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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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Sep 21 2015

Fed Stresses Global Weakness, Quietly Recognizes Slowing U.S. Economy

Last January we warned of a closing window for liftoff of the fed funds rate, asking the rhetorical question, “if not now, when?” in the face of an impending slowdown. Now, the Fed is in the awkward position of justifying no rate hike last week by blaming “global economic and financial developments,” while assuring the markets that the “U.S. economy … has been performing well.”

Meanwhile, the latest Federal Open Market Committee projections indicate grudging recognition of the falling trend growth central to our yo-yo years thesis, as they once again cut their longer-run estimates of real GDP growth. In four years it has fallen from 2.65% to just 2%, converging to the economy’s 2% stall speed determined by an earlier Fed paper.
 
ECRI’s latest analysis examines the historical relationship between Fed rate hike cycles and positive and negative deviations from economic trend growth, shedding light on how well-positioned the U.S. economy is for the rate hike cycle the Fed is desperate to begin.

Related News & Events

January Flashback: If not now, when?

ECRI September 16, 2015

Eight months after we asked “if not now, when?” the reality is that growth has been slowing all year. That’s a fact, not a forecast. More

 

Three Highlights from Bloomberg Interview

Bloomberg September 10, 2015

Discussing the U.S. slowdown, "full employment," and world export price deflation. More

 

Cheap Labor

ECRI September 1, 2015

The employment/population ratio – which is consistent with stagnant wage growth – may be overstating job market health. More

 

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