Kevin Warsh's nomination for the position of Fed chair generated some unease and uncertainty on Wall Street. This wasn't because he was notably dovish or overly hawkish on monetary policy, but because he shares a similar perspective with Greenspan: asset prices are important when considering the economic and financial outcomes of monetary policy decisions. Greenspan and Warsh approach asset prices from distinct angles. In his well-known "Irrational Exuberance" speech, Greensp

If you rely on the GDP estimates from the Federal Reserve Bank of Atlanta's team, the US economy is performing the improbable by growing well beyond its potential, despite two key sectors experiencing no growth and minimal new job creation. The Atlanta Fed's GDPnow estimate suggests that Q4 GDP growth is at an annualized rate of 5.1%. However, that estimate of output growth is at odds with the weak growth picture depicted by data from manufacturing, housing, and employment. T

Nominal GDP increased at an annual rate of 8.2% in Q3, after a 6% annualized rise in the previous quarter. These consecutive strong increases in nominal economic activity are the largest since 2022. Monetary policy affects nominal spending, and the Nominal GDP/Fed Funds rule suggests that the current monetary policy stance is "far too easy". GDP price Index +3.7%. Earth to Fed!

During this week's press conference, Fed Chair Powell inserted himself and the Fed into the discussion about payroll job measurement. Powell stated that there is a "systemic overcount" of payrolls, estimating it to be around 60,000 per month, according to Fed staff. It is uncertain why Powell questioned the accuracy of payroll data since the Fed's "employment mandate" focuses on the unemployment rate, which is measured by the household employment survey rather than the payrol

Consumer affordability is a widely discussed topic, but it's not enough to simply look at consumer prices. Affordability encompasses the prices or costs of essential and discretionary items, which are mainly captured in the consumer price index, along with mandatory expenses that standard price measures don't cover. When considered together, the costs of purchasing consumer items and meeting essential obligations indicate that "affordability" has become a big problem for a l

Monetary policy mistakes are often self-inflicted. Sometimes, policymakers cling to an official policy for too long, necessitating a swift and sharp reversal to mitigate economic harm. At other times, they try to address or reduce economic imbalances that aren't caused by monetary policy. That's when policy mistakes happen, and it seems that policymakers are about to make another mistake soon if they react to recent job data. Policymakers are tasked with an employment and inf