Iâ€™m trying to work out my morning schedule so I can get â€śRandom Shotsâ€ť up earlier in the day. This blogging thing is new for all of us, though, so please bear with me as I fiddle with the timing.
Lower Growth, More Inflation
I know thereâ€™s a name for this â€¦ if I could only think of it.
Oh wait, now I remember.
Sure, this is from way back in February, but itâ€™s sometimes useful to look back at public officialsâ€™ pronouncements.
â€śI donâ€™t anticipate stagflation,â€ť [Fed Chairman Ben] Bernanke told the Senate Banking Committee.
Even in February the writing in terms of energy and food prices, and an economic slowdown, was on the wall. Certainly in terms of â€śinflationary pressuresâ€ť the Fed was aware that energy prices were hurting consumers. However as of late February, it appeared the Federal Reserve was gearing up to fight the â€śstagâ€ť part of stagflation in the hope that the inflation mess would somehow work itself out. A story on page A2 of the Feb. 27 Wall Street Journal summarized a Feb. 26 speech by the Fedâ€™s vice chairman, Donald Kohn, in which he said that while inflation news was â€śdisappointing,â€ť he didnâ€™t expect the trend to continue. â€śIn my view the adverse dynamics of the financial markets and the economy have presented the greater threat to economic welfare,â€ť he said.
Also on Feb. 16, the U.S. Department of Labor reported that its Producer Price Index for Finished Goodsâ€”a measure of wholesale inflationâ€”rose by 1% in January, mainly due to rising costs for energy and food. Testifying before the House Financial Services Committee on Feb. 27, Mr. Bernanke echoed Mr. Kohnâ€™s words, suggesting that the Fed was aware of inflation risks, but was focused on stimulating the economy and mitigating downside risks.
The clear implicationâ€”or as clear as any Fed chairman seems capable of, at any rateâ€”was that the Fed was not through cutting interest rates. And in fact, on March 18, the Fed cut interest rates again by 75 basis points, to 2.25%. Since last summer, when trouble in the credit markets reached a boil, the Fed has cut interest rates by 300 basis points. In response, the economy has slowed further and the dollar has weakened, although the dollar weakening trend seems to have abated of late.
Seems like thatâ€™s still a good question.
This is a good week for hand-wringers; lots of reports coming out. Today the Conference Board said its index of leading economic indicators edged up 0.1% in April, a sign the economy isnâ€™t grinding to a complete halt. It marked the second consecutive monthly increase, and Aprilâ€™s gain surprised some economists who had expected it to remain flat.
Stock prices, the interest rate spread, and housing permits made large positive contributions to the index this month, more than offsetting the sharp declines in average weekly hours and consumer expectations. In April, the six-month rate of decline in the leading index slowed to -1.2 percent (a -2.3 percent annual rate), from - 2.4 percent (a -4.7 percent annual rate) from July 2007 to January 2008. In addition, the weaknesses among the leading indicators have become somewhat less widespread in the last two months.
Later this week, be on the lookout for the Producer Price Index for April on Tuesday, minutes from Aprilâ€™s Federal Open Market Committee meeting on Wednesday and Aprilâ€™s existing home sales figure on Thursday.
The Chicago Way: Competitiveness
How classic is it that Chicago is hosting the 2008 National Summit on American Competitiveness?
This ought to be a hoot. Almost as much fun as reading this. . . .
You Donâ€™t Say
The Middle East is running out of oil? Not to worry, we have plenty of advice for them.