Federal Reserve
Summary 1. Friday's Q3 ECI release showed a modest slowdown in the pace of wage growth. Coupled with what we already knew about Q3 employment growth, we are continuing to see a slower—though still highly respectable and resilient—pace of gross labor income growth (~6.1% annualized
Two things are all but guaranteed for the rest of the week: 1. The Fed is going to hike 75 basis points (2.25%-2.50%) and signal that it remains vigilant about inflation. Their characterization of growth dynamics are likely to remain on the rosier side, and inflation expectations
Summary Although neither the magnitude nor composition of last week's inflation print surprised us, especially given the knock-on effects from the 'Ukraine shock', they did surprise the CPI forecasting consensus. In response, Chair Powell and the rest of the committee will likely deliver two innovations: 1.
At tomorrow's FOMC meeting, the Fed will almost certainly hike 25 basis points. With that hike comes the full conclusion of the Fed's ambitious yet sometimes opaque "maximum employment" forward guidance. A hike in March is a clear declaration that the Fed believes the
Journalists can pretty much pre-write their headlines given the spike in oil prices. Year-over-year headline inflation readings are set to make new highs, potentially breaching 8% based on the food and energy impulse from what we might call the "Putin shock" to key commodities. At the same time,
Conventional wisdom has held that rate hikes slow inflation long enough that straightforward accounts of how exactly one turns into the other are hard to find. Today, everyone needs to be on the same page about how exactly it is that Fed policy in particular can slow inflation.
We provide an update on what our in-house monetary policy framework suggests about the appropriate trajectory for monetary policy using more reliable “real-time” measures of gross labor income
To understand how the Fed is interpreting its “maximum employment” mandate in the current context, it’s worth going through Chair Powell’s remarks and Q&A for the December FOMC meeting.
Critical to the Fed successfully achieving maximum employment over the short run and the longer run is a commitment to, and a communication of, “maximum employment” that is Credible, Broad, and Inclusive.
