Name: Quarterly Economic & Market Observations
Start: 2022-10-20T15:00:00Z
End: 2022-10-20T15:00:53.000Z
Location: BrightTALK
Rating: 5

Mellon is a global leader in index management and one of the world’s largest institutional index managers by assets under management. Since 1983, Mellon’s dedication to precision and client partnership has gone beyond the benchmark. Our storied history of innovation can be tracked back to the 1970s to founders William Fouse and Thomas Loeb, who are widely recognized as pioneering developers and champions of indexing. Armed with perspective earned from 40 years of experience, Mellon manages money for many of the world’s most sophisticated clients, proving that index investing requires an active mindset.

Chief Economist, Macro Strategist and one-time Federal Reserve (Fed) staffer Vincent Reinhart takes us behind the curtain of the latest Fed action.

Behind the Curtain: The FOMC Meeting in Review

The past five years have given central bankers the important reminder that “pride goes before a fall.”

This installment of our Economic and Market Observations will explain why we think the mistakes from hubris by the Federal Reserve (Fed) are mostly in our wake and the odds favor sustained economic expansion in the US and a return to the neighborhood of price stability.

To accomplish this, we believe the Fed must learn more lessons about household balance sheets, labor market balance and inflation dynamics, while navigating choppy political waters.

Quarterly Economic & Market Observations

We believe the Federal Reserve (Fed) still intends to cut rates before the end of 2024, assuming economic growth continues and despite higher-than-expected inflation at the beginning of the year.

Go behind the curtain with Chief Economist and one-time Fed staffer Vincent Reinhart, Dreyfus’ Head of Portfolio Management & Trading Frank Gutierrez and Mellon’s Senior Investment Strategist Ted Bair to review the latest Federal Open Market Committee (FOMC) meeting.

Please view the transcript under the attachments tab for important disclosures.

With the Federal Reserve (Fed) meeting for the first time in 2024, investors and markets are looking for clues of the central bank’s next move as rate cuts are in sight.

Go behind the curtain with Chief Economist and one-time Fed staffer Vincent Reinhart, Dreyfus Chief Investment Officer John Tobin and Mellon’s Senior Investment Strategist Ted Bair to review the latest Federal Open Market Committee (FOMC) meeting.

Please view the transcript under the attachments tab for important disclosures.

In this quarterly installment of Economic and Market Observations, we discuss the forces shaping the global economy and monetary policy in 2024, including:

     • The potential paths of Federal Reserve (Fed) policy this year as linked to economic activity and inflation.
     • Why the possible outcomes for economic activity in 2024, given the starting point of current financial conditions and other drivers of demand, are distinct.
     • Our continued belief that the “last mile” of inflation will be hard—the slow progress in lowering services prices limits how quickly central banks dial back monetary policy restraint.

This presentation will consider the possible direction of monetary policy and how its momentum could drive the economic outlook and asset returns.

Please view the transcript under the attachments tab for important disclosures.

The Federal Reserve (Fed) has signaled that it may continue to hold rates as they watch changing economic conditions. As the current rate-hike cycle concludes, we believe officials could find it difficult not to pivot if the economy contracts and financial strains worsen, especially as internal division and outside pressure mount.

Go behind the curtain with Chief Economist and one-time Fed staffer Vincent Reinhart, Dreyfus’ Head of Portfolio Management & Trading Frank Gutierrez and Mellon’s Senior Investment Strategist Ted Bair to review the December Federal Open Market Committee (FOMC) meeting.

Please view the transcript under the attachments tab for important disclosures.

The Federal Reserve (Fed) is prepared to raise the nominal funds rate to a restrictive level, holding it there until inflation falls back to goal. As this occurs, investors and markets will have to tolerate weakening economic activity—a likely consequence of the Fed’s higher-for-longer approach to interest rates.

Go behind the curtain with Chief Economist and one-time Fed staffer Vincent Reinhart, Dreyfus Chief Investment Officer John Tobin and Mellon’s Senior Investment Strategist Ted Bair to review the latest Federal Open Market Committee (FOMC) meeting.

Please view the transcript under the attachments tab for important disclosures.

In this quarterly installment of Economic and Market Observations, we go back to the future to explain the policy strategy of the Federal Reserve (Fed) and the likely outcomes we expect for activity and investment opportunities. We will discuss the current situation:

• The Fed’s policy problem is simple and familiar. We believe Fed Chair Powell must restrain demand to put it in better alignment with supply, as his predecessors Volcker and Greenspan did in the prior century.

• It is now unlike earlier this century—during the terms of Bernanke and Yellen, and in Powell’s first term—when Fed officials had to push demand up to supply as the zero lower bound to the nominal policy rate loomed.

• In this new old world, we anticipate that the Fed will keep the real policy rate high and no longer act to support equity prices. This raises the natural real interest rate and term and equity premiums, reshaping the investing landscape.

Data and events are driving the Fed’s policy guidance, as the central bank continues to monitor major developments.

Please view the transcript under the attachments tab for important disclosures.

The Federal Reserve (Fed) has vowed to keep working to bring still-elevated inflation down to its 2% goal. As the US central bank watches economic data, eyes will be on the next rate decisions. The path of policy has a long way to go as we move through this latter part of the year.

Go behind the curtain with Chief Economist and one-time Fed staffer Vincent Reinhart, Dreyfus Chief Investment Officer John Tobin and Mellon’s Senior Investment Strategist Ted Bair to review the September Federal Open Market Committee (FOMC) meeting.

Please view the transcript under the attachments tab for important disclosures.

In this quarterly instalment of Economic and Market Observations, we go back to the classics to explain that the loss of price stability is a tragedy of central banking. We will cover the unfolding leading up to our current predicament:

      • We believe well-intentioned Federal Reserve (Fed) officials had the tragic flaw of believing good economic performance for the first two decades of this century owed uniquely to their skill and not partly to good luck.
      • A reversal of fortune followed as the pandemic disrupted longstanding sectoral trends and set fiscal authorities into more energetic motion than ever before, which central bankers were slow to recognize. 
      • The result was catastrophe; inflation returned to levels last witnessed forty years ago and only sluggishly reversing.
      • Not recognizing that the problem was partly of their doing has made it difficult for the Fed to convince the public of the remedy—a sustained, restrictive policy rate that makes economic recession probable.
      • As a result, important asset markets are mispriced, financial strains loom large, and attendant risks to corporate balance sheets are sizable. 

Tragedies, by definition, do not end well and have serious, long-lasting consequences. The hope is that it leads to understanding, or catharsis. The fear is that it yields to retribution, or nemesis, in the form of the loss of central bank independence and permanent slippage of the anchor of price stability.

Please view the transcript under the attachments tab for important disclosures.

The Federal Reserve (Fed) is charting a narrow path between a surprisingly resilient economy and inflation. There is uncertainty about how tight monetary conditions are after the regional banking crisis and debt ceiling drama. As we have said before, we believe this is when the Fed’s job becomes difficult. 

Step behind the curtain with Chief Economist and one-time Fed staffer Vincent Reinhart, Dreyfus Chief Investment Officer John Tobin and Mellon’s Head of Index Stephanie Hill to review the June Federal Open Market Committee (FOMC) meeting.

Please view the transcript under the attachments tab for important disclosures.

The Federal Reserve (Fed) appears to be approaching the end of this tightening cycle. With the banking crisis mostly a memory, we expect a bias for maintaining rates at a restrictive plateau and a 25-basis-point hike in May. Questions remain. Will the market believe the Fed? Will we tip into recession? How soon will we have to address the debt ceiling?

Step behind the curtain for some answers with Chief Economist and one-time Fed staffer Vincent Reinhart, Dreyfus Chief Investment Officer John Tobin and Mellon’s Head of Index Stephanie Hill to review the May Federal Open Market Committee (FOMC) meeting.

Please view the transcript under the attachments tab for important disclosures.

Investors are skittish in their attitude toward risk taking, as depositors have turned away from some banks in the search for safer havens. Concerns about economic recession have returned, and expectations about Federal Reserve (Fed) policy have swung wildly. This quarterly installment of Economic and Market Observations will remind us that this was part of the Fed’s plan.  

              • The policy interest rate has been raised almost 5 percentage points in little over a year with the intent of slowing the growth of spending to be more in line with that of resources to return inflation to goal.  
              • To work, we believe the plan requires tightening financial conditions and crimping credit availability, as played out through the standard monetary transmission mechanism.
              • In the event, Fed firming got surprisingly little traction for a year only to bite harshly with banking crisis in the spring of 2023.  

We will discuss the Fed’s intent and results thus far, emphasizing the risks to the global economic outlook, both inherent in the effort to reduce inflation and potentially self-inflicted by politicians.

Please view the transcript under the attachments tab for important disclosures.

With recent market activity, a boring press conference was not expected but it was delivered. We believe Chair Powell clearly wanted to make the latest hike benign against backdrop of the banking crisis. However, the implications for the markets and the path of rates are varied and vast. 

Watch Chief Economist and one-time Fed staffer Vincent Reinhart, Dreyfus Chief Investment Officer John Tobin and Mellon Senior Investment Strategist Ted Bair to review the March Federal Open Market Committee meeting, which includes an updated Summary of Economic Projections.

Please view the transcript under the attachments tab for important disclosures.

As we approach the end of the tightening cycle, we expect the Federal Reserve (Fed) to hold interest rates at a restrictive plateau even at the risk of recession. The US Treasury’s announcement of “extraordinary measures” due to debt ceiling limits poses risks to markets and the economy. 

Join Chief Economist and one-time Fed staffer Vincent Reinhart, Dreyfus Chief Investment Officer John Tobin and Mellon Senior Investment Strategist Ted Bair to review the first Federal Open Market Committee meeting of 2023.

Please view the transcript under the attachments tab for important disclosures.

As we step into 2023, we outline our core view that the Federal Reserve (Fed) will hold rates at a restrictive plateau, even at the risk of economic recession. Despite firmer financial conditions and fiscal drag, aggregate demand is expanding faster than potential output. These demand pressures build upon an already taut labor market.

While inflation has receded, we think it will remain well above the Fed's goal as wages and service prices catch up. We believe other central banks will firm policy to deal with inflation stemming more from supply restraints than demand excesses, even more surely putting their economies into recession.

Our discussion will review what did and, importantly, did not happen in 2022, our base case for 2023 and risks surrounding our view.

Please view the transcript under the attachments tab for important disclosures.

Our panel of specialists, including Chief Economist and one-time Federal Reserve (Fed) staffer Vincent Reinhart, Dreyfus Chief Investment Officer John Tobin, and Mellon Senior Investment Strategist Ted Bair, digest the outcome of the last Federal Open Market Committee meeting of the year. 

While the pace of hikes will likely slow, the Fed’s job of returning inflation to the Volcker-Greenspan zone of price stability remains challenging. With the Congressional budget season and a potential debt ceiling showdown approaching, its job will likely get harder in 2023.

Please view the transcript under the attachments tab for important disclosures.

Chief Economist, Macro Strategist and one-time Federal Reserve (Fed) staffer Vincent Reinhart takes us behind the curtain of the latest Fed action. Moderated by Head of Distribution Scott Ullum, Vincent is joined by Chief Investment Officer John Tobin and Head of Index Stephanie Hill. 

Immediately following the Federal Open Market Committee meeting, this panel of specialists unpack the arithmetic and the investment implications along the yield curve from the Fed’s latest action.

Please view the transcript under the attachments tab for important disclosures.

This quarterly installment of our economic and market observations discusses two generational shocks: the pandemic and a major land war in Europe. Serving as stress tests of the Federal Reserve’s (Fed’s) new monetary framework, we explain why the Fed failed in addressing them appropriately.

In our view, the Fed did not appreciate the sectoral incidence of the shocks, the size of the global fiscal response, and the danger of making inflation a salient concern of households and firms.

As long as the Fed emphasizes the external drivers and not the internal design flaw, we believe inflation will persist well above goal even as the US economy slips into recession.

The rest of the world's economy is probably more at risk as it absorbs Fed tightening, is closer to the center of conflict, and has not resolved the pandemic threat.

#globaleconomy #macroviews #FOMC #marketobservations #economicoutlook

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Quarterly Economic & Market Observations

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