“Markets and the Fed are caught between strong growth and weak inflation,” Tim Duy, chief U.S. economist at SGH Macro Advisors, wrote in an analyst note this week. “The GDP report is genuinely new and unexpected information that the Fed will read as challenging its forecast that growth will soon slow to, or below, trend.”
SGH Macro Advisors, in partnership with Columbia University, hosted a panel discussion entitled “A Conversation with Isabel Schnabel,” Executive Board Member of the European Central Bank, on Monday, March 27, 2023, in New York City from 11:00 to 12:15 pm Eastern time.
SGH’s CEO Sassan Ghahramani hosted and moderated the panel, featuring Ms. Schnabel, and Columbia University’s Richard Clarida, most recently Vice-Chairman of the Board of Governors of the US Federal Reserve.
At this event, ECB Board Member Isabel Schnabel, who has been among the most influential and prescient voices on the European Central Bank leadership in its current battle against inflation, shares her views and comments on the Eurozone, followed by a lively and topical panel discussion on the policy challenges and economic outlook for the European and global economies as we enter the second quarter of 2023.
“The policy stance and underlying inflationary pressures in the eurozone” put the European Central Bank in a “dramatically different position” from the Fed, Sassan Ghahramani, the founder and chief executive of SGH Macro Advisors, wrote in a note…
..."The Western ban on insuring tankers carrying Iranian oil was perhaps the single most effective measure in taking a significant part of the Islamic Republic's clandestine oil exports off markets," Sassan Ghahramani of consultancy SGH Macro Advisers said in a note Tuesday...
...Tim Duy, chief U.S. economist at SGH Macro Advisers, said the market is unsure what the Fed will do in September.
"The Fed is pressing forward with rate hikes, and Waller's speech should help erase speculation that the Fed will not follow through with another two 50bp hikes or skip a hike at the September meeting," said Duy...
Tim Duy, chief economist at SGH Macro Advisors, told clients Tuesday that for the May FOMC meeting "incoming inflation and jobs data will almost certainly support the [50 basis point] move, and more importantly [Fed Chairman Jerome] Powell likely supports it as well."
Moderated by Sassan Ghahramani, Founder and CEO of SGH Macro Advisors, with panelists Dr. Michael Woodford, John Bates Clark Professor of Political Economy, Columbia University, and Tim Duy, Chief US Economist for SGH Macro Advisors and author of “Tim Duy’s Fed Watch.”
Tim Duy, chief U.S. economist at SGH Macro
Advisors, put it this way: “Hawkishness is the new dovishness.”
To be clear, the Fed’s stance will almost certainly remain
highly accommodative by historical standards. Real yields aren’t
anywhere near turning positive. In the past, the central bank
might be inclined to slam the brakes on the economy to stamp out
the sharpest price growth in four decades. The Powell Fed
absolutely won’t do that. But it does seem to have the tacit
approval of the White House to get a tad more aggressive on
The Fed needs to be a bit more aggressive with removing accommodation than they have been,” said Tim Duy, chief U.S. economist at SGH Macro Advisors, who expects officials to revise their median forecast to two rate hikes next year to rein in inflation levels, from a split at their last meeting on if they even needed one...
...Given all these crosscurrents, it seems like it might make sense for the central bank to keep its options open. One longtime Fed watcher I spoke with said that was what Powell was doing last week by making his hawkish comments about inflation and accelerating the taper. “By tapering early, the Fed can actually increase its optionality going into 2022,” Tim Duy, the chief U.S. economist at SGH Macro Advisors, said. “They could decide to raise interest rates as early as March, or, depending on the incoming data, they could continue to push out until the fall.”
Duy also said that he suspects, with core inflation running at more than four per cent and the jobless rate at 4.2 per cent, many people at the Fed believe that the necessary conditions for a rate hike have already been met...
“What is going on here is that Powell is looking at the level of inflation and looking at how fast the economy is growing and is starting to get worried that the Fed has been too easy for too long,” said Tim Duy, an economist at SGH Macro Advisors and the University of Oregon. “They are shifting the narrative.”
...That kind of framing seems misguided at best. Tim Duy, chief U.S. economist at SGH Macro Advisors, put it this way: “It’s not a choice between a recession or zero rates forever.” Indeed, it’s time for the Fed to start contemplating how to tread a middle ground if officials continue to be wrong about inflation...
...Tim Duy of SGH Macro Advisors said in a note that there was a danger of a “possible leadership vacuum at the Fed” if the Biden administration did not make decisions quickly, both on Powell’s fate and other vacancies at the top of the central bank.
Randal Quarles’ tenure as Fed vice-chair for supervision, which is responsible for banking regulation, expired this month without a replacement and no one has been tapped for the job. Meanwhile, the Fed is gearing up to start shrinking the pace of its asset purchases to slow the support for the economy as high inflation persists. Next year the Fed will be debating when and how to actually start raising interest rates. “The lack of White House attention to the Fed creates potentially enormous policy uncertainty,” Duy said...
...Tim Duy, chief U.S. economist at SGH Macro Advisors, said comments from the Fed are moving in an overall hawkish direction. He said it will be important to see if Fed Chairman Jerome Powell pushes back on such talk at his upcoming speech on Friday.
...“My instinct is that with Powell acting quickly to address the issue and assuming he can keep the scandals at arm’s length, he is still the favorite for the top spot,” said Tim Duy, SGH Macro Advisors chief U.S. economist, in a note last week...
Washington Post and Bloomberg - September 28, 2021
“I view Rudd’s policy implications as an indictment of the Fed’s new policy framework,” Tim Duy, a former Bloomberg Opinion contributor who’s now chief U.S. economist at SGH Macro Advisors, wrote in a report. “There is clearly some internal conflict.”
I wrote last week after the Federal Open Market Committee decision that Powell tried to walk back the central bank’s inflation fear, which was evident in the hawkish shift in the “dot plot.” The sort of questions raised by Rudd’s paper only increase the likelihood that policy makers will be leery of inflation that persistently exceeds 2% and that for all the talk about a “substantially more stringent test” to raise interest rates and the steadfast belief that price growth will be transitory, they’ll react similarly to the way they have in the past.
Reuters - August 26, 2021
Fed’s Powell likely to give few hints on bond-buying taper timeline
..."It's complicated messaging right now," said Tim Duy, chief U.S. economist at SGH Macro Advisors. "The reality is the tapering is not separate from the rate hike: once you start the tapering, you kind of start a clock on the rate hike."...
"...Leave it to Tim Duy, the provocative University of Oregon professor and chief U.S. economist at SGH Macro Advisors, to make the connection.
Duy said the White House at this point is distracted and politically weakened by the events in Afghanistan. “I think that favors Powell in that he represents continuity and the path of least resistance,” he said. Powell, a Republican, would gain support from the GOP side of the aisle, and a key swing Democrat, West Virginia Sen. Joe Manchin, has said he prefers tapering sooner rather than later — which presumably means he doesn’t want a more dovish choice than Powell.
That would make it difficult to get the realistic alternative to Powell, Fed. Gov. Lael Brainard, through Senate confirmation. “With Powell, Biden likely has an easier path to a bipartisan win, and I think his administration will be looking to rack up those wins, although the progressive wing’s calls for tighter regulation will also play then to the compromise of Brainard as vice chair for supervision (assuming, of course, that she would be interested in taking the job),” said Duy.
According to a Bloomberg News article, Powell’s reappointment is supported by Treasury Secretary Janet Yellen, and Biden will make his decision around Labor Day.
Duy said the Fed will wait till November to formally announce a slowdown in bond purchases. “I think a consensus will be easier to reach with two more employment reports, that the Fed would not want to announce a taper heading into another debt ceiling debate in October, and that the Fed will want to use September to telegraph that the taper is coming,” he said. As for the Jackson Hole Fed gathering — being held virtually beginning Thursday — “watch also for signs that Powell has lost some of his conviction that the delta variant will have only limited economic impacts; any increase of concerns on this front would be a clear signal against September.”