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Where Are We in The Economic Cycle?

In early April ECRI's Lakshman Achuthan discussed "Where Are We in The Economic Cycle?" at the Philadelphia Council for Business Economics Conference. Key points are summarized below, along with link to the presentation slides, including notes.

Central banks may be out of ammo to fight recession.

This year began with recession fears throwing a spotlight on the elephant in the room: as The Economist magazine put it a few weeks back, the Fed may be out of ammo to fight recession.

Since then, the Fed has backed off of its projection of four rate hikes in 2016, the markets have recovered and recession fears have receded.
This does not mean that the aforementioned elephant has left the room, and the Fed has the ammo to deal with a recession.
Rather, with recession fears easing, the spotlight has simply shifted away from the elephant, leaving her in the shadows again.

How did we get here?

Evolution of ECRI outlook leading up to today:

Jul 2014: Global Slowdown

Nov 2014: Two-Speed U.S. Economy

Jan 2015: They Should Have Tightened Then

Jun 2015: One-Speed Economy

Jul 2015: Collision Course

Mar 2016: A Cautious Consumer

Apr 2016: Stagflation-Lite

The economy as a whole remains in a slowdown.

But there’s a further complication. Inflation is on the rise in terms of both headline and core PCE deflator growth, with the latter approaching the Fed’s 2% target

U.S. Future Inflation Gauge, has now risen to a 7½-year high.


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