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April 2, 2015

Monetary Policy
Is the Fed Gonna Tighten Like It’s 1994? Or 2004?

How will the Fed raise rates once it starts?  Gradually, in small steps?  Faster, with larger steps? In 2012, before becoming Fed chair, Janet Yellen argued for a later first rate-hike than would…

Is the Fed Gonna Tighten Like It’s 1994? Or 2004?

February 2, 2015

Monetary Policy
Employment Data Suggest Fed Could Be "Patient" Until 2016—or Later

In its last two statements, the FOMC has said that it “expects inflation to rise gradually toward 2 percent over the medium term”—2 percent being its target rate. What would it take to move it the…

Employment Data Suggest Fed Could Be "Patient" Until 2016—or Later

November 20, 2014

Europe and Eurasia
Bank Valuations Tank as ECB Flubs Its Stress Test

Low market valuations (i.e., price to book ratios) for euro area banks reflect market concerns over their capital cushions, opined the Bank of England just prior to last-year’s launch of the ECB s…

Bank Valuations Tank as ECB Flubs Its Stress Test

November 3, 2014

Europe and Eurasia
The ECB Fails to Stress Banks Over the One Critical Variable It Controls: Inflation

Relentlessly falling inflation is bad news for Eurozone banks.  It increases the real (inflation-adjusted) value of borrower debt and the real cost of servicing that debt.  It causes loan defaults…

The ECB Fails to Stress Banks Over the One Critical Variable It Controls: Inflation

October 10, 2014

Monetary Policy
Are Fed Doves Mucking with Future Unemployment Estimates to Justify Dovishness?

Do Fed doves and hawks get their aviary classifications based on their cold, hard analysis of data, or is it the reverse – do they select data points to justify their dovish or hawkish perspective…

Are Fed Doves Mucking with Future Unemployment Estimates to Justify Dovishness?

September 15, 2014

Monetary Policy
A Dovish Market Has History on Its Side in Tuning Out the Fed

Market expectations for Fed policy have been decidedly more dovish than the Fed itself, a conundrum that is concerning San Francisco Fed economists.  As the Fed debates its rate-liftoff forward gu…

A Dovish Market Has History on Its Side in Tuning Out the Fed

May 5, 2014

China
China's RMB Fairly Valued, Euro Overvalued, According to Our Geo-Graphics iPad mini Index

The “law of one price” holds that identical goods should trade for the same price in an efficient market. To what extent does it hold internationally? The Economist magazine’s famous Big Mac Inde…

China's RMB Fairly Valued, Euro Overvalued, According to Our Geo-Graphics iPad mini Index

April 30, 2014

Europe and Eurasia
French Banks Play Russian Roulette

In the fourth quarter of last year, with tensions rising between Russia and the West over Ukraine, U.S., German, UK, and Swedish banks aggressively dialed down their credit exposures in Russia.  B…

French Banks Play Russian Roulette

April 16, 2014

Europe and Eurasia
Should the ECB Go on a Bund Buying Spree?

Should the European Central Bank finally join the Fed, the Bank of England, and the Bank of Japan and deliver a good, stiff dose of Quantitative Easing? Maybe, came the surprise response from the…

Should the ECB Go on a Bund Buying Spree?

March 28, 2014

Europe and Eurasia
IMF Reform and Ukraine: Amateur Hour for U.S. Economic Diplomacy

In our March 5 post, we argued that the Obama administration linking Ukraine aid to IMF reform was disingenuous and counterproductive.  We were right: the legislation failed, congressional Republi…

IMF Reform and Ukraine: Amateur Hour for U.S. Economic Diplomacy