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Plosser juxtaposition…….Philly Fed President Plosser stated in a speech this
morning that the Federal Reserve may be late in anticipating a pickup in
inflation and is at risk of “being behind the curve” in controlling inflation.
What’s the point? Plosser’s comments are quite a contrast to recent comments from both current Fed chief Janet Yellen and former Fed chief Ben Bernanke. They have both stated recently that they expect accommodative monetary policy to remain for quite a while due to high structural unemployment and excess capacity. Plosser has been known to be an inflation hawk and has been singing this tune for several years. Who is correct? At this point, we still see a lot of slack in the U.S. economy. In addition, there are other exogenous deflationary forces, particularly weak overseas growth. We think an significant acceleration in inflation is still a ways off. The signal for increased inflation risk we think will be a much tighter labor market. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&Date=20140520&ID=17635698&topic=TOPIC_ECONOMIC_INDICATORS&isub=3
What’s the point? Plosser’s comments are quite a contrast to recent comments from both current Fed chief Janet Yellen and former Fed chief Ben Bernanke. They have both stated recently that they expect accommodative monetary policy to remain for quite a while due to high structural unemployment and excess capacity. Plosser has been known to be an inflation hawk and has been singing this tune for several years. Who is correct? At this point, we still see a lot of slack in the U.S. economy. In addition, there are other exogenous deflationary forces, particularly weak overseas growth. We think an significant acceleration in inflation is still a ways off. The signal for increased inflation risk we think will be a much tighter labor market. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&Date=20140520&ID=17635698&topic=TOPIC_ECONOMIC_INDICATORS&isub=3
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Many still “underwater”……In a report out today by Zillow, there continue to be
a large number of homeowners whose house is worth less than their mortgage,
otherwise known as being “underwater”. The good news is the ratio of underwater
homeowners has dropped to about 19% from
25% a year ago.
What’s the
point? The “underwater” factor is a
lingering vestige of the housing bubble and has multiple ramifications: reduces
available housing inventory and thereby housing turnover/sales; maintains a
negative for consumer psychology (lower “wealth effect”), that may be affecting
consumer spending, which has grown in this recovery at about half the rate of
post-WW2 average. We believe the underwater factor will continue to gradually
improve along with healing in overall housing market and consumer spending. It
may also have the effect of prolonging the current economic recovery. Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140520&id=17635723
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