Fed officials split; Biden backs infrastructure deal

Fed Chair Jerome Powell stuck to the script in his congressional appearance earlier this week, arguing it was “very, very, unlikely” that the US would experience a return to the high inflation of the 1970s. Elsewhere, President Joe Biden gave his support to a bipartisan infrastructure deal worth $1trn then promptly threatened to veto it too.
Paul Ashworth Chief North America Economist
Continue reading

More from US

US Economics Weekly

Debt ceiling could still delay QE taper

This week the focus was on the Fed, which appears intent on announcing a QE taper at the next FOMC meeting in early November. Next week the focus will shift to fiscal policy, with the Democrat’s plans to boost infrastructure and social welfare spending balanced on a knife edge. A debt ceiling crisis in late-October could even delay the Fed’s taper plans.

24 September 2021

US Economics Update

Taper to begin in November

Fed officials gave a heavy hint today that the QE taper will be formally announced in November and, presumably in response to concerns that the surge in inflation won't be as transitory as they originally hoped, there were notable increases in the median interest rate projections.

22 September 2021

US Chart Book

Data provide mixed signals on Delta impact

The latest data provide mixed signals on the impact that the Delta variant is having on the economy. The high frequency indicators for high contact services suggest that activity levelled out in August and weakened a little in early September. Last month’s retail sales report also revealed that spending on food services was broadly flat, but control group sales nevertheless rebounded strongly, as households refocused their spending online and in favour of goods consumption. Elsewhere, leisure and hospitality employment was unchanged in August which, because that sector had been such an important contributor to the strength of the gains in earlier months, helps to explain why payroll employment increased by little more than 200,000 last month. Finally, even though activity only stagnated, the prices for some high contact service activity like hotels and air fares fell quite sharply. The good news is that, with Delta variant infections having now peaked, we should see some rebound in affected activity and employment soon, although the downside is that could contribute to a renewed pick-up in inflation linked to reopening.

21 September 2021

More from Paul Ashworth

US Chart Book

‘Transitory’ inflation claims look less convincing

The further jump in CPI inflation in May was again driven by a handful of categories most affected by the lifting of pandemic restrictions. But there were also clear signs that inflationary pressures are becoming more widespread, with rent of shelter inflation in the early stages of a cyclical rebound and the jump in food away from home prices a sign that severe labour shortages, and the resulting upward pressure on wages, are starting to feed through. Those trends are much less likely to be transitory, particularly when inflation expectations have continued to trend higher. With the economy still a long way from the Fed’s full employment goal we doubt that officials will be in any rush to bring forward plans for tightening policy. But we suspect the Fed will eventually be forced to admit that higher core inflation will prove more persistent they initially believed.

16 June 2021

US Economics Weekly

Democrats’ spending plans hit by reality check

The Senate Parliamentarian delivered some bad news to the Democrats this week – ruling that they could introduce another reconciliation to the current budget, which would allow them to pass more of President Joe Biden’s spending plans measures with a filibuster-proof simple majority. But she also ruled that any new reconciliation would first have to be approved by the Senate Budget Committee and, since that is split evenly 11-11, the Democrats are left in the hopeless position of trying to convince one of those 11 Republicans to switch sides.

4 June 2021

US Data Response

Employment Report (May)

The 559,000 gain in non-farm payrolls in May was at least an improvement on the 278,000 gain in April but, with the level of employment still 7.6 million below its pre-pandemic peak, it would take more than 12 months at that pace to fully eradicate the shortfall. Only a few months ago we had expected to see several months' worth of gains north of one million, as the economy reopened, but labour supply is bouncing back much more slowly than demand.

4 June 2021
↑ Back to top