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A Framework That Provides Clarity

During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Fed Not Crying Wolf


In early February, following the last Fed statement, March rate hike probabilities fell to just 15%, with the markets expecting only two rate hikes in 2017. In contrast, we explained why faster rate hikes were likely and declared in an ECRI report: “The Fed will be spurred to hike rates more than most believe. That is the inescapable logic of the current state of the economic cycle.”

Today, a March rate hike is seen as a virtual lock, with three or four rate hikes this year considered the most likely scenario (chart), meaning that expectations have shifted dramatically toward ECRI’s view. That cyclical perspective has proved to be just as prescient this year as it was last year, when the Fed failed to deliver on its rate hike promises, following ECRI’s declaration that the “Fed’s rate hike plans are on a collision course with the economic cycle.”

As always, ECRI’s forecasts have been rooted in its analysis of cyclical forces, based on its leading indexes of economic growth and inflation. For a more detailed look into our Fed rate hike outlook, please see this excerpt from February’s U.S. Essentials report.

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Interview on U.S. Jobs, Fed & ECB

Reuters March 10, 2017

Lakshman Achuthan's Reuters interview on U.S. Jobs, the Fed and ECB. More

 

Cyclical Outlook Good, But Sustained 3-4% GDP Growth Unlikely

MSNBC March 8, 2017

Interview highlights on near-term outlook, and specific items that need to improve for faster sustained growth. More

 

Disentangling Cyclical from Structural

ECRI January 17, 2017

Hong Kong presentation slides and notes. More

 

26th Annual Hyman P. Minsky Conference

Levy Economics Institute April 18, 2017

On April 18, Lakshman Achuthan will present at the Levy Institute's 26th Annual Minsky Conference.

 

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