerns, auto subprime edition

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Below are some data points from recent credit statistics and analyses, showing trends in the auto credit sector. Related posts: Subprime auto delinquency rate at highest level since financial crisis What will policy normalization mean for credit markets (wonkish) Auto sales stalling for the fourth month on the trot

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14 июня, 01:05

The Fed’s financial stability concerns before its June hike

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Hiking rates now after a monster commercial real estate cycle has already developed is akin to closing the stable doors after the horse has already bolted. But this may be a concern of the Fed. Let’s see what the Spring 2017 OCC Risk Assessment says when it comes out. Related posts: Re-calibrating our thinking about Brexit after MPC rate cut The yield curve is still flatter than at anytime since the last recession What are credit markets signalling about the US economy?

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13 июня, 16:14

Why commercial real estate will be central to the next credit bust

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On Sunday, macro strategist Lawrence McDonald made three tweets about corporate real estate I think merit highlighting. They show a corporate real estate market that has been white hot during this particular business cycle. And that means it is one of the credit sectors to watch for signs of distress Related posts: US credit growth is decelerating across a variety of areas What will policy normalization mean for credit markets (wonkish) Auto sales stalling for the fourth month on the trot