foul is fair market
“Fair is foul, foul is fair” sounds like Shakespeare’s version. “Good news is bad news.”
In recent months, financial markets have been reacting to the good news of increased consumer spending. I got more work than I expected! Wages will go up!—It’s like being hit with a poisoned arrow. The reason, of course, is that each piece of good news is viewed as: Postponing date by which the Fed may cut interest rates.
All sound and anger Is there no point in exceeding the interest rate?
On Friday, comical scenes unfolded on the trading desks and newsrooms of our struggling nation. With little economic data flowing out of the regular font, scribes and traders focused on the annual revisions to the seasonally adjusted values that the Bureau of Economic Analysis uses to calculate economic indicators. Consumer Price Index (CPI).
For as long as anyone can remember, almost no one cared about this. CPI seasonally adjusted value revision. However, last year’s seasonal adjustments were especially large, and the latest revisions show that price trends are not as favorable as expected. Fed policymakers and the market participants watching were surprised.
Christopher Waller Federal Reserve Board Waller said he will keep an eye on this year’s revisions, which have received more attention after he mentioned last year’s revisions in a recent meeting with David Wessel of the Brookings Institution.
Recall that a year ago, when inflation seemed to be falling rapidly, the annual seasonal update wiped out the increase.
The January CPI report and revised version for 2023 will be released in mid-February, which could change the inflation picture. My hope is that the revisions confirm the progress we have seen, but good policy is based on data, not hope.
Mr. Waller may be the most important Fed governor today.Chairman of the Federal Reserve System Jerome Powell is said to have great respect for Waller’s economic analysis.. His long tenure as the St. Louis Fed’s head of research lends further weight to his views on the economy. That makes the data unprecedentedly consequential, as he says he is keeping a close eye on uncertainties like the seasonally adjusted CPI revision.
After all, The revision hardly fixed. In the graph below, the red line shows the revised value and the blue line shows the pre-revised data for monthly changes in the Consumer Price Index.
This is what it looks like Core CPI:
The best interpretation of this is that the revision actually took place. “Check progress” Regarding the inflation we saw last year. While it is still debatable how much progress has been made in the past six months, it certainly appears that disinflation has stalled, but whatever your view prior to the revision, , there’s little reason to change it now.
Is no news good news or just no news?
“No more reports please. Let everyone fly.” macbeth declares that the end of the Scottish drama is near.
The Scottish usurpers were exhausted by constant reports of desertions, defections, and the approach of enemy forces that awaited the inevitable armed conflict. I can see him hunched over in front of his device, disgusted. Analyze the latest data This is an indicator of when the Fed will cut interest rates.
The history books probably won’t record whether the Fed cut rates in May or June.of Shock waves transmitted to the market The Fed’s signal that it will not cut rates in March will soon be obscured by the dust of time.
Laurence Olivier and Vivien Leigh are seen playing the roles of Macbeth and Lady Macbeth in a 1955 production of Shakespeare’s play in Stratford-on-Avon, England.
In fact, this is the main reason it makes sense. Expect the Fed to postpone rate cuts. With the economy growing rapidly and unemployment rates a distant memory of those sick days a few years ago, there is little cost to delay. A 1-3 month delay in rate cuts is unlikely to be the difference between economic growth and recession.
It is important to point out that Shakespeare’s Macbeth does not last long if it avoids the news. Just 30 or so lines later, he asks his still-faithful servant: “What more news?” In modern times, he’d go back to scrolling, check his inbox, and hit the refresh button.
Money’s end?
There may be even greater lessons to be learned from the CPI revision episode. Just as the Federal Reserve’s rate hikes do not appear to have weighed on growth much, the revisions to the consumer price index were less significant.which one will raise The question of whether interest rates matter Everyone thinks so.
A little more than a decade ago, two economists working for the Federal Reserve conducted a study. “Sensitivity of corporate capital investment to changes in interest rates.”
Economists Stephen Sharp and Gustavo Suarez looked at a survey of chief financial officers from hundreds of U.S. companies conducted by Duke University and CFO Magazine. They found that CFOs believe they are. not responsive to interest rates at all. Lower interest rates do not encourage more investment, and higher interest rates do not discourage investment much.
The title of their paper sums it up nicely.Investment insensitivity to interest rates: Evidence from a survey of CFOs.”
This would explain why the impact of interest rates was much smaller than expected. Consider this an alternative to the following explanation (discussed in a previous edition of Breitbart Business Digest): Hiking is not that important Because the neutral interest rate is higher than previously thought.
When Sharp and Suarez were working, the big mystery was the opposite of what it is today. Why didn’t ultra-low interest rates and quantitative easing increase inflation or growth rates much? In other words: Inflation seems to have no effect on the downside..
Ed Harrison, now at Bloomberg, said: I have written:
I think monetary policy is ineffective. I don’t even know how that works. Indeed, interest rate policy can be helpful at key points in the business cycle by lowering interest payments when debtors are under stress. But we are reaching the limits of what central banks can do. As a result, we have resorted to quantitative easing, negative interest rates, and yield curve control. And for what? That’s crazy.
The solution is right in front of us. It’s about helping to put money in the pockets of those facing the most severe economic stress in our economy. These are the people who need the money the most and are the ones most likely to spend it. Until we do, the stress on our economic and financial system will continue to increase…and with it, political instability will continue to increase.
I’m on vacation now.Maybe I’ll leave the beach [me] With a positive mindset.
Shakespeare said:
Life is just a walking shadow, a bad player
It struts around on stage and spends its time
And no more can be heard.it’s a story
A fool full of sound and anger spoke,
It doesn’t mean anything.
Monetary policy may be at an impasse. Perhaps, although Mr. Harrison is hinting at fiscal policy, it may be time to start looking at other avenues. What actually drives inflation and growth?.
