MA’s Ken Matheny was quoted in the article, “Boring is best as Fed contemplates smaller balance sheet” by David Nicklaus of the St. Louis Post-Dispatch. (Excerpts shown below.) It was a big deal when the Federal Reserve bought trillions of dollars in bonds to boost the economy. Now that the Fed is about to reverse the process, we’re told it will be about as exciting as watching paint dry. Why the difference? For one thing, we’re not in a financial crisis, and the Fed plans to subtract those trillions more gradually than it added them. So far, markets have reacted calmly as one Fed official after another has discussed the balance-sheet reduction process. “It’s not really going to have a major impact on the outlook for bond yields,” said Ken Matheny, an economist at Macroeconomic Advisers. “Markets should be very well prepared for this, because the Fed has told us … Continue Reading
Monthly GDP jumped 0.7% in May following a 0.1% decline in April, which was revised down by two-tenths. About two-thirds of the May increase was accounted for by nonfarm inventory investment, which is estimated to have risen sharply in May following five monthly declines. Net exports and domestic final sales also contributed to the increase in May. Averaged over April and May, monthly GDP was 2.7% above the first-quarter average at an annual rate. Implicit in our forecast of 3.3% GDP growth in the second quarter is roughly no change in monthly GDP in June. Click here for more information on MA’s Monthly GDP measure.