2018-07-09 09:39:00 Mon ET
federal reserve monetary policy treasury dollar employment inflation interest rate exchange rate macrofinance recession systemic risk economic growth central bank fomc greenback forward guidance euro capital global financial cycle credit cycle yield curve
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.
2023-12-08 08:28:00 Friday ET

Tax policy pluralism for addressing special interests Economists often praise as pluralism the interplay of special interest groups in public policy. In
2019-07-09 15:14:00 Tuesday ET

The Chinese new star board launches for tech firms to list at home. The Nasdaq-equivalent new star board serves as a key avenue for Chinese tech companies t
2019-12-28 09:36:00 Saturday ET

Global debt surges to $250 trillion in the fiscal year 2019. The International Institute of Finance analytic report shows that both China and the U.S. accou
2022-02-25 00:00:00 Friday ET

Empirical tests of multi-factor models for asset return prediction The capital asset pricing model (CAPM) of Sharpe (1964), Lintner (1965), and Bla
2023-08-28 08:26:00 Monday ET

Jared Diamond delves into how some societies fail, succeed, and revive in global human history. Jared Diamond (2004) Collapse: how societies
2025-10-07 10:30:00 Tuesday ET

Stock Synopsis: With a new Python program, we use, adapt, apply, and leverage each of the mainstream Gemini Gen AI models to conduct this comprehensive fund