An NBER working paper analyzes more than 20,000 calendar entries from Fed Chairs Bernanke, Yellen and Powell. All spent over 30% of documented meetings with Fed staff, media contact grew, and Powell met lawmakers notably more often than his predecessors.
— via Marginal Revolution, Tyler Cowen
A back-of-the-envelope calculation in a new paper, "Saving for the Machines," argues that the AI investment boom would sharply raise real interest rates. Adopter economies like the U.S. could manage the debt through taxes on capital income, but non-adopters like Spain would face rapidly climbing debt and potentially default, inflation or financial repression.
— via Marginal Revolution, Tyler Cowen
Economists surveyed by the Wall Street Journal in October expect 10-year Treasury yields to climb, with forecasts for December 2027 ranging from 3.95% to 5.63%. A mix of improving growth, new inflationary pressures and worries about the U.S. fiscal path has pushed yields higher since summer, and many forecasters say they've had to rethink how much investors want Treasurys.
— via Econbrowser, Menzie Chinn
The yield curve inverted hard in 2022 and no recession came, and adding the debt service ratio to the model is what makes that miss disappear. For the US and Germany, the authors find the debt service ratio reconciles the 2024 non-recession with the inversion, while the term premium barely moves the results.
— via Econbrowser, Menzie Chinn
Industrial production came in above consensus, and nominal retail sales beat expectations too. After adjusting for prices, though, retail sales were close to flat, and sales excluding gasoline stations fell in real terms when deflated by core CPI.
— via Econbrowser, Menzie Chinn
US labor productivity has nearly doubled its 2010s pace since 2019, but 10-K filings show the extra revenue isn't going to paychecks. Gross margins jumped from 34 percent of sales to 37 percent, and firms that spent more on R&D before 2019 captured the biggest gains.
— via Fed Reserve — Liberty Street
The dollar's oldest rule just broke. Since "Liberation Day," rising U.S. yields relative to foreign ones no longer pull the dollar up, a reversal that points to markets pricing in risk rather than rate hikes.
— via Econbrowser, Menzie Chinn
The Fed tracks prices on more than 300 categories of goods, from jams to kitty litter, yet sets none of them directly. A New York Fed post walks through the surveys, models and indexes it uses instead to chase its price-stability mandate.
— via Fed Reserve — Liberty Street
Small businesses already using AI expect to hire, not cut: 33 percentage points net optimism on employment versus just 15 for non-users, new Fed survey data show. Revenue optimism runs highest among AI users still struggling to make the technology work.
— via Fed Reserve — Liberty Street
Most firms barely flinch when rates move. But for roughly 5 percent of firm-quarters, a 1-point rate hike triggers a 4-point drop in capital growth, and the usual suspects (size, age, financial health) explain surprisingly little of who gets hit hardest.
— via Fed Reserve — Liberty Street
A percentage-point tariff hike adds roughly a quarter percent to consumer prices within a year, new research finds. Import prices jump almost immediately, with about 90 percent passed through, while higher costs at U.S. factories take six to twelve months to fully show up at the register.
— via Fed Reserve — Liberty Street, Mary Amiti, Sebastian Heise, and David E. Weinstein
Homeowners insurance still leaves policyholders exposed to 29 percent of expected losses, even though curbing moral hazard costs insurers little, new contract-level estimates show. Lower-FICO borrowers pay more for protection yet retain the most uninsured risk.
— via Fed Reserve — Liberty Street
Payrolls added just 29,000 jobs against a forecast of 89,000, with the prior two months revised down a combined 81,000. Household employment still hasn't climbed back above January 2025 levels, and freight data has dropped sharply since May.
— via Econbrowser, Menzie Chinn
A plain term-spread recession model that nailed every downturn since 1960 starts missing them once 2024's false alarm gets baked into the data. Add that one bad signal and the model suddenly loses the 1990-91, 2001, and 2007-09 recessions entirely.
— via Econbrowser, Menzie Chinn
"Domestic" stock funds aren't as American as they look: science and tech funds park 43.3 percent of assets in U.S. firms with Chinese customers, data on over 5,000 mutual funds show. When Washington blacklists those customers, the risk hits fund investors anyway: and they're paid a premium for carrying it.
— via Fed Reserve — Liberty Street
A deflator revision just erased income's missing months: real personal income, once stuck below January 2025, is now 1.6% above it. Consumption is running hot too, up an annualized 6.6% in August, even as consumer sentiment surveys sit near rock bottom.
— via Econbrowser, Menzie Chinn
Consumer confidence just cratered to 81.9, badly missing forecasts of 89.2 and sliding further from August's 88.6, landing three standard deviations below its mean. Business conditions turned negative for the first time in a year, and the family-finances outlook flipped negative for the first time since 2022.
— via Econbrowser, Menzie Chinn
U.S. repo markets now move more than $13 trillion, dwarfing federal funds and Eurodollar trading combined. Dealers sit at the center of it all, borrowing $3.7 trillion and lending $3.4 trillion a day by late 2024, pocketing spreads for absorbing the risk nobody else wants to hold.
— via Fed Reserve — Liberty Street, Gara Afonso, Jun-Davinci Choi, Gonzalo Cisternas, and Will Riordan
When the Fed does a repo, it's called a reverse repo, and vice versa. This piece untangles the terminology and traces repo usage back to 1917, showing three real stress episodes since 2019 when the Fed had to flood the banking system with cash.
— via Fed Reserve — Liberty Street, Gara Afonso, Jun-Davinci Choi, Gonzalo Cisternas, and Will Riordan
Ten-year Treasury and TIPS yields have climbed since February 27, and the increase tracks the start of the US-Iran war. Two charts lay out the moves across the yield curve, from short-term to ten-year rates.
— via Econbrowser, Menzie Chinn
