THE U.S. ECONOMY IS IN FREAT SHAPE (COMPARED WITH ITS PEERS)
Lackluster economic growth in the United States remains the envy of the developed world.
The U.S. economy has struggled to grow at much better than a 2% annual pace during the seven-year expansion, and employment gains have been steady but largely unimpressive compared with past recoveries.
But those improvements beat those of other developed countries, says a new report from the Organization for Economic Cooperation and Development.
“The U.S. economic recovery, while modest by historical standards, has been one of the strongest in the OECD,” said the organization, which has 34 member countries. That is “thanks to robust monetary policy support and an early fiscal expansion.”
The U.S. economy is 10% larger than it was at its pre-recession peak. In contrast, the eurozone has grown less than 1% and Japan’s economic growth has been nearly flat during that time.
The U.S. unemployment rate is among the world’s lowest. The U.S. rate slipped below the 34-country average in late 2012.
While the pace of job creation in the U.S. slowed recently, the country passed its previous peak employment in 2014. Japan only approached that mark this year and the eurozone is still well below pre-recession levels.
The U.S., however, has a relatively high degree of slack in its labor market compared with peers, at least by one measure. The ratio of employment to the working-age population, defined as those 16 years and older, is well below pre-recession levels. In Germany and Japan a greater share of the population is working.
Soft business investment, especially since the energy sector began to retrench in 2014, is one factor many economists say has held back U.S. growth. But again, America is outperforming other large economies. U.S. business investment is up nearly 10% since the recession began. In Germany, such investment is down 1%.
YELLEN: NO RATE RISE UNTIL ECONOMIC OUTLOOK CLEARS
Fed chief doesn’t say when a hike could come, after stating in May a move ‘in the coming months’ appeared likely.
Federal Reserve Chairwoman Janet Yellen affirmed Monday that the central bank won’t be raising short-term interest rates until new uncertainties about the economic outlook are resolved.
Her comments, delivered at the World Affairs Council of Philadelphia, echoed conclusions investors drew Friday after the release of disappointing job market data.
Ms. Yellen and other officials still believe they will be gradually lifting rates because they expect the economy to improve. However, a rate increase at the Fed’s policy meeting next week is now effectively off the table. An increase in July is possible but has become less likely, and a September move is possible if economic data show the economy is rebounding by then.
Her comments represented a shift from less than two weeks ago, when she confidently said a strengthening economy meant the Fed likely would move rates up again in the “coming months.” She dropped that time frame reference Monday.
The Fed’s plans were sidetracked by a Labor Department report Friday, which showed employers added just 38,000 jobs in May. It could be an aberration, or a sign of a more fundamental slowdown in hiring and output. The cautious Fed leader made clear she isn’t inclined to take chances drawing a conclusion yet.
“New questions about the economic outlook have been raised by recent labor market data,” Ms. Yellen said Monday. “Is the markedly reduced pace of hiring in April and May a harbinger of a persistent slowdown in the broader economy? Or will monthly payroll gains move up toward the solid pace they maintained earlier this year and in 2015?”
She said she and her colleagues would now be “wrestling” with these and other questions.
The central bank risks overreacting to one report, said Drew Matus, an economist with UBS. “It is one thing to be data dependent,” he said, “it is another to be data point dependent.”
Fed officials like to say they don’t put too much emphasis on any one data point, but it long has been the case that the Labor Department’s monthly employment reports get extra attention from the central bank. It is one of the more comprehensive measures of economic activity produced by the government—a monthly survey of 146,000 businesses and government agencies in addition to a survey of 60,000 households.
The job market is also central to Ms. Yellen’s framework for reading the economy. The Fed has a congressional mandate to seek “full employment,” meaning as many jobs as possible without triggering inflation, and stable prices. Ms. Yellen has made it a priority to squeeze slack out of the job market, believing low inflation will start moving up to the Fed’s 2% goal as that happens.
The Fed raised short-term rates by a quarter percentage point, to between 0.25% and 0.5%, in December. In April, Fed officials set three benchmarks for another rate increase: 1) An acceleration in economic growth in the second quarter after a disappointing first quarter; 2) continued improvement in the job market; and 3) signs that inflation is picking up. The May jobs report raised questions about whether the economy is meeting the first two of those benchmarks.
Ms. Yellen and other Fed officials have emphasized since Friday’s report that they still think rates are going up gradually; they’re just not sure how gradually.
“What is certain is monetary policy is not on a preset course,” Ms. Yellen said. “The [Fed] will respond to new data and reassess risks so as to best achieve our goals.”
Ms. Yellen also said a number of “considerable and unavoidable” uncertainties could affect the economic outlook and the path of interest rates, including sluggish global growth, weak business investment, low U.S. productivity growth and uncertainty about the outlook for inflation.
“The uncertainties are sizable, and progress toward our goals and, by implication, the appropriate stance of monetary policy will depend on how these uncertainties evolve,” she said.
“Indeed, the policy path that my colleagues and I judge most likely to achieve and maintain maximum employment and price stability has evolved and will continue to evolve in response to developments that alter our economic outlook and the associated risks to that outlook,” she said.
She also said that, while Fed officials now believe the central bank’s target federal-funds rate will return to 3.25% in the long run, officials have been lowering that estimate over time and further changes were likely.
On an upbeat note, Ms. Yellen said she expects the economic expansion to continue, noting that overall the labor market’s progress has “been quite positive,” household incomes have been rising, the housing sector is strong and fiscal policy is now providing a boost to the economy, rather than a drag.
Fed officials will provide updated economic projections when they meet next week, which Ms. Yellen said could differ from their last projections issued in March.
“Speaking for myself, although the economy recently has been affected by a mix of countervailing forces, I see good reasons to expect that the positive forces supporting employment growth and higher inflation will continue to outweigh the negative ones,” she said.
STOCKS STEADY AHEAD OF U.S. JOBS REPORT
A strong report could encourage Fed officials to raise benchmark interest rates for the first time this year
The Stoxx Europe 600 inched up 0.2% in morning trade, following a higher close on Wall Street and in Asia.
Energy and mining shares led gains in Europe as Brent crude oil held firm just above $50 a barrel. Weekly U.S. crude inventories and production data by the Energy Information Administration showed steady declines, helping traders overlook a decision by the Organization of the Petroleum Exporting Countries not to impose a production ceiling.
Metals prices also rebounded, with London three-month copper futures up 1.2% at $4,650 a ton.
Futures pointed to a small opening loss for the S&P 500. Changes in futures don't necessarily reflect market moves after the opening bell.
The S&P 500 closed at 2,105.26 on Thursday, within striking distance of its all-time closing high of 2,130.82 reached in May 2015.
Investors have avoided making big bets on stocks in the run-up to the monthly employment report, due at 8:30 a.m. ET, which is the final major release on the U.S. labor market before the Federal Reserve’s June meeting.
A strong report could encourage Fed officials to raise benchmark interest rates this summer for the first time this year.
Federal Reserve Bank of Chicago President Charles Evans said Friday the U.S. economy continues to be dominated by downside risks, suggesting he’s still on the fence about rates.
“I see the value in making small and gradual adjustments to the fed-funds rate as the data improve and confirm my positive baseline outlook for the U.S.,” he said.
Earlier, shares in Japan rose 0.5% but ended the week lower as a stronger yen dampened sentiment. Shares in Australia added 0.8% on the day, but snapped a seven-week winning streak.
The Shanghai Composite rose 0.5% to end the week over 4% higher after six consecutive weeks of losses. Investors there were hoping global index provider MSCI might include mainland Chinese stocks in its benchmark.
FRANCE LABOUR DISPUTE: WAVW OF STRIKE ACTION NATIONWIDE
Strike action over labour law reforms gripped France on Thursday, with oil refineries, nuclear power stations and transport hubs disrupted.
Riot police battled protesters in Paris and other cities, making 77 arrests, while 15 officers were injured and cars and shops were vandalised.
Prime Minister Manuel Valls insists the reforms will not be withdrawn but has suggested they could be "modified".
France is due to host the Euro 2016 football championships next month.
A state of emergency imposed after November's deadly attack by militants from the so-called Islamic State group in Paris remains in place.
The CGT union is leading the action, supported by six other unions including Force Ouvriere and Unef, whereas the more moderate CFDT union backs the labour reforms.
- Stakes rise in French labour protests
- French jokes about fuel shortages
- Violence mars Paris police protest
- Labour reforms: Hollande's last throw of the dice
Tear gas filled the air as police in Paris struggled to contain a march which set off from Place de la Bastille.
Of the arrests, 36 were made in the capital while other cities like Lyon and Bordeaux saw similar confrontations.
Officials say 153,000 people took part across France though union leaders put the number at nearly twice that.
French labour reform bill - main points
- The 35-hour week remains in place, but as an average. Firms can negotiate with local trade unions on more or fewer hours from week to week, up to a maximum of 46 hours
- Firms are given greater freedom to reduce pay
- The law eases conditions for laying off workers, strongly regulated in France. It is hoped companies will take on more people if they know they can shed jobs in case of a downturn
- Employers given more leeway to negotiate holidays and special leave, such as maternity or for getting married. These are currently also heavily regulated
Flights to and from Paris, Nantes and Toulouse were affected, and a rolling strike by train drivers brought further disruption to regional and commuter rail services.
RTE, the body overseeing France's national power network, said stoppages at nuclear power stations were not having an immediate effect on electricity supply but warned, "If it worsens, it will have an impact on the management of the network."
A third of petrol stations were dry or dangerously low on fuel after days of blockades at refineries by union activists.
Five of the country's eight refineries remained at standstill or were operating at reduced capacity on Thursday.
'Not such a bad thing'
Mr Valls indicated there might "still be changes, improvements" made to the labour reform laws.
But he rejected Finance Minister Michel Sapin's suggestion that Article 2 of the bill could be rewritten.
Article 2 gives individual companies the power to opt out of national obligations on labour protection if they feel they need to - something the CGT union fiercely opposes.
German Finance Minister Wolfgang Schaeuble backed the reform, saying: "France can live with such disputes."
"A certain dissatisfaction of voters with their respective rulers isn't such a bad thing in principle," he added.
Unions were enraged by the government's decision to use a constitutional device to allow its watered-down labour reforms to be made into law without parliamentary approval.
The government says the reforms, which make it easier for companies to hire and fire staff, are needed to bring down unemployment.
The CGT has called for another day of action on 14 June, four days after Euro 2016 opens.
"The government has the time to say 'let's stop the clock' and everything will be OK," CGT chief Philippe Martinez told Reuters news agency when asked if his union was willing to disrupt the tournament.
CANADA FIRES COST OIL SANDS PRODUCTION $760M
A new report into the financial impact of the McMurray fires says some $760m (C$985m; £528m) in oil sands production has been lost.
The analysis says the blaze has meant the loss of 1.2 million barrels of oil a day over two weeks.
The sum is equivalent to 0.33% of the province of Alberta's projected GDP this year, as well as representing 0.06% of the country's projected GDP.
"These are big numbers," Kevin Birn, an analyst at IHS Energy, said.
"The industry was already feeling the impact of a very low price environment in the first quarter of the year, with prices lower than in the rest of the world," he told the BBC's Bill Wilson.
The analysis, by economic research organisation the Conference Board of Canada, projects that national economic impacts will be "minimal".
He said the oil sands firms affected were among the biggest energy companies in the world, and that they would be "pushing to get facilities up and running as soon as possible".
"Some facilities had already started ramping up ready to restart production, but have had to stand down again and evacuate workers. There is rain forecast for this weekend which will hopefully bring an end to this disruption."
Mr Birn added that most of the Canadian sands oil produced was sent to the US mid-west for processing, and that a knock-on effect would be that refineries there would be having to look for alternative sources, "which comes with additional costs for them".
The fire now covers 3,527 sq km (1,366 square miles) and conditions are getting more dangerous for fire fighters north of Fort McMurray.
It is moving east and encroaching the border with Saskatchewan, officials said on Tuesday, and continuing to "burn out of control".
The Alberta government is taking a "second look" at plans for re-entry into Fort McMurray, said Alberta premier Rachel Notley.
"We're not going to have people going back until we know it's safe," she said.
She said said it is unclear when oil production can resume.
Gas service has returned to 60% of the city and electricity is restored in undamaged areas, she said.
Workers who were sent to Fort McMurray to begin working on the hospital have now been evacuated.
Alberta Highway 63 is likely to be threatened and could be closed for a period of time, she said.
Canada's oil sands industry
- Oil sands are a mixture of sand, water, clay and a thick, heavy oil called bitumen
- Bitumen is extracted using surface mining and drilling, and must be treated before it can be turned into petrol and other usable fuels
- Canada has the third largest oil reserves in the world after Venezuela and Saudi Arabia
- The Alberta oil sands produced about 2.3 million barrels a day in 2014
Canadian Finance Minister Bill Morneau told CBC News that the cost of the disaster was still being evaluated.
"We're obviously going to stand shoulder to shoulder with the people in Fort McMurray and rebuild the city," he said.
AN ECONOMIC FORECAST FOR THE EUROPEAN UNION
This is what to expect from the week ahead:
Taking the pulse of the eurozone.
Tuesday morning, the European Commission will announce its spring economic forecast for growth and employment across the 28 member states of the European Union. The forecast may also shed light on whether thelong-awaited recovery in the eurozone may finally be consolidating and on the effects of falling prices and the economic slowdown in China. The commission, which makes the forecasts three times a year, may update its estimates about the costs and benefits of the ongoing large-scale migrations to European nations. James Kanter
U.S. job market numbers are due.
On Friday at 8:30 a.m., the Labor Department is scheduled to release its report on the nation’s hiring and unemployment for April. With 73 months of uninterrupted job growth in the private sector, the American economy has already broken a record. In the March report, there were other encouraging gains aside from the impressive addition of 215,000 jobs. Average hourly wages increased by 0.3 percent while the proportion of Americans in the labor force — which had been on the decline — hit a two-year high at 63 percent. While the economy’s overall growth rate has been sluggish, the job market has remained a bright spot. Wall Street estimates that employers hired about 200,000 workers last month, and that wages will continue their forward momentum. Patricia Cohen
Analysts expect new vehicle sales to rise.
Automakers on Tuesday are scheduled to report sales of new vehicles in the United States in April, and analysts expect the industry to report an increase over the same month a year ago. The research firm Kelley Blue Book has forecast a 4 percent improvement and a seasonally adjusted annual sales rate for the month of about 17.5 million vehicles. While trucks and sport utility vehicles continue to propel the overall growth of the market, passenger cars made by Honda and Nissan are also selling well. Analysts will be watching which auto companies are increasing discounts and other incentives to improve their sales, and whether Volkswagen canhalt its steady decline in the United States since admitting last year that it cheated on diesel emissions tests. Bill Vlasic
Tesla to share Model 3 numbers.
The electric carmaker Tesla Motors is expected to report its first-quarter earnings on Wednesday, and will probably release more details on how much money it raised by taking $1,000 reservations for its forthcoming Model 3 vehicle. The company has said it received deposits for more than 325,000 of its newest electric car, which will not be available for sales until the end of the next year at the earliest. Tesla is preparing to expand its manufacturing operations in California and planning to build a battery plant in Nevada. Bill Vlasic
Quarterly results for European banks.
It will be another busy week for bank earnings as several of Europe’s largest institutions report their first-quarter results. The British bank HSBC, the Swiss lender UBS and the French banks BNP Paribas and Société Générale are all expected to provide updates to their investors. The first quarter has been a difficult one for lenders as uncertainty in the financial markets has weighed on banking results in Europe and the United States. The challenging environment comes as several of Europe’s biggest lenders are in the midst of reshaping their businesses. Chad Bray
Alibaba focuses on efficiency and expansion.
Alibaba will look to build on the momentum of its strong earnings at the end of last year when it announces results for the first quarter on Thursday. The Chinese e-commerce giant has struggled to live up to the huge hype ahead of its listing in 2014, and has been working to become more efficient even as it expands operations to rural parts of China. Many analysts will be watching the company’s performance as an indication of the broader confidence of the Chinese consumer as the world’s second-largest economy continues to experience slower economic growth. Paul Mozur
Steel industry hopes for stabilization.
ArcelorMittal, the world’s largest steel company, is planning to report first-quarter earnings on Friday. Investors will study the results to see whether the beleaguered steel industry is beginning to turn around. ArcelorMittal, which lost nearly $8 billion in 2015, and other steel makers are having success in persuading the United States and the European Union to impose protective tariffs on Chinese steel exports that the companies say are undercutting their products. But analysts expect the Luxembourg-based company to report lower profits than in the first quarter of 2015. Stanley Reed
Redstone trial is set to begin.
For the last five months, the ailing media mogul Sumner M. Redstone has been the subject of a salacious legal battle over his mental capacity. On Friday, a public trial is scheduled to begin. The suit was filed in Novemberby Manuela Herzer, a former companion to Mr. Redstone. Ms. Herzer claims that Mr. Redstone, 92, was not mentally competent in October when he removed her from a directive that would have given her supervision over his health decisions. On the same day, Mr. Redstone removed Ms. Herzer from his personal estate, in which he had planned to leave her $50 million and his Los Angeles mansion, valued at $20 million.
Ms. Herzer has said that she has fought the legal battle out of love for Mr. Redstone and that she is concerned for his well-being. Lawyers for Mr. Redstone have called the suit meritless and have said that she is after his money.
THINGS TO WATCH IN THE APRIL JOBS REPORT
Things to Watch in the April Jobs Report
The Labor Department will release its broad snapshot of the jobs market on Friday. Economists surveyed by The Wall Street Journal forecast the report to show employers added a seasonally adjusted 205,000 jobs in April and the unemployment rate held steady at 5%. Here are five things to watch in the jobs report.
5 MAY 2016 12:18PM
Can the labor market maintain this year’s momentum? Through the first three months of the year, payrolls have grown at a healthy average of 209,000 jobs each month. Those gains stand in contrast to a deceleration in economic growth. That’s left policy makers to question which measure—jobs or output—is a better gauge of the economy’s health.
209,000Average monthly job growth in 2016
The unemployment rate ticked up from an eight-year low in March. However, at 5%, the reading is near a post-recession low and at a level consistent with a healthy labor market and growing economy. As November’s election nears, the unemployment rate could garner additional attention from candidates seeking to highlight the economy’s progress, or setbacks, depending on which direction the number moves.
5%Current unemployment rate
The slight jump in the unemployment rate in March wasn’t entirely negative. Rather, it reflected that more Americans were looking for jobs. The share of Americans working, or looking for work, rose to 63% in March, the highest since early 2014. The number of Americans with jobs rose to the highest level since early 2009.
63%The share of Americans working or looking for a job in March
The missing ingredient in the job market’s recovery has largely been stronger wage growth. In March, average hourly earnings rose 2.3% from a year earlier. That’s a slowdown from the start of the year. Look to see if there is a spring rebound. More broadly, annual wage growth has been stuck near 2% since the economy began to steadily add jobs in 2010.
2.3%Average hourly earnings growth in March from a year ago
Strong job gains over the past year haven’t been universal. Manufacturers shed about 26,000 positions in March from a year earlier. Mining employment, which includes oil drilling and coal extraction, fell by 143,000. State governments, outside of school jobs, cut 7,000. Meanwhile food services and drinking places added 366,000 positions.
366,000New food services jobs in March from a year earlier
ECONOMISTS REACT TO THE FED DECISION: "MORE OPTIMISTIC...THAN IN MARCH"
Federal Reserve officials voted to hold rates steady at the conclusion of their two-day policy meeting Wednesday. They appear to be in no rush to move them higher in the weeks ahead amid signs of slower economic activity and lingering concerns about inflation and global developments. Here’s what economists had to say about the latest policy statement:
“The statement was more optimistic-sounding than in March…consistent with tightening again soon—potentially in June—if the data and markets are supportive. And while the formal risks assessment was not reinserted, the reference to ‘global economic and financial developments’ posing risks was dropped. Instead, officials will ‘monitor’ ‘global economic and financial developments,’ along with inflation indicators.”—Jim O’Sullivan, High Frequency Economics
“On the domestic economy, the statement draws attention to the split between the ‘further’ improvement in the labor market ‘even as growth in economic activity appears to have slowed.’ They don’t say explicitly that the labor data are more reliable than the GDP numbers but it’s easy to conclude that that’s what they think.…Overall, the shifts in the language suggest the Fed wants to keep its options open, and to make sure markets know it. June is therefore in play, but we still think the Brexit referundum just eight days after the meeting is a serious barrier to action.”—Ian Shepherdson, Pantheon Macroeconomics
“The [Federal Open Market Committee] walked a fine line in keeping the door open for a rate hike at their next meeting in June but as usual emphasized that their decision will be ‘data driven.’ We expect much better jobs, income, retail sales, industrial production and housing data for April and May. Also, the headline [consumer-price index] and [personal-consumption expenditure] price indices should show big increases in April and May as gasoline prices jump and services prices continue their steady climb. With global financial conditions likely to remain better in coming weeks, I still expect a 25 basis-point rate hike at the June FOMC meeting.” –Stuart Hoffman, PNC Financial Services Group
“The Fed’s firmer assessment of the domestic demand picture, combined with eased concerns about global-growth headwinds, have confirmed that the June rates meeting remains ‘live,’ which keeps the prospect of another rate hike on the markets’ radar. However the Fed’s unchanged cautious strategy reflected in this steady-rate decision, combined with a commitment to ‘accommodative financial conditions’ via its balance sheet stance and an agnostic attitude towards a globally informed outlook for inflation, imply little impetus (or risk-adjusted fundamental conviction) for further near-term tightening.”—Lena Komileva, G+ Economics
ECONOMIC BOOST FROM OIL PRICES UNLIKELY UNTIL RATES RISE: IMF
The slump in oil prices is unlikely to boost the world economy until interest rates start to rise — by which time the commodity may have recovered somewhat anyway, the International Monetary Fund (IMF) said on Thursday.
The fund and many economists had believed that the 65 percent collapse in oil prices would be a net positive for the world economy, with gains to commodity-importing countries offsetting exporters' losses. However, the positive impact on consumption in advanced oil-importing economies such as the euro zone has been less than forecast.
"The widely anticipated 'shot in the arm' for the global economy has yet to materialize. We argue that, paradoxically, global benefits from low prices will likely appear only after prices have recovered somewhat and advanced economies have made more progress surmounting the current low interest rate environment," Maurice Obstfeld, Gian Maria Milesi-Ferretti and Rabah Arezki said in an IMF blog post.
Brent and WTI light crude futures appear to have bottomed at $40 per barrel for the time being, having fallen below $30 in January. Prices have continued to recover since February, but remain far off the average of around $110 per barrel reached before prices began tumbling more than a year and a half ago.
A period of slow economic growth before oil prices started falling meant major central banks had already lowered interest rates almost as low as possible, the blog's authors said. The banks were then unable to make further cuts to combat deflationary pressures resulting from lower production costs due to the decline in oil. The decline in inflation thus raised the real interest rate (the nominal rate adjusted for inflation), softening demand and possibly stifling an increase in output or employment, the IMF said.
"The current episode of historically low oil prices could ignite a variety of dislocations including corporate and sovereign defaults, dislocations that can feed back into already jittery financial markets," it said.
The U.S. Federal Reserve has begun gradually raising rates, but said this month that it now expects to make two hikes this year rather than four.
The Bank of England held rates at record lows in March, while the European Central Bank announced further monetary stimulus measures, including cuts to cut its main refinancing rate and its deposit rate.
FED FEELING ITS WAY IN A FOG OF UNCERTAINTY
Going slowly as old economic truisms are not working
WASHINGTON (MarketWatch) — The Federal Reserve’s decision on Wednesday to hold rates steady and pencil in fewer rate hikes reflects a central bank feeling its way through tremendous uncertainty.
“The Fed is driving on a cliff road on a foggy night, it makes sense to go slow,” said Kim Schoenholtz, an economists professor at NYU Stern School of Business.
Zachary Karabell, head of global strategy at Envestnet, agreed.
“I think the Fed should be uncertain,” given that all the models the central bank used to rely on have been breaking down over the past seven years.
The global environment feathers very low inflation, low long-term interest rates and there’s not a lot monetary policy can do to move the needle of demand, Karabell said.
“The world is too fluid. It is a little crazy out there,” is how former St. Louis Fed President William Poole put it before the U.S. central bank meeting.
After two days of talks, Fed officials held rates steady for the second straight meeting due to “global economic and financial developments in recent months.” They penciled in only two rate hike this year, down from four in December.
Karabell took issue with Yellen’s statement during the press conference that U.S. monetary policy is “somehow constrained” by the fact that other major global central banks, such as the European Central Bank and the Bank of Japan, are adopting easier policy measures.
Fed officials know that if they tighten rate policy, money will flow into the U.S. and rates will drop.
It’s a more significant factor but Yellen “would take a lot of heat” if she mention it because the global interest-rate environment is not part of the Fed’s mandate from Congress, he said.
Schoenholtz said the so-called “dot-plot” was the most interesting part of the Fed’s post-meeting communication despite Yellen’s attempt to downplay its significance.
“There was not a lot of news in the statement but there was more content in the dot plot,” he said.
The Fed revised down the path of rates and also lowered the so-called neutral funds rate, or the level of interest rates where the economy could grow without engendering inflation.
“The dot plot is useful, the Fed shouldn’t scrap it,” he said.
He endorsed a recent paper by leading economists and a former Fed governor to improve the dot plot by tying the dots to a specific economic forecast.