Congress steps up to the plate

The $2trn stimulus package agreed by Congress will include a permanent fiscal expansion worth up to 5% of GDP and, in conjunction with the new lending facilities announced by the Fed, could channel up to $6trn in temporary financing to consumers and firms over the coming months. Even that won’t be enough to prevent a sharp decline in GDP in the second quarter, but it should help to support an eventual recovery once the coronavirus outbreak has been brought under control.
Andrew Hunter Senior US Economist
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US Economics Update

Fed lines up March rate hike

The Fed’s announcement that it will “soon be appropriate” to raise interest rates and the numerous hints dropped by Chair Jerome Powell in the post-meeting press conference all but guarantee that a March rate hike is coming. Meanwhile, the Fed set out a brief outline of how it will run down its balance sheet, but with any decision still “a couple of meetings” away, that process won’t get underway until mid-year.

26 January 2022

US Chart Book

Omicron impact short-lived

The surge in Omicron infections means more people were self-isolating in early-January than at any time since the beginning of the pandemic, although the impact that will have on employment and output remains uncertain. Furthermore, with cases now falling just as quickly as they rose, any effects will be quickly reversed in February. In contrast to earlier waves, the rise in infections hasn’t prompted as big a pullback in services activity, with fears of catching the virus lower than during previous waves. The far bigger factor this time is staff absenteeism, which we think will cause both payroll employment and manufacturing output to decline in January, although the impact should be mostly reversed by the end of the first quarter.

24 January 2022

US Economics Weekly

Omicron reaches plateau, leaving Fed free to hike

We expect the Fed to deliver some heavy hints at next week’s FOMC that it is planning an interest rate hike in March. With the Omicron wave now past its peak nationally, there is little to hold the Fed back, particularly if next week brings news of a further acceleration in wage growth.

21 January 2022

More from Andrew Hunter

US Data Response

Industrial Production (May)

The 0.8% m/m rise in industrial production in May, driven by a 0.9% gain in manufacturing output, suggests that some of the shortages holding back production in recent months could have eased. But manufacturing output is still slightly below its pre-pandemic peak and continues to lag well behind the earlier resurgence in goods demand.

15 June 2021

US Data Response

Consumer Prices (May)

The further jump in core CPI inflation to a 28-year high of 3.8% in May, from 3.0%, was again driven by the same handful of categories most directly affect by the lifting of virus restrictions. But there were also signs of emerging inflationary pressures in other sectors, including housing costs and restaurant prices, which suggests that not all the current upward pressure on inflation will prove transitory.

10 June 2021

US Fed Watch

Talking about talking about tapering

Fed officials may finally begin ‘talking about talking about’ tapering their asset purchases at next week’s FOMC meeting. But with recent data leaving the economy still some way from making “substantial further progress” towards the Fed’s full employment goal, we suspect that taper won’t begin until early next year.

9 June 2021
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