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
Category: Eye On–Macro
Job Growth Twice As Strong As Expected In January
The U.S. added 353,000 jobs in January, almost double the 185,000 economists expected, as the economy walks the tightrope of maintaining a strong labor market while simultaneously bringing down inflation to a palatable level. The unemployment rate stayed flat at 3.7 percent.—Forbes, February 2, 2024 Why did the unemployment rate stay flat when employment increased? … Continue reading Job Growth Twice As Strong As Expected In January
The Fed’s Interest Rate Toolkit
Federal Reserve (the Fed) Chair Jerome Powell describes the Fed’s interest rate tools as follows: “The Federal Reserve sets two overnight interest rates: the interest rate paid on banks' reserve balances and the rate on our reverse repurchase agreements. We use these two administered rates to keep a market-determined rate, the federal funds rate, within … Continue reading The Fed’s Interest Rate Toolkit
Silicon Valley Bank in Perspective
Our recent posts investigated the failure of Silicon Valley Bank (SVB) and the response of regulators. Here, we provide some data on U.S. banks and bank failures to place SVB in perspective. How big was SVB? SVB’s total assets at the end of 2022 were $209 billion, which is 0.96 percent of the total assets … Continue reading Silicon Valley Bank in Perspective
A Stress Test for U.S. Bank Regulation
Our recent post investigated the failure of Silicon Valley Bank (SVB). Bank regulation is designed to make failures like it rare and contained events, and the performance of the U.S. banking system following SVB’s failure provides a test of the regulatory framework. Did bank regulators miss SVB early warning signs? In February 2023, KPMG, SVB’s … Continue reading A Stress Test for U.S. Bank Regulation
Silicon Valley Bank Shut Down
When the business day ended on March 9, 2023, Silicon Valley Bank had cash payment obligations that exceeded its cash reserves by close to $1 billion. The following morning, depositors attempted to withdraw $42 billion, a quarter of the bank’s total deposits. SVB couldn’t get the cash to pay its depositors and the Federal Deposit … Continue reading Silicon Valley Bank Shut Down
Leaders and Followers: Are Central Banks on Track to End Inflation?
In March 2021, the inflation rate in the United States was comfortably inside a range of 1 and 2 percent per year, considered to be price stability. One month later, the U.S. inflation rate exceeded 4 percent, and then increased to more than 8 percent. Inflation took off in most other economies too. What do … Continue reading Leaders and Followers: Are Central Banks on Track to End Inflation?
Bank of Canada Says Labor Market Can Weather a Slump Without a Jobless Surge
The Bank of Canada is raising interest rates to return inflation to target, and Governor Tiff Macklem says Canada’s red-hot labor market can weather an economic slump without seeing a major surge in unemployment—Reuters, November 10, 2022 What is Canada’s inflation rate and what is its inflation target? Statistics Canada reports Canada’s inflation rate every … Continue reading Bank of Canada Says Labor Market Can Weather a Slump Without a Jobless Surge
Fed Jacks Up Interest Rates Again, Hints at Smaller Increases Ahead
The Federal Reserve raised interest rates by three-quarters of a percentage point on November 2 and said fighting inflation will require further rises, yet at a slower pace in what has become the swiftest tightening of U.S. monetary policy in 40 years.—Reuters, November 3, 2022 What is monetary policy tightening? Monetary policy tightening is raising … Continue reading Fed Jacks Up Interest Rates Again, Hints at Smaller Increases Ahead
U.S. Monetary Policy in 2022–2023
The Federal Reserve raised interest rates once again, adding to the sharpest series of hikes since the 1980s. So far, the Fed has increased rates by three points this year and Chair Jerome Powell says there's more to come.—pbs.org Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal … Continue reading U.S. Monetary Policy in 2022–2023