Robin Harding at FT writes:
The other issue on the agenda is replacing the FOMC’s current forecast that rates will stay low until mid-2015 with a set of preconditions for the economy to reach before it considers raising rates. “I now think a threshold of 6.5 per cent for the unemployment rate and an inflation safeguard of 2.5 per cent . . . would be appropriate,” said Charles Evans, president of the Chicago Fed…..
The problem is that both of these thresholds are moving targets:
- Unemployment is based on surveys and only includes those who have actively sought a job in recent weeks. It fluctuates with the participation rate.
- Inflation is also subjective, dependent on the basket of goods measured and estimates of housing inflation that are subject to manipulation.
Targeting nominal GDP growth would be far more accurate.
via Fed set to unveil extra asset purchases – FT.com.
Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.
Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.
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