Guy Berger, Ph.D.

Per the link below, the Federal Reserve just announced "additional information about the periodic review of its monetary policy strategy, tools, and communications—the framework it uses to pursue its congressionally-assigned goals of maximum employment and price stability. "The review is focused on two specific areas: the Federal Open Market Committee's Statement on Longer-Run Goals and Monetary Policy Strategy, which articulates the Committee's approach to monetary policy; and the Committee's policy communications tools. The Committee's two percent longer-run inflation goal will not be a focus of the review." https://lnkd.in/ektPKDWR #economy #markets #centralbanks #federalreserve

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The Monthly Inflation Indicator can be very confusing. Some take the view it is best to ignore it. If all you do is look at the reported through the year inflation rates, then that is probably the best option. The Monthly Indicator is not a monthly version of the quarterly CPI but rather the release of the data for the quarterly CPI in the month it is available (hence the Indicator tag). As such, in any one month we only get an update on around 60% of the components in the quarterly survey. So 40% of the quarterly CPI is not reported in amy one month. Also, quite a few of the series are only surveyed once a quarter so only appear in one month each quarter. As such, the monthly series is more volatile than the quarterly even if it trends around the quarterly estimate. So if you are not an inflation geek like me it is best to wait for the quarterly CPI to get the correct update on the ABS's estimate of inflation. But if you are a geek the Monthly Indicaor is rhe best source of partial information we have for formulating a near cast of the next quarter CPI. And from the partials in April there was not significant change in our view on the current pace of inflation. More import to our view is the introduction of the energy rebates, both Federal and state, plus rental rebates, changes in indexation and almost free public transport. These introduce significant volatility into the forward estimates can could push the annual rate of headline inflation down below 3%yr by the end of this year, if not a bit sooner. I cover this off in more detail in the following video - I do start out a bit stiff but luckily I warm up as we go along. #inflation #ausbiz #CPI https://lnkd.in/gViX_bZu https://lnkd.in/gcFRYXat

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Could be a very important legal issue in 2025.

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Next week is a big event for labor market data nerds: the Bureau of Labor Statistics releases its preliminary benchmark estimate for March 2024 - a big component of eventual benchmark revisions to key BLS data. I wrote a too-long preview of that event on my substack: https://lnkd.in/eTvWT8Sk Key takeaways: 1/ The benchmark revision is likely to be negative, enough to shift our assessment of job growth during the March 2023 - March 2024 period from "strong" to "solid". But it won't look recessionary. 2/ This is "old news". We have much fresher, high quality data that's giving us a good picture of the labor market trajectory. Data from 4.5-16.5 months ago won't alter that. But I've spoken to enough savvy people who think that to financial markets or "the vibes", old news can matter. 3/ This revision won't affect two of our most important labor market data sources: key household survey ratios like the unemployment rate and the prime working age employment/population ratio; and data on unemployment insurance.

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Quick reminder - on Wednesday we get the preliminary benchmark estimate from the BLS, which is likely to be negative. My explainer is below:

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A repost: The link I had originally did not work. Here is a link that works, at least for now. The Fed is using discretion instead of a set of rules to approve or reject applications for master accounts. One implication is a death sentence for innovation in banking at the state level. The Fed is not a big fan of innovation in banking by new banks, or small or medium-sized banks, even federally chartered ones. This blog post by me explains some of the details and a recent decision ab out Custodia's application for a master account. article. https://lnkd.in/e54akgW7

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In the latest episode of Decision Nerds, Paul Richards and I talk with Professor Alex Edmans of LBS. Alex recently published a book, ‘May Contain Lies’, which discusses our vulnerability to the misuse of evidence, statistics and stories, and how we can get better at deciphering the information that we consume. Alex talks us through his 'Ladder of Misinference', which is a great framework for understanding how we might be mistaken when in receipt of information, and what we can do about it. As part of the discussion we also cover areas including: - How to help people move beyond black-and-white thinking and engage with complexity - getting the right mix of data and stories - Why do bad ideas stick - do you still 'Power Pose'? - Changing minds – the power of good questions (there’s a great experiment on pianos and toilets that you can try at home). - Trading off the short and long-term - why he chose the most critical agent to help him publish his book. - Understanding neurological carrots and sticks - what happens when we put people in a brain scanner and give them statements they like and don’t? - The state of debate around ESG and DEI – ideology, identity and pressures to conform. I hope you enjoy the conversation, which covers a range of subjects that feel increasingly important. You can listen to the episode in the usual places, or from the link in the comments.

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Demographic and financial attributes can affect whether a consumer uses mobile payment apps or buy now, pay later or acquires cryptocurrency. Read more about the factors affecting the adoption and use of payment innovations in my new Boston Fed paper with Claire Greene and Julian Perry:

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🎙🎙🎙Why is the U.S. economy outperforming much of the world? Inside Economics Podcast: Episode 166—Economic Exceptionalism Moody's Analytics economist Matt Colyar joins the podcast panel for a deep dive on the resilience of the U.S. economy. Colyar begins with a report on personal consumption expenditure inflation data and its implications for monetary policy at the Federal Reserve. He and podcast regulars Mark Zandi, Cristian deRitis and Marisa DiNatale explore reasons behind the U.S. economy's rapid and robust recovery compared with the rest of the world. Listener questions focus on implications of quantitative easing and quantitative tightening and the predictive power of the yield curve. https://lnkd.in/eiGZKswZ

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With the jobs data behind us, attention will again focus back on politics. Here is the latest snapshot of our election dashboard. Monitor it live at WSL ELECTION<GO>: https://lnkd.in/eE7rf6it

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Pat Bustamante has put together a great note on the divergence between the states and yet we see a convergence with inflation. We have indeed calculated a trimmed mean for each capital city. Just like the broader CPI they do trend to track with the national average (maybe due to the fact we only survey the capital cities for prices and not the regions) and only diverge in extreme situations. Let me know if you would like more information our our Capital Cities Trimmed Mean. #inflation #CPI

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The Federal Reserve minutes are out for the September meeting where the FOMC opted for a 50 bps cut (link below). It turns out that the discussion about the magnitude of the September cut was more robust than suggested at the press conference that followed the policy meeting. Indeed, the minutes’ wording suggests that quite a few FOMC members would have supported a 25 bps. https://lnkd.in/ee8Z8Wa4 #economy #markets #federalreserve

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After the fear that an emergency FED intervention (rate cut) before the September meeting would create more damage than good, I have the feeling that a different (indirect) channel of intervention was in place. The BoJ's pro-risk signal, as suspected also by Mohamed El-Erian, it is partly due to external pressures (global stock losses) and might potentially conflict with the country’s domestic economic requirements. Although, the mean of intervention was different, the goal seems that is the same-continuation of the carry-trade funded by Japanese Jen, thus calming the stock markets (reduce the losses). So I raise the same question I did a couple of days ago. Doing these interventions, although the idea itself is noble in mitigating a greater crisis from happening, who do central bankers really serve in the end the greater public (tame inflation) or market players?

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Today we get policy announcements from the Bank of England and the Federal Reserve. The “easy” part of the prediction is that both central banks will cut rates by 25 bps. Also, both are likely to signal subsequent cuts, they will be quite vague about how many while hinting at 25 bps magnitudes (rather than another Fed jumbo 50 bps). Harder to predict is how much each central bank will be willing to share about changes to their outlooks in light of recent developments. I suspect that the BoE is much more advanced in internalizing last week's UK budget news than the Fed with the potential policy approach of President-Elect Trump. #economy #markets #centralbanks #federalreserve

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“Political parties of all stripes are pushing for higher government spending” - according to a new thought-provoking paper on fiscal discourse from the IMF. In the U.S., support for fiscal expansion among Democrats is close to historic highs (the data series goes back to the 1920s) – something to think about in the run up to the elections and against the backdrop of the already wide general government deficit (which is expected to remain wide for years to come – check the latest CBO projections if you like a good horror story). The paper makes it clear that fiscal expansion discourse is a global trend, but EM look marginally better on this metric right now. And in our opinion, improving checks and balances in EM – including independent central banks which do not hesitate to tighten in order to send warning shots to the government (like this week’s expected rate hike in Brazil) – can improve fiscal outcomes. The market reaction to EM fiscal transgressions and rating agencies’ wrath are great disciplining tools as well (both are sadly absent in advanced economies most of the time). Mexico’s president-elect Sheinbaum was well aware of this fact when she re-appointed Minister of Finance Ramirez de la O, sending a message of fiscal consolidation hours after her victory. Indonesia adjusted its pro-growth aspirations to target a smaller budget deficit in 2025. India tightened its 2025 deficit target after the inclusion in the EM local bond index, because this is what Fixed Income investors care about. And the opposite is true as well - South Africa’s “fiscal sleeper” story contributed to a major post-election bond rally, and sovereign bonds in Argentina and El Salvador gave a round of applauds to 2025 draft budgets.

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My commentary on the Treasury's NPRM on outbound investment and findings from the 2023 CSET report in Roll Call today: "Between 2015 and 2021, at least $40.2 billion, or about 37 percent, of the $110 billion in capital raised by Chinese artificial intelligence companies involved U.S. investors, according to a 2023 report by the Center for Security and Emerging Technology at Georgetown University’s Walsh School of Foreign Service. The proposed rule seeks to cover investments in AI technologies that would have specific military end uses, including weapons development, target identification and combat simulation. But it also would expand investment prohibitions to the development of powerful AI systems known as frontier models, said Ngor Luong, a senior research analyst at Georgetown’s CSET. The proposed rule intends to set the boundary for prohibitions based on the computing power such AI models would use, Luong said." https://lnkd.in/emp62Ks3

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The much needed exchange rate depreciation that was avoided earlier under intensive interest group influence is providing the expected macroeconomic dividend. This also underscores that while there are no silver bullets when it comes to macroeconomic stabilization but conventional policies work provided we accept the growth tradeoffs and show patience.

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Riddle me this. Bidenomics in action: Bidenettes just set up a program with Freddie Mac (to be followed by Fannie Mae) to provide guaranteed HELOCs to homeowners who don't want to refinance their first mortgages which carry lower rates. Not only a deja vu from 2008-2010 in terms of excess borrowing, and leveraging up a volatile asset, the impetus seems to be to provide more consumption capacity to consumers, as they are tapped out on income and savings. A way to keep the economy (over-)heated. Inflationary? Of course. But think of this another boost of helium in the bubble that will soon pop. Household debt is already approaching $16 trillion - given mortgages, auto, credit card/BNPL, and when added to corporate, muni and federal debt, we as a nation bypassed $60 trillion. And consider total savings across all of these - govvies, consumers and business - stands at under $5 trillion. I again state that "red is the new black", as borrowings have gone beyond an endemic stage; I do believe a waff of fatality is in the air. So our govvie leaders are inducing and incentivizing more borrowing to show economic progress??? To follow my earlier piece on AI & Religion, what the govvies are doing is literally sacrilegious.

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