The FOMC meeting now under way – concluding with a statement at lunchtime tomorrow, Thursday September 13, followed by a Ben Bernanke press conference – could well produce the most important Fed move since the 2008-09 crisis. Here is what I expect.
Will the Fed launch QE3?
There is an excellent chance that the Fed will both extend its forecast of low interest rates into 2015 and launch a new round of asset purchases.
Fed communications point emphatically in that direction. Read more
Last Friday the FT’s economics editor Chris Giles took issue with the use of “the Niesr chart”, so-called because of its frequent publication by the National Institute of Economic and Social Research, to show what’s happening with the UK economy.
Chris argued that the Niesr chart, which shows that — in GDP terms — the current recession is the longest and the deepest since the 1930s, “may well be showing us irrelevant nonsense”.
Though output is now almost 4 per cent below where it was in 2008, the latest employment figures – out today – show that there are more jobs around today than before the crisis began. And this, Chris argued, meant that neither the Niesr chart nor the employment data should be used alone to illustrate what has happened to the UK economy in recent years.
External Monetary Policy Committee member Ben Broadbent has some sympathy with this view. In a speech today, Mr Broadbent argued that, because of the disparity between what the output figures and the jobs data tell us, policy makers “may be less confident than usual” about whether the origins of a change in the GDP result from a supply shock (which monetary policy can do little about) or weak demand (which monetary policy is supposed to address). Read more