US Economics Focus Core inflation will continue to rise The recent rise in core inflation is not just “noise” as Janet Yellen suggested and instead a large partof it is linked to a decline in the amount of spare capacity in a number of different sectors... 9th July 2014 · 1 min read
US Economics Focus Is the neutral interest rate now lower? The higher post-crisis cost of financial intermediation, increased risk aversion, higher precautionary saving and the decline in the US economy's potential growth rate mean that the neutral real fed... 7th July 2014 · 1 min read
US Economics Focus Stress-testing the US economy against a recession in China Even if China endured a financial crisis and a recession, the hit to the US economy would probably be fairly small. China is just not that important to America’s banks, businesses and investors. We... 5th May 2014 · 1 min read
US Economics Focus Productivity growth held back by structural problems The slowdown in trend productivity growth, which began a decade ago, is principally due to two structural factors; the fading boost from the IT revolution and the aging of the population. The... 22nd April 2014 · 1 min read
US Economics Focus Dwindling spare capacity will provide boost to investment There are finally reasons to expect a more sustained pick-up in business investment this year and next. Admittedly, economists have been forecasting that business investment would become a driving... 3rd April 2014 · 1 min read
US Economics Focus Medical inflation is coming back to life A rebound in medical inflation from recent 40-year lows will add to a wider strengthening in price pressures to push core PCE inflation above the Fed’s 2% target next year. This may prompt the Fed to... 24th March 2014 · 1 min read
US Economics Focus Fed will eventually have to hike rates more rapidly The markets are happy to take the Fed at its word that it won't begin to raise rates until mid-2015 and will tighten only gradually after that, but we fear that rising wage and price inflation will... 13th January 2014 · 1 min read
US Economics Focus Drop in participation rate more structural than cyclical The push by the Fed to delay tapering its asset purchases and possibly to lower its unemployment rate threshold suggests that officials expect the participation rate to rebound. We're not convinced... 18th November 2013 · 1 min read
US Economics Focus The rising costs of QE The further rise in the long-term costs of QE means that a smaller improvement in the economic data than before may be needed to prompt the Fed to slow the pace of its asset purchases. At the margin... 13th November 2013 · 1 min read
US Economics Focus Income inequality is not holding the economy back The rise in income inequality may not be morally defensible or socially desirable but, for now at least, it doesn't appear to be restraining economic growth. 11th November 2013 · 1 min read
US Economics Focus Can America's debt problem be solved? It's ironic that the recent government shutdown and debt ceiling crisis came at a time when America's debt situation is improving. Over the next decade, a combination of faster GDP growth and only a... 28th October 2013 · 1 min read
US Economics Focus Current account deficit unlikely to re-emerge as threat Despite the recession in Europe and the slowdown in economic growth in China, the US current account deficit has continued to narrow. Our calculations suggest that in the second quarter it hit a 15... 15th August 2013 · 1 min read
US Economics Focus Thinking about the new "new normal" There are reasons to believe that the recent period of sluggish economic growth and near-zero interest rates are coming to a close. While the economy's potential growth rate is probably now only... 23rd July 2013 · 1 min read
US Economics Focus All you need to know about the Fed’s exit strategy The Fed’s exit strategy is a work in progress that will be determined by the economic data and the evolution of the Fed’s thinking on the costs of unwinding its ultra-loose monetary policies. But we... 2nd July 2013 · 1 min read
US Economics Focus Field of dreams: Is farmland the next bubble? There does appear to be a localised bubble in farmland values in the corn belt. Near-zero interest rates have undoubtedly played some role in this, but the bigger factor has been the surge in corn and... 10th June 2013 · 1 min read
US Economics Focus Further dip in core inflation won't prevent trimming of QE3 Core inflation is unlikely to fall to a level that will spark concerns about deflation and prevent the Fed from slowing the pace of its monthly asset purchases later this year. This is mainly because... 5th June 2013 · 1 min read
