In rising economy, wages are a wild card

In rising economy, wages are a wild card

By the end of the first quarter, U.S. economic data began to improve somewhat from what had been winter-related economic weakness. After disappointing results from various sectors of the U.S. economy, higher auto sales, improving business activity, and overall job creation that is generally in line with forecasts have helped shape expectations for a comparatively

The ECB relies on smoke and mirrors

The ECB relies on smoke and mirrors

In Europe, slow growth appears likely to continue, with some regional differentiation. Signs of strength in the south Spain is doing much better than it had been just 18 months ago, and even Italy looks somewhat healthy now that its political crisis has passed. Importantly, fiscal pressure in the form of austerity programs is slated

Why wages might rise

Why wages might rise

Unemployment continues to drop, but not because a lot of new jobs are being created, as many would hope. Instead, the unemployment rate is dropping primarily due to a declining labor participation rate. This remains a cause for concern for us because of what it could mean for inflation. The Fed, under Chairman Ben Bernanke,

Is the Fed fighting the last war?

Is the Fed fighting the last war?

In recent posts, we have approached the problem of the outlook for interest rates by outlining the questions that surround the potential growth rate of the U.S. economy. It is established that this rate is heavily influenced by conditions in the labor market. New workers are joining the labor force at a slower pace than

How yields can change in a “normalizing” economy

How yields can change in a “normalizing” economy

As the Federal Reserve plots its actions and communications strategy for the gradual normalization of monetary policy, fixed-income investors face the challenge of anticipating the future course of interest rates. Economic growth influences interest rates The long-term “equilibrium” interest rate of an economy is intimately linked to the economy’s overall growth potential when it is

Does an inflation surprise lurk in Fed stimulus?

Does an inflation surprise lurk in Fed stimulus?

Ever since the topic of stimulus tapering was aired in June, the Fed has hastened to clarify its message: We’ll taper if and only if the data argues for tapering. Generally unimpressed with the U.S. recovery since then, the tough talk on tapering has noticeably cooled. The gradual reduction of the Fed’s bond-buying program is