The total bill could exceed $500 billion. A proper evaluation should make the next one less expensive. America’s experiment with quantitative easing is almost over. This week, the Federal Reserve will likely announce plans to slow the shrinkage of its balance sheet, foreboding the end of a long period in which it sought to stimulate the economy ...

This time around, the market has it right. The federal funds rate will probably stay a lot higher than what officials are projecting.Financial markets and the US Federal Reserve remain in disagreement on a subject crucial to asset prices and economic growth: how low interest rates will eventually go. Betting against the Fed is a fraught ...

Regulators have yet to address the system’s vulnerability to sudden depositor withdrawals. Ever since the demise of Silicon Valley Bank in March 2023, regulators have been focused primarily on increasing loss-absorbing capital at the largest US financial institutions. Much less attention has been paid to the problem that precipitated last ...

Defeating inflation without crashing the economy is still a challenge. Financial markets have lately been intensely focused on the US Federal Reserve’s next moves: How soon will it start cutting interest rates, and how low will it take them this year? That’s really hard to answer, but I can offer some insight into what will drive the ...

This time around, quantitative tightening needn’t destabilize money markets. The US Federal Reserve faces a monetary-policy challenge above and beyond determining the right level of short-term interest rates: how much and how quickly to reduce the more than $7 trillion in securities still on its balance sheet — holdings it amassed in ...

There’s a better way to ensure lenders can always pay their depositors. Almost a year ago, America experienced a frightening financial shock: a run on banks, in which depositors raced to pull money out of institutions that they feared were about to collapse. Such events can and should be a thing of the past, but this will require ...

Almost a year after Silicon Valley Bank's failure, the Federal Reserve is still keeping the public in the dark about the deficiencies it finds at US lenders. The US has yet to fully address one of the greatest weaknesses revealed by last year’s failure of Silicon Valley Bank and other regional lenders: Supervisors saw the problems, but they ...

The US Federal Reserve has bet its reputation on a soft landing. Here’s hoping it works out. The US Federal Reserve and its chair, Jerome Powell, are betting that they can have the best of both worlds — that they’ll be able to defeat excessive inflation without forcing the economy into recession. I hope it goes well. Unfortunately, there’s still ...

Central bank digital currencies can make the financial system more useful for more people. But the US Federal Reserve needs to get involved. When the crypto bubble was on the rise, it prompted governments to step up development of their own form of electronic cash, known as central bank digital currencies. Now that enthusiasm for crypto has ...

Broader financial conditions matter for the economic outlook. The Fed is right to focus on them. Lately, Federal Reserve officials have been paying greater attention to financial conditions – that is, to the influence that market phenomena such as stock prices, bond yields and housing prices have on economic activity, above and beyond the ...

The upward pressure on long-term interest rates from QT will persist until late 2025. The US Federal Reserve’s efforts to quell inflation have sent long-term interest rates to their highest level in a generation, putting a lot of stress on banks, companies and anyone looking to finance a new home. How long will this go on? Judging from the ...

Five things to watch in the Summary of Economic Projections. Can the Federal Reserve engineer a soft landing, in which it defeats excessive inflation without tipping the US economy into recession? This week, Fed officials will offer important clues as to whether that’s achievable.The Sept. 19-20 meeting of the policy-making Federal Open ...

US regulators want to boost capital requirements for the biggest banks by nearly 20%. There are better ways to make the financial system more resilient. US banking regulators are back to their old tricks. In the wake of a crisis — this time the March demise of a handful of regional banks — they want banks to fund themselves with ...

The paradigm has shifted. Higher yields are back. Who knew that the subject of US Treasury bond yields could inspire such passion? When, in late June, I argued that they were likely to move considerably higher than the then-prevailing 3.75%, I attracted some vehement pushback. In a publication titled “Don’t Be a Dud,” analysts at Morgan ...

Unless 3.6% unemployment is the new normal, the central bank has more tightening to do. After a string of encouraging data, markets are displaying increasing optimism that the Federal Reserve might be done with its battle against inflation – and that the US will experience a rare "soft landing," in which inflation falls back to 2% and the ...

Sometimes the Fed has to get creative to support the economy. But it must consider the risks, too. Having presided over America's first banking crisis since 2008, Federal Reserve officials are rightly focused on reforming regulation. That said, they should keep in mind some lessons for monetary policy, too. The Fed has promised to complete ...

Lessons for regulators from three weeks of financial mayhem. The banking havoc of the past few weeks has focused attention on regulators: What should they learn, and what should they do about it? I see five lessons, and five prescriptions. First, banking rests on confidence. For uninsured depositors, running at the first sign of trouble is ...

The central bank doesn’t have to sacrifice its monetary policy goals to calm turmoil in the financial sector. The US Federal Reserve is facing increasing pressure to sacrifice its monetary-policy goals for the sake of financial stability, on the grounds that its interest-rate increases are to blame for the turmoil in the banking sector. This is ...

If US officials don’t do something about the government’s fiscal problems, the bond market will. As recently as the early 1990s, America's leaders cared a lot about how bond investors would react to their decisions. James Carville, a political strategist for Bill Clinton, famously said that he'd like to be reincarnated as the bond market, ...

“Money printer go brrrrr” doesn’t describe how Federal Reserve policy actually operates. Internet memes and pundits alike often display a specific understanding of how the US economy works: that the sheer volume of money is the most important determinant of output and prices. Following their logic, the Federal Reserve's pandemic-related ...

A moderate and patient approach to raising interest rates would increase the chances of a soft landing for the US economy. But the central bank might not have that luxury. How will the US Federal Reserve wage its battle with inflation — by keeping interest rates elevated for longer, or by taking them even higher? Investors are fixated on ...

The central bank faces three significant risks in its ongoing battle to get inflation back under control. In some ways, the 2023 economic outlook for the US is locked in. The Federal Reserve's goal is to push the rate of inflation back down to 2% over the next few years. It will do this by keeping monetary policy tight enough for long enough ...

If markets remain optimistic, the central bank will just have to tighten more to achieve its inflation objective. Try as it might, the Federal Reserve can't seem to break the market's relative optimism about the outlook for interest rates. But there's one thing investors need to understand: The central bank has ample power to make its ...

Changing the objective now would be bad for the economy and for the central bank’s own credibility. Some people are suggesting that the Federal Reserve consider a compromise in its battle with rising prices: Instead of imposing the full monetary tightening required to get inflation back down to its 2% target, why not increase the target a bit? ...

The repercussions won’t be as dire as those of the financial crisis. But a comparison offers insights into what comes next. History may not repeat, but it certainly rhymes. Although the repercussions of the carnage in crypto markets won't be as broad or dire as those of the 2008 financial crisis, the parallels between the two episodes ...

The Fed chair can’t escape the fundamental trade-off: Ensuring victory against inflation will require economic sacrifice. US Federal Reserve Chair Jerome Powell faces a crucial choice as the central bank battles the worst bout of inflation since the 1970s: What kind of chair will he be? A Paul Volcker, who took interest rates ever higher in ...

The US central bank can’t ease the international repercussions of its rapid monetary tightening, but it can and should own up to its mistakes. Federal Reserve officials have been getting an earful about the economic threat that the US central bank's rapid monetary tightening presents to the rest of the world — complaints that will no doubt ...

The central bank is still pretending that its policies won’t hurt much. That’s not a good sign. The US Federal Reserve has made its inflation-fighting intentions abundantly clear. Now comes the difficult part: sticking to that commitment as tighter monetary policy restrains the economy and puts millions out of work. Will the Fed stay the course? ...

Quantitative tightening won’t lead to another cash crunch. Now that the US Federal Reserve has gone into full quantitative tightening mode, reversing an asset-buying program that had expanded its balance sheet to nearly $9 trillion, a worry is emerging: Could a disruptive cash crunch ensue, along the lines of what happened in money markets a ...

The Federal Reserve chair finally got his message across. Now comes the hard part. Federal Reserve Chair Jerome Powell has finally delivered his message loud and clear: To get inflation under control, the central bank intends to push interest rates higher, and keep them there longer, than markets had expected. It's a great first step. Now the ...

The chair of the Federal Reserve may have a hard time convincing markets that the central bank is serious about defeating inflation. But he’ll have to try. Nearly a year ago, when US Federal Reserve Chair Jerome Powell delivered his speech at the annual economic conference in Jackson Hole, a global audience was hanging on every word for ...

Market speculation about a “pivot” is overdone and counterproductive. Investors have lately become strangely optimistic that the Federal Reserve won't have to tighten monetary policy much further, bidding up stocks and bonds amid hopes that the Federal Reserve will soon get inflation under control. This wishful thinking is both unfounded ...

Don’t be fooled by data suggesting the central bank is making headway. The task ahead remains extremely daunting, both practically and politically. Developments in the US economy have recently been going the Federal Reserve's way, with price pressures peaking even as economic growth and strong payroll gains have been sustained. But don't ...

A recession is coming within 12 to 18 months as the Fed focuses on curbing inflation. If you're still holding out hope that the Federal Reserve will be able to engineer a soft landing in the US economy, abandon it. A recession is inevitable within the next 12 to 18 months. In their latest set of projections, Fed officials laid out a ...

Sugarcoating the outlook will only complicate its job and undermine its credibility. How high will the U.S. Federal Reserve take interest rates? It's a crucial question, given that the value of trillions of dollars in stocks and bonds worldwide is riding on the outcome. For markets, the answer suggested by Fed Chair Jerome Powell's ...

The longer oversight is delayed, the greater the chance it won't be very innovation-friendly. Digital finance is booming, with the value of cryptocurrencies outstanding reaching more than $2 trillion from almost nothing a decade ago – almost entirely without regulatory oversight to protect investors and the broader financial system. This is ...

If a recession doesn’t happen in the next couple years, it will only be worse. In a recent column, I made the case that the Federal Reserve's efforts to get inflation under control will inevitably result in a hard landing for the economy. But that leaves an important question unanswered: When will the recession happen? My best guess: Probably ...

Tightening financial conditions will be key to getting inflation under control. It's hard to know how much the U.S. Federal Reserve will need to do to get inflation under control. But one thing is certain: To be effective, it'll have to inflict more losses on stock and bond investors than it has so far. Market participants' heads are ...

Jerome Powell is far too optimistic about the chances of a soft landing. U.S. Federal Reserve Chair Jerome Powell has made two ambitious assertions about the central bank's management of the economy. In his latest news conference, he said that the Fed's new, more inflation-tolerant monetary policy framework bears no responsibility for the ...

U.S. debt burdens will be much less of a drag than investors appear to expect. A strange disconnect has emerged in financial markets. Investors now expect the Federal Reserve to raise interest rates this year much more aggressively than previously thought, to combat persistent inflation. Yet their expectations for how high rates will go ...

Quantitative easing generated ample income for the government. That’s about to change. The U.S. Federal Reserve's vast securities-purchasing program has had an ancillary benefit beyond stimulating economic growth: It has generated profits for the Treasury, as the income on the securities has exceeded the interest the central bank pays on ...

The central bank has to balance timing, magnitude and the mix of levers in tightening monetary policy. The Federal Reserve's pivot from easing monetary policy to tightening is nearly complete. That leaves a number of questions about how the central bank will accomplish its goal, from timing to magnitude to mix. Why did Chair Jerome Powell and ...

Quantitative tightening probably won’t upend money markets like it did in 2019. With the U.S. Federal Reserve on track to complete its asset purchase program in March and start raising interest rates soon thereafter, attention has turned to the next step in the monetary tightening process: reducing the central bank's holdings of more than ...

It can’t remain in the fantasyland of its dovish forecasts indefinitely. I have news for those who think the U.S. Federal Reserve has turned more hawkish on inflation: It has only just begun. True, the minutes from the Fed's December policy-making meeting display growing concern. Officials are acknowledging that the labor market is already ...

Beyond the taper, the longer-term outlook for interest rates might come as a shock to markets. The U.S. Federal Reserve has bitten the bullet: At their policy-making meeting next week, in recognition of persistent high inflation, officials will announce a speedier tapering of asset purchases that have been supporting economic growth. The aim ...

If central bankers don't accelerate the taper at their policy meeting in two weeks, it'll be too late. When the U.S. Federal Reserve holds its next policy-making meeting in mid-December, officials will face a tough decision: Whether to remove stimulus by cutting back more sharply on asset purchases, as Chair Jerome Powell suggested they might ...

The central bank will most likely stick to its current path and hope for better news on inflation, inflation expectations and labor market supply. But hope is not a strategy. Evidence that the Federal Reserve needs to tighten monetary policy continues to accumulate. First, inflation rates continue to move higher, and are likely to stay there ...

The central bank might need to raise interest rates more than twice as high as investors anticipate. Investors are increasingly betting that the Federal Reserve will have to raise interest rates sooner than previously expected to keep inflation in check. A few months ago, futures prices implied that "liftoff" from the current near-zero ...

The central bank’s approach would have made more sense a decade ago. In figuring out how to deal with resurgent U.S. inflation, the Federal Reserve needs to understand the nature of its adversary: Is the current economic situation similar to what it was after the 2008 financial crisis, or something new and different? I'm concerned that the Fed ...

If people start to doubt the Fed’s inflation-fighting credibility, his job will get a lot harder. If all goes according to Federal Reserve Chair Jerome Powell's baseline forecast, the current surge in U.S. inflation will prove transitory, despite the central bank's persistent efforts to stimulate growth and reduce unemployment. But what if ...

But that doesn’t mean the Fed isn’t paying attention to inflation. In his address at the annual Jackson Hole economic conference, Federal Reserve Chairman Jerome Powell offered a finely calibrated message that I think is worth amplification: The Fed wants to do everything it can to restore jobs lost during the pandemic, but that doesn't mean ...

It might take a while, but normality will return. See if you can figure out which of these data points conflicts with the others: The U.S. economy grew at an annualized, inflation-adjusted rate of 6.5% last quarter; it added an estimated 850,000 jobs last month; consumer prices have risen 5% over the past year; and the 10-year Treasury note ...

The Fed's new repo facility is a good first step, but not enough.The market for U.S. Treasury securities is a lynchpin of global finance, providing funds for the government, a safe place to park money and a benchmark for interest rates everywhere. Yet on too many recent occasions, this crucial market has malfunctioned, unnerving investors ...

Appointing Lael Brainard to supervise banks could shore up support among progressive Democrats. Federal Reserve Chair Jay Powell faces a personal kind of employment challenge: Two important Democratic senators, Sherrod Brown and Elizabeth Warren, are saying that he has been too soft on bank regulation, putting pressure on the Biden ...

There are three main factors making it difficult for employers to find workers, but these are mostly transitory. The U.S. labor market holds the key to the inflation outlook and the timing of the withdrawal of monetary policy accommodation. After all, it is pressure on resources that ultimately leads to persistent inflation. If workers are ...

Central bankers have some experience this time around. The U.S. economy is making good progress toward meeting the Federal Reserve's objectives for employment and inflation. This means it's time to revisit a topic that generates great anxiety in financial markets: when and how the Fed will start removing stimulus by reducing its monthly ...

There’s a better way to manage monetary policy. The U.S. Federal Reserve's interest-rate decisions have big repercussions for the country and the world. Yet the short-term interest rate it targets — known as the federal funds rate — no longer plays a meaningful role in the economy, and requires occasional fiddling to keep it in line. The ...

The execution of its new inflation-targeting regime leaves much to be desired. The U.S. Federal Reserve's new approach to managing inflation, unveiled last summer, makes a lot of sense: By seeking to achieve an average of 2% — that is, by allowing inflation to overshoot enough to offset previous undershooting — the central bank should be able ...

The current spike will probably pass, but the longer-term risk remains. The U.S. Federal Reserve is showing little concern about inflation, even though its preferred measure — the core price index for personal consumption expenditures — has increased 3.1% over the past year, far exceeding the central bank's longer-term 2% target. Should people ...

The benchmark 10-year rate is likely to more than double in coming years. The 10-year U.S. Treasury note is part of the foundation of global finance. Its yield helps determine the cost of mortgages, the value of U.S. stocks and how much the U.S. government must pay to service its growing debt. I think markets are severely underestimating how ...

A 4.5% peak in the Fed’s target rate isn’t out of the question. When Treasury Secretary Janet Yellen recently made the innocuous observation that the Federal Reserve might at some point have to increase interest rates to keep inflation in check, financial markets became so flustered that she had to revise her comments. She was right the ...

Modifying the leverage ratio would be safe and sensible. The Federal Reserve is deploying vast resources to ensure that the U.S. economy recovers as fully as possible from the coronavirus pandemic. It and other regulators shouldn't let a flaw in banking rules get in the way. At issue is the leverage ratio, a rule that requires the largest ...

Some short-term interest rates could go negative unless the central bank acts. Investors are worried that a flood of cash could soon disrupt U.S. money markets, as the Treasury rushes to rid itself of money that Congress won't allow it to keep. It's a possibility that the Federal Reserve would do well to anticipate. Two phenomena have ...

It's probably headed higher, but that doesn't mean it will get out of control. I've lately been arguing that financial markets could be in for a surprise in the form of higher-than-expected U.S. inflation. But let me be clear: This doesn't mean that it will spiral out of control or soon undermine the post-pandemic recovery. Many forces ...

This recovery will be very different than the last one. One of the big questions looming over the U.S. economy is how soon the recovery from the coronavirus slump will start to generate inflation. In a recent column, I offered five reasons to be worried about the risk of an unpleasant surprise, in which inflation returns faster than people ...

There's a lot of fixing to do outside the core banking system. The coronavirus crisis delivered a severe shock to the U.S. financial system. So how did it do? Did the reforms enacted after the 2008 financial crisis succeed in ensuring stability this time around? The answer is mixed, which means there's more work to do. The core U.S. banking ...

The best the central bank can do is be prepared to limit the economic fallout. At some point, when the U.S. economy looks strong enough, the Federal Reserve will have to scale back its efforts to stimulate growth by buying large quantities of government securities. Announcing such an intention, however, will risk repeating the "taper tantrum" ...

People and markets could be in for a surprise. A lot of people believe that inflation in the U.S. is dead or, if not dead, in a state of suspended animation for the foreseeable future. They could be setting themselves up for an unpleasant surprise. In official projections and market prices, it's hard to see any concern about the possibility ...

Central bank officials aren't bluffing when they say that only government spending can rescue the U.S. economy. No central bank wants to admit that it’s out of firepower. Unfortunately, the U.S. Federal Reserve is very near that point. This means America’s future prosperity depends more than ever on the government’s spending plans — something ...

Banks are OK. Other financial institutions, not so much. After the U.S. financial system came to the brink of collapse in 2008, Congress and regulators spent years on renovations designed to prevent that from ever happening again. More than six months into a global pandemic that has delivered another monumental shock, it’s worth asking: Were ...

Recovery depends much more on Congress and the White House. The U.S. Federal Reserve is changing the way it conducts monetary policy, a move that will have significant long-term consequences for interest rates, inflation and employment. But, unfortunately, this shift is not likely to be of much help to the current, fragile recovery. Last week, ...

Saving the U.S. economy matters much more than the health of the central bank’s balance sheet. The Federal Reserve’s balance sheet is expanding extraordinarily rapidly and by yearend may exceed $10 trillion. This is against a capital base of only about $39 billion, which implies a leverage ratio of more than 250-to-1. What balance-sheet risks ...

The enormous figure deserves attention, but for now the risks seem manageable. The Federal Reserve’s balance sheet is exploding, growing by about $3 trillion since mid-March and now totaling more than $7 trillion. It could conceivably exceed $10 trillion by yearend, as the central bank buys corporate bonds, municipal securities and makes loans ...

Ending the cycle of saving nvestors and markets from themselves is going to be really hard. The Federal Reserve has responded aggressively to market strains and the sharp drop in the economy caused by the coronavirus pandemic. The central bank cut short-term interest rates nearly to zero, bought hundreds of billions of dollars of Treasuries ...

A new program could end up being ignored or loaded with bad loans. The Federal Reserve has done much to support markets, stabilize financial conditions and backstop key areas of the U.S. debt and credit markets. But challenges remain. One big one is to get its Main Street Lending Program up and working well. As the Fed describes it, this ...

It should help small businesses and municipalities, but draw the line at non-investment-grade corporate borrowers. The U.S. Federal Reserve has gone to unprecedented lengths to keep money flowing to households and businesses that, through no fault of their own, have suffered from the measures needed to contain the coronavirus. But it can’t ...

By containing the economic damage, they’re making it easier to curb the pandemic. That said, we have the power to improve the terms of the trade-off. This is precisely what Congress is doing by enacting the largest fiscal stimulus ever, aimed in part at replacing the income that people and businesses have lost. And it’s why the Fed has ...

The financial-crisis playbook isn’t well-suited to the problems posed by the pandemic. The coronavirus threatens to have wrenching effects on the U.S. economy. Growth will be hurt by supply disruptions that depress production and by falling consumer demand as discretionary activities are constrained to slow the spread of the virus. So how will ...

The central bank is being measured, but would move up plans to cut rates if needed. The U.S. equity market finally is taking notice of the coronavirus, which now is spreading from China to other countries and increasing the risk of a shock that could cause a U.S. recession.  So what are the implications for the U.S. economy and the ...

Equities are being driven by low rates and a healthy economy, not central bank T-bill purchases. During the past few months, the U.S. stock market has surged as the the Federal Reserve bought hundreds of billions dollars of Treasury bills to add reserves to the banking system and calm the repo market. Are the two connected? Or is the stock ...

The central bank can take four steps to support its new framework for monetary policy. The past decade experienced a revolution in how the Federal Reserve conducts monetary policy. While new tools such as quantitative easing have received the most attention, just as significant have been the changes made in how the Federal Open Market ...

Low Treasury bond yields won’t last, and companies continue to pile on debt that could become junk in a bust. The Federal Reserve, in its most recent semiannual report about risks to financial stability, concluded that there are no serious immediate threats. So does this mean we should relax? I definitely don’t think so. In my view, not only ...

The Fed should take out some insurance against a recession. People shouldn’t be as worried as they are about the risk of a U.S. recession. That said, it wouldn’t take much to trigger one, which is why the Federal Reserve should take out some insurance by providing added stimulus this week. Market participants see all sorts of reasons to fret ...

There are more steps the Fed should take. Easing bank regulations isn’t one of them. People have drawn a lot of far-reaching conclusions from last month’s brief bout of turmoil in money markets. They see implications for bank regulation, for benchmark interest rates and even for the way the Federal Reserve implements monetary policy. Actually, ...

The central bank has plenty of options. One of the world’s most important interest rates has had a tumultuous week. Thanks to a sudden shortage of dollars in a separate market, the federal funds rate – the focal point of the U.S. Federal Reserve’s monetary policy – briefly breached the 2%-to-2.25% range that the central bank was targeting. ...

The Fed should push back to encourage better policy, not stand by and allow a recession. My Bloomberg Opinion article from last week, titled “The Fed Shouldn’t Enable Donald Trump,” elicited an intense and often critical reaction. To provide context and address any misunderstanding, I believe some further explanation is warranted. ...

The central bank should refuse to play along with an economic disaster in the making. U.S. President Donald Trump’s trade war with China keeps undermining the confidence of businesses and consumers, worsening the economic outlook. This manufactured disaster-in-the-making presents the Federal Reserve with a dilemma: Should it mitigate the damage ...

Recent economic data have weakened the case for added stimulus. The U.S. Federal Reserve is poised to make a monumental move: At its policy-making meeting this week, it will cut interest rates for the first time in more than 10 years. Many see this as just the first step in a new stimulus policy aimed at supporting a fragile economy. I’m not ...

Linking decisions on interest rates and the balance sheet would be a bad idea. For the past year and a half, the U.S. Federal Reserve has been paring down the multi-trillion-dollar portfolio of securities it purchased to support the recovery from the 2008 financial crisis. Now, Chairman Jerome Powell has suggested that the Fed might end ...

It’s better to be richer than poorer. President Donald Trump has lately taken to criticizing Europe for taking actions that cause the euro’s value against the dollar to decline. The underlying logic appears to be that a stronger dollar is bad for the U.S., because it undercuts the competitiveness of the country’s exports. It’s not that ...

Make fiscal stimulus more automatic. The U.S. Federal Reserve is grappling with a difficult question: If interest rates remain low, leaving the central bank with less leeway to ease monetary policy, will it have sufficient ammunition to fight the next economic downturn? The Fed could use some help from Congress. Over the past 50 years, the ...

The federal funds rate has outlived its usefulness. Adjusting interest rates has long been the Federal Reserve’s primary tool for managing the U.S. economy. But as the way in which the Fed implements monetary policy changes, it needs to consider changing the interest rate it targets. For many years, the Fed has focused on the federal funds ...

The central bank can survive a couple politicized appointments. President Donald Trump keeps attacking the Federal Reserve, and has recently moved toward appointing loyalists to the Fed’s governing board. This has sparked fears that he might gain some control over the world’s most powerful central bank, getting it to do his bidding rather ...

It’s probably not imminent, and won’t be severe. With recession anxieties climbing, people are increasingly worried about the Federal Reserve’s capacity to respond. I take issue with the premise: I don’t expect a recession this year, and when one does come I think it will be mild enough for the Fed to handle. Three factors seems to be ...

Trump’s fiscal policy is undermining his trade agenda. Ever since U.S. President Donald Trump came to power, his administration has focused on shrinking the trade deficit, pressuring foreign countries to reduce barriers to American exports. Yet the government recently reported that the deficit rose significantly in 2018, to $621 ...

The economy could yet justify more tightening. The U.S. Federal Reserve recently modified its assessment of the economy, saying that it will be “patient” in deciding whether to further remove stimulus. This has led financial markets to conclude that the world’s most powerful central bank won’t be raising interest rates any further in this ...

The U.S. government has the capacity to take on more debt, but it’s not unlimited. People from across the political spectrum are challenging a bit of long-held conventional wisdom: that if the U.S. government runs big, sustained budget deficits, its mounting debts will eventually cause grievous harm to the economy. They have a point — but it ...

It’s not the threat that people seem to think it is. Financial types have long had a preoccupation: What will the Federal Reserve do with all the fixed income securities it purchased to help the U.S. economy recover from the last recession? The Fed’s efforts to shrink its holdings have been blamed for various ills, including ...