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Policy Hub: Macroblog provides concise commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues for a broad audience.

Authors for Policy Hub: Macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.

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July 20, 2006

Data Independence

This really is not much of a surprise, but I think this pattern of intraday probabilities estimated from fed-funds futures options is interesting:




There are plenty more more pictures in this spirit at Econbrowser

June 30, 2006

Post-FOMC Market Update

The pudding, from the Financial Times..

“Traders probably sense from the statement that the Fed is proceeding cautiously, even reluctantly, in terms of future tightening,” said Alan Ruskin, strategist at RBS Greenwich Capital. “It seems like it may have caught the market off guard.”

Futures traders priced in a reduced probability of an August rate rise – still about 65 per cent cent, but down from about 90 per cent the day before.

... along with some more proof in pictures:




That change is not quite as dramatic as the numbers quoted from the Financial Times -- a result of using options rather than futures alone in the calculations of the probabilities -- but the story remains more or less the same. The details and data will be available later this morning on the Cleveland Fed website, where you will also find the first hint of what the market thinks September will bring:



UPDATE: Meanwhile, in the global blogger village: The Capital Spectator observes that the decision was "a surprise to no one", but the statement was "anything but routine."  (CS also digs up an analyst willing to muse "If we get a bad consumer price index report, for instance, the Fed might do something the next day".) The Nattering Naybob reads the statement as "status quo" (and puts the decision in the broader context of the day's news, as does The Skeptical Speculator.) But The Prudent Investor is not buying the dove interpretation.  William Polley thinks "another one or two quarter point steps are probably in the cards." Hypothetical Bias reminds us that "the Fed has a history of overdoing tightening regimes" and suggests that to "demonstrate his inflation-fighting credentials, Bernanke may continue this pattern." A full parsing of the Committe' statement is available at Economist's View and at The Mess That Greenspan Made.

The New Economist has some links that I missed.

Sort of related: Contango has an interesting panel of Morgan Stanley economists discussing whether monetary policy has defnitely turned restrictive. (Answer: Yes.)  Greg Mankiw relays (with some skepticism) an attempt to resurrect the reputation of Arthur Burns.

UPDATE II: Michael Shedlock has many thoughts, all of which lead to the conclusion that "the recession of 2007 is looming ever larger."

June 15, 2006

No More Questions About The June FOMC Meeting

The aftermath of the inflation report on market expectations about what the FOMC will do next:




For the first time in our estimates, the probability that the funds rate target will be pushed to 5.5% by the time the August FOMC meeting is done exceeds the implied probability of a pause sometime this summer (if only by a little):



The details and the data will be available later this morning at the Federal Reserve Bank of Clevelandf website.

UPDATE: Calculated Risk agrees: "The June Fed Debate Appears Over".

June 7, 2006

Hawk Amphetamines

From Greg Ip, in the Wall Street Journal (page A6 of the print edition):

Inflation alarms at the Federal Reserve rang louder yesterday as a top official said slowing economic growth may not be enough to contain inflation if the public's inflationary psychology intensifies.

"If inflation turns out to exceed ... our target range, I do not believe we can count on a slowing economy to bring inflation down, by itself, quickly," William Poole, president of the Federal Reserve Bank of St. Louis, said in an interview. If inflation expectations rose in "a persistent way...we could expect to see that show up in measured inflation in fairly short order.

And another familiar story:





I guess you know by now that you can find the data from these pictures -- and how they are constructed -- later today, at the Cleveland Fed web site.