US Business Cycle Risk Report | 19 September 2019

Slow growth continues to dominate the US economic profile, and the trend could weaken further in the months ahead. But the downshift has yet to trigger a credible recession warning. Although some indicators suggest otherwise – including the inverted Treasury yield curve – a broad reading of economic and financial data still points to a modest expansion in the recent past—and for the immediate future.

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Macro Briefing | 19 September 2019

Fed cuts rates by 1/4 point, drawing criticism from Trump: Politico
Fed lost control of key interest rate early this week: CNBC
OECD: global growth expected to ease to slowest pace in a decade: WSJ
US discussing with Gulf allies possible responses to Saudi attacks: Reuters
UK Supreme Court’s hearing of case against prime minister ends today: Reuters
Former Fed official: trade-war uncertainty, not tariffs, weighing on economy: CNBC
US housing starts rose to 12-year high in August: CNBC

Macro Briefing | 18 September 2019

Fed expected to cut rates today, for second time this year: WSJ
Saudi Arabia set to show evidence of Iran link in oil facility attacks: Reuters
Oil exports will continue as normal, Saudi Arabia says: Bloomberg
Israel election, second in 5 months, results in deadlock: BBC
An economic crisis for Latin America is lurking: NY Times
Eurozone inflation stable in Aug, at lowest pace in nearly 3 years: Reuters
UK inflation slips to slowest pace since 2016: Bloomberg
US manufacturing activity rebounded in August, Federal Reserve reports: CNBC
US homebuilders remain bullish in September on housing outlook: NAHB

Macro Briefing | 17 September 2019

Oil shock creates new uncertainty for global economy: CNN
Oil market weighs the impact from attacks on Saudi production: NY Times
Oil prices pull back after Monday’s surge: Reuters
US gasoline prices set to rise after spike in oil prices: Bloomberg
Iran ‘will never talk to America,’ supreme leader says: CNBC
The Fed is divided but expected to cut interest rates this week: Reuters
Israelis go to polls today for the 2nd time in 5 months: Politico
German economic sentiment rebounds in Sep after sharp slide: Investing.com
NY Fed Mfg Index reflects sluggish growth in September: NY Fed
Oil spiked on Monday after weekend attacks on Saudi Arabia: CNBC

Macro Briefing | 16 September 2019

Oil prices surge after attack on Saudi oil facilities: Reuters
US economy is relatively immune to blowback from Saudi oil attack: WSJ
Trump: US ‘locked and loaded’ after attack on Saudi oil supply: CNBC
United Auto Workers union goes on strike against GM: CNN
China’s economic growth continued to decelerate in August: Bloomberg
Johnson to tell European Commission UK won’t delay Oct 31 Brexit: BBC
Incoming ECB chief will likely maintain ultra-loose policy: Bloomberg
Import prices for US fell sharply in August: MW
US consumer sentiment rebounded moderately in September: UoM
US retail sales edged up to +4.1% annual pace in August: CNBC

Book Bits | 14 September 2019

The Case For People’s Quantitative Easing
By Frances Coppola
Review via Brave New Europe
The thesis behind the book is that, although quantitative easing since the Great Financial Crisis of 2007/8 has failed, the cause of failure was its implementation, not the policy itself. Quantitative easing was a policy proposed by Milton Friedman and Ann Schwartz back in 1963 as a way to counter a financial depression, or “Great Contraction” as they termed it. The idea was to radically increase the money supply, providing consumers with money to resuscitate the economy. Five years later Friedman used the metaphor of a helicopter dropping money over communities to achieve this goal. He emphasised that it had to be a one-off event to discourage people from saving it, thinking there was more to come. Following the Great Financial Crisis, central banks worldwide initiated Friedman’s policy of helicopter money, dispensing trillions of dollars. However, as Coppola explains, this massive use of quantitative easing, or the “Great Experiment”, failed because” Friedman’s “‘helicopter drop” came to mean not putting money into people’s pockets, but rather casting money blindly onto international financial markets without regard to where it would end up. The desired result did not happen; instead we find ourselves in the “Long Stagnation”.
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Will Inflation’s Upside Surprise Spoil The Fed’s Rate-Cutting Party?

Just when it looked like inflation’s threat was fading, yesterday’s August report on consumer prices dispensed a not-so-fast alert. The core reading of the Consumer Price Index (CPI), which excludes food and energy, rose 0.3% last month and accelerated to a 2.4% annual pace – the highest in 11 years. One data point isn’t a trend, of course. But yesterday’s release is conspicuous at a time when the US economy is struggling with slow growth and expectations that interest rates are headed lower, perhaps turning negative at some point.

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