{"id":6466,"date":"2012-12-12T15:28:09","date_gmt":"2012-12-12T20:28:09","guid":{"rendered":"http:\/\/goldstocksforex.com\/?p=6466"},"modified":"2012-12-12T15:28:09","modified_gmt":"2012-12-12T20:28:09","slug":"feds-numerical-thresholds-are-a-bad-idea","status":"publish","type":"post","link":"https:\/\/thepatientinvestor.com\/index.php\/2012\/12\/12\/feds-numerical-thresholds-are-a-bad-idea\/","title":{"rendered":"Fed\u2019s numerical thresholds are a bad idea"},"content":{"rendered":"

The Fed effectively tied its monetary policy to a balloon bobbing in the wind. Pedro da Costa<\/a> writes on Reuters:<\/p>\n

The Federal Reserve on Wednesday took the unprecedented step of tying its low rate policy directly to unemployment, saying it will keep rates near rock bottom until the jobless rate falls to 6.5 percent. That\u2019s as long as inflation, the other key parameter of policy, does not exceed 2.5 percent.<\/p><\/blockquote>\n

Both unemployment and inflation are moving targets. Unemployment primarily because results are highly dependent on the participation rate: disheartened job seekers who give up looking for work are excluded from unemployment figures. Likewise, inflation measures are highly subjective. Weightings require constant adjustment because of advances in technology and changes in consumption patterns, while cost of housing estimates, which make up 39 percent of core CPI, seem to have little connection with reality. Scott Sumner<\/a> points out:<\/p>\n

The problem seems to be that, according to the Bureau of Labor Statistics, housing prices did not fall. On the contrary, their data shows housing prices actually rising between mid-2008 and mid-2009, despite one of the greatest housing market crashes in history. And prices did not rise only in nominal terms; they rose in relative terms as well, that is, faster than the overall core CPI. If we take the longer view, the Bureau of Labor Statistics finds that house prices have risen about 8 percent over the past six years, whereas the famous Case-Shiller house price index shows them falling by nearly 35 percent…..<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

The Fed effectively tied its monetary policy to a balloon bobbing in the wind. Pedro da Costa writes on Reuters: The Federal Reserve on Wednesday took the unprecedented step of tying its low rate policy directly to unemployment, saying it will keep rates near rock bottom until the jobless rate falls to 6.5 percent. That\u2019s … <\/p>\n

Continue reading “Fed\u2019s numerical thresholds are a bad idea”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[31,34],"tags":[1352,1833,2487,3535],"class_list":["post-6466","post","type-post","status-publish","format-standard","hentry","category-the-fed-banks-interest-rates","category-us-canada-countries-regions","tag-fed","tag-inflation-targeting","tag-nominal-gdp-targeting","tag-unemployment-targeting"],"yoast_head":"\nFed\u2019s numerical thresholds are a bad idea - the patient investor<\/title>\n<meta name=\"robots\" content=\"noindex, follow\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Fed\u2019s numerical thresholds are a bad idea - the patient investor\" \/>\n<meta property=\"og:description\" content=\"The Fed effectively tied its monetary policy to a balloon bobbing in the wind. Pedro da Costa writes on Reuters: The Federal Reserve on Wednesday took the unprecedented step of tying its low rate policy directly to unemployment, saying it will keep rates near rock bottom until the jobless rate falls to 6.5 percent. 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He describes the traditional problem of inadequate response by central banks to market shocks like the collapse of Lehman Brothers: Although wages hold steady when nominal income falls, unemployment tends to rise\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":31033,"url":"https:\/\/thepatientinvestor.com\/index.php\/2022\/02\/18\/inflationary-pressures-to-continue\/","url_meta":{"origin":6466,"position":1},"title":"Fed monetary policy and the stagflation threat","author":"Colin Twiggs","date":"February 18, 2022","format":false,"excerpt":"January retail sales (excluding motor vehicles and parts) are still way above trend -- at $517 billion compared to $445 billion -- indicating continued upward pressure on consumer prices. Despite buoyant retail sales, consumer sentiment has fallen to recession levels. The University of Michigan consumer sentiment survey fell below 70\u2026","rel":"","context":"In "Deficit Spending & Employment"","block_context":{"text":"Deficit Spending & Employment","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/deficit-spending-employment\/"},"img":{"alt_text":"Retail Sales","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-02-18-retail.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-02-18-retail.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-02-18-retail.png?resize=525%2C300&ssl=1 1.5x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-02-18-retail.png?resize=700%2C400&ssl=1 2x"},"classes":[]},{"id":38490,"url":"https:\/\/thepatientinvestor.com\/index.php\/2022\/11\/03\/fed-hikes-now-pain-comes-later\/","url_meta":{"origin":6466,"position":2},"title":"Fed hikes now, pain comes later","author":"Colin Twiggs","date":"November 3, 2022","format":false,"excerpt":"Fed Chairman Jerome Powell announced a 75 basis point increase in the Fed funds target rate at his post-FOMC press conference today: \"Today, the FOMC raised our policy interest rate by 75 basis points, and we continue to anticipate that ongoing increases will be appropriate. We are moving our policy\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"Fed Funds Rate","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-11-02-ffr-hike.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-11-02-ffr-hike.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2022\/2022-11-02-ffr-hike.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]},{"id":17135,"url":"https:\/\/thepatientinvestor.com\/index.php\/2018\/10\/05\/extraordinary-times-of-low-unemployment-and-low-inflation\/","url_meta":{"origin":6466,"position":3},"title":"Extraordinary times of low unemployment and low inflation","author":"Colin Twiggs","date":"October 5, 2018","format":false,"excerpt":"Unemployment fell to 3.7% for September, well below the long-term natural rate of unemployment. This normally signifies a tightening labor market, a precursor to higher inflation. But growth in average hourly earnings dipped slightly, to 2.75% for the past 12 months. Underlying inflationary forces remain subdued. As Fed Chairman Powell\u2026","rel":"","context":"In "Deficit Spending & Employment"","block_context":{"text":"Deficit Spending & Employment","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/deficit-spending-employment\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":6354,"url":"https:\/\/thepatientinvestor.com\/index.php\/2012\/12\/04\/fed-set-to-unveil-extra-asset-purchases-ft-com\/","url_meta":{"origin":6466,"position":4},"title":"Fed set to unveil extra asset purchases – FT.com","author":"Colin Twiggs","date":"December 4, 2012","format":false,"excerpt":"Robin Harding at FT writes: The other issue on the agenda is replacing the FOMC\u2019s 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. \u201cI now think a threshold of 6.5 per cent for the\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":42835,"url":"https:\/\/thepatientinvestor.com\/index.php\/2023\/07\/04\/fed-only-expects-to-hit-2-0-inflation-target-in-2025\/","url_meta":{"origin":6466,"position":5},"title":"Fed only expects to hit inflation target in 2025","author":"Colin Twiggs","date":"July 4, 2023","format":false,"excerpt":"The Fed is walking back its hawkish stance on inflation. During an ECB panel discussion Jerome Powell stated that he only expects the Fed to hit their 2.0% inflation target for core inflation in 2025. The Fed Chair says job creation and real wage gains are driving real incomes and\u2026","rel":"","context":"In "Banks & Interest Rates"","block_context":{"text":"Banks & Interest Rates","link":"https:\/\/thepatientinvestor.com\/index.php\/category\/economy\/the-fed-banks-interest-rates\/"},"img":{"alt_text":"Unemployment, Average Hourly Earnings Growth","src":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-07-02-u3-wages.png?resize=350%2C200&ssl=1","width":350,"height":200,"srcset":"https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-07-02-u3-wages.png?resize=350%2C200&ssl=1 1x, https:\/\/i0.wp.com\/www.incrediblecharts.com\/images\/2023\/2023-07-02-u3-wages.png?resize=525%2C300&ssl=1 1.5x"},"classes":[]}],"_links":{"self":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/6466","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/comments?post=6466"}],"version-history":[{"count":0,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/posts\/6466\/revisions"}],"wp:attachment":[{"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/media?parent=6466"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/categories?post=6466"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/thepatientinvestor.com\/index.php\/wp-json\/wp\/v2\/tags?post=6466"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}