Dr. Perryman discusses the The Federal Reserve's latest open market meeting and what we can expect for interest rates.
The Fed held off on an interest rate increase during its June meeting, but Dr. Perryman says that considering how bloated their balance sheet is, they'll have to do it soon.
With inflation spiking and job openings far outnumbering unemployed persons, it is little surprise that the Federal Reserve is signaling a change in the game plan. By clearly communicating the thought process and the likely approach, the potential for disruptive surprises has been reduced.
Calm down! Recent inflation reports have caused alarm and, frankly, overreaction. The overall Consumer Price Index increased again in May, bringing the rate over the last 12 months to 5.0%. It was the largest 12-month increase since a 5.4% rise observed in August 2008, during the midst of the Great Recession. The index for all items less food and energy rose 3.8%, the largest annualized increase since June 1992.
In a few speeches and scribblings of late, I have noted that we appear on the cusp of a new Roaring Twenties, similar to that emerging a century ago in the wake of the Spanish flu (hopefully without any expectation that I will master the Charleston). That modest projection inevitably raises the question: "If we roar like the 1920s, will we then fall through the floor like the Great Depression of the 1930s?" The answer is quite simple – No!!
Paul A. Volcker, who recently passed away, was a giant figure in modern economics. As head of the Federal Reserve, he took bold and unpopular steps to solve major economic problems, setting the stage for the prosperity we enjoy today, including the two longest expansions in US history.
President Trump has nominated Jerome H. Powell to be Chairman of the Board of Governors of the Federal Reserve System, succeeding Janet Yellen when her term expires in February. The Federal Reserve Chairmanship is among the most powerful positions in the public sector (or, in fact, anywhere), due to its substantial influence over the US economy and, indeed, the fortunes of nations throughout the world. The Chair serves a four-year term and can then be reappointed. Contrary to the usual pattern, President Trump decided against nominating Janet Yellen for a second term, though he praised her efforts and results. This move was highly unusual, as the Chair is almost invariably reappointed by Presidents in their first term when the economy is doing well.
The Federal Reserve will begin to pare down its nearly $4.5 trillion balance sheet this month, starting the process of reducing assets purchased during the global financial crisis and later quantitative easing (QE) to help the US economy recover from the "Great Recession." It's been almost a decade, and it is time for the unwinding of these positions to begin.
It's been almost a decade, but the Federal Reserve (Fed) is finally confident enough in the economy to begin actions to get back to normal after the "great recession." This is good news, because getting the Fed's balance sheet back in order is essential to future economic performance.