The Fed’s balance sheet grew to about $9 trillion after the financial crisis and still remains high at around $6.7 trillion, a primary concern for Fed chair nominee, Kevin Warsh, who proposes faster bond sales to reduce the size of the Fed’s balance sheet.—wsj.com The Questions Who is Kevin Warsh? What is the Fed’s balance … Continue reading Kevin Warsh and the Monetary Base
Category: Eye On–Macro
The United States Exports Oil to Europe
Heightened U.S.–Iran tensions pushed Brent crude to $104 and West Texas Intermediate, WTI, to about $98.5 (26 March 2026). Brent, extracted directly from North Sea, is more exposed to global disruptions than WTI. Price differences create arbitrage opportunities.—quantvps.com The Questions What are the varieties of crude oil? Who are the suppliers? Who are the buyers? … Continue reading The United States Exports Oil to Europe
Federal Reserve cuts rates to three-year low after fractious meeting
The Federal Reserve has cut interest rates to a three-year low … by a quarter point to between 3.5 to 3.75 per cent. Two of the 12 FOMC members objected to the cut and one wanted a larger cut.—Financial Times, December 10, 2025 The Questions What is the Fed’s dual mandate? Which inflation measurement does … Continue reading Federal Reserve cuts rates to three-year low after fractious meeting
Bank of Canada Follows up with a Second Rate Cut
After a first interest rate cut in June, the Bank of Canada again lowered its key overnight rate by 0.25 percentage points to 4.5 percent.–Royal Bank of Canada Why did the Bank of Canada cut its policy interest rate in two successive months? The Bank of Canada cut its policy interest rate in both June … Continue reading Bank of Canada Follows up with a Second Rate Cut
Taxes and Economic Growth
Are taxes too high? This question features in political debates everywhere, and in 2024 was a source of debate in the French, U.K., and U.S. elections. The U.K. Chancellor of the Exchequer (Finance Minister) wrote: ‘The most dynamic economies tend to be places with lower taxes. The lesson is clear: supporting businesses with competitive taxes … Continue reading Taxes and Economic Growth
Canada Becomes First G7 Central Bank to Cut Interest Rates This Cycle
The Bank of Canada lowered its policy rate to 4.75 percent on June 5, having increased confidence that with an unemployment rate of 6.1 percent, inflation will continue to move closer to the 2 percent target. –Financial Times, June 5, 2024 What is the Bank of Canada’s policy target? The Bank of Canada’s policy aims … Continue reading Canada Becomes First G7 Central Bank to Cut Interest Rates This Cycle
Key Fed Inflation Measure Rose 2.8 percent in March from a Year Ago
The core personal consumption expenditures price index increased 2.8 percent from a year ago in March, exceeding the Fed’s 2 percent target. The all-items PCEPI increased 2.7 percent. On a monthly basis, both measures increased 0.3 percent, equaling the increase from February.—CNBC, April 26, 2024. What is the PCEPI? The PCEPI is the personal consumption … Continue reading Key Fed Inflation Measure Rose 2.8 percent in March from a Year Ago
Could the ECB Cut Rates Before the Fed?
After the biggest rise in the cost of living for a generation, the diverging paths of inflation in the Eurozone and the United States have prompted investors to predict the European Central Bank (the ECB) could cut interest rates earlier than the Federal Reserve (the Fed).—Financial Times, 3 April 2024. What is the Eurozone? The … Continue reading Could the ECB Cut Rates Before the Fed?
U.K. and Japan Fell into Recessions at the End of Last Year
U.K. real GDP shrank by 1.4% in the fourth quarter of 2023 following a 0.3% fall in the quarter before. Japan also had two consecutive quarters of shrinking real GDP—3.3% in the third quarter and 0.4% in the fourth. U.S. real GDP grew 3.3% in the fourth quarter.—Investopedia, February 16, 2024. What is a recession? … Continue reading U.K. and Japan Fell into Recessions at the End of Last Year
History’s Inflation Lessons
IMF economists Anil Ari, Carlos Mulas-Granados, Lev Ratnovski, and Wei Zhao and Victor Mylonas of Tilburg University, explored 111 inflation shocks between 1973 and 2014. Use the links to read this important study. Here is a summary of what they found. Sources: Anil Ari, Lev Ratnovski, History’s Inflation Lessons, International Monetary Fund, December 2023, and … Continue reading History’s Inflation Lessons