Federal Reserve raises the interest rate again in mid-2018 in response to 2% inflation and wage growth.

John Fourier

2018-07-09 09:39:00 Mon ET

The Federal Reserve raises the interest rate again in mid-2018 in response to 2% inflation and wage growth. The current neutral interest rate hike neither boosts nor constrains inflationary pressure. FOMC minutes reveal some members' concerns about whether the Trump tariffs would dampen robust macroeconomic momentum and full employment. When western allies such as Canada, Europe, and Mexico lash back with retaliatory steel and aluminum tariffs, this ripple effect may weaken 2.7%-3% U.S. economic growth and production. Both capital equipment and risky asset investments may deteriorate in light of international trade frictions.

Also, FOMC members express their concern about potential yield curve inversion that might signal the dawn of an economic recession. Whether a recession lurks around the corner remains an open controversy. While both stock market valuation and domestic demand continue to indicate investor optimism, the core term spread between short-and-long-term interest rates warns of potential output contraction.

In light of its dual mandate of price stability and maximum employment, the Federal Reserve may raise the interest rate twice in the second half of 2018. The current interest rate hike may continue above the neutral threshold sometime in mid-2019.

On balance, the recent Fed Chair transition from Yellen to Powell reflects the fact that the medium-term monetary policy stance has shifted from dovish to hawkish. A dovish monetary policy stance focuses on attaining full employment, whereas, a hawkish stance emphasizes inflation containment.

This monetary policy transition is a major inflection point that shines fresh light on the inexorable and mysterious New Keynesian trade-off between price stability and employment.

 


If any of our AYA Analytica financial health memos (FHM), blog posts, ebooks, newsletters, and notifications etc, or any other form of online content curation, involves potential copyright concerns, please feel free to contact us at service@ayafintech.network so that we can remove relevant content in response to any such request within a reasonable time frame.

Blog+More

Central banks in India, Thailand, and New Zealand lower their interest rates in response to the Federal Reserve rate cut.

Daisy Harvey

2019-09-11 09:31:00 Wednesday ET

Central banks in India, Thailand, and New Zealand lower their interest rates in response to the Federal Reserve rate cut.

Central banks in India, Thailand, and New Zealand lower their interest rates in a defensive response to the Federal Reserve recent rate cut. The central ban

+See More

Kobe Bryant and several other star athletes have been smart savvy investors.

Charlene Vos

2019-08-08 09:35:00 Thursday ET

Kobe Bryant and several other star athletes have been smart savvy investors.

Kobe Bryant and several other star athletes have been smart savvy investors. In collaboration with former Web.com CEO Jeff Stibel, the NBA champion invests

+See More

Precautionary-motive and agency reasons for corporate cash management

Monica McNeil

2022-10-05 08:24:00 Wednesday ET

Precautionary-motive and agency reasons for corporate cash management

Precautionary-motive and agency reasons for corporate cash management Bates, Kahle, and Stulz (JF 2009) empirically find that public firms have doubled t

+See More

Federal Reserve Chair Jerome Powell announces the monetary policy decision to lower the federal funds rate by a quarter point to 2%-2.25%.

Chanel Holden

2019-09-07 17:37:00 Saturday ET

Federal Reserve Chair Jerome Powell announces the monetary policy decision to lower the federal funds rate by a quarter point to 2%-2.25%.

Federal Reserve Chair Jerome Powell announces the monetary policy decision to lower the federal funds rate by a quarter point to 2%-2.25%. This interest rat

+See More

AYA fintech finbuzz analytic report on the global macro economic outlook Summer-Fall 2019

Andy Yeh Alpha

2019-08-07 08:32:00 Wednesday ET

AYA fintech finbuzz analytic report on the global macro economic outlook Summer-Fall 2019

Our fintech finbuzz analytic report shines fresh light on the current global economic outlook. As of Summer-Fall 2019, the current analytic report focuses o

+See More

Apple and Samsung are the archrivals for the title of the world's top smart phone maker.

Olivia London

2018-06-25 12:43:00 Monday ET

Apple and Samsung are the archrivals for the title of the world's top smart phone maker.

Apple and Samsung are the archrivals for the title of the world's top smart phone maker. The recent patent lawsuit settlement between Apple and Samsung

+See More