Oxford Economics/SMRA Webcast
On Tuesday Greg Daco, Kathy Bostjancic and Ray Stone participated in an Oxford Economics Webcast regarding the outlook for the US economy. This Webcast is available here.
Discount Rate Comment - How Many Requests Does it Take?
After reviewing the discount rate meeting minutes of July 25, a reader asked SMRA if it was unusual for the Board of Governors to receive so many requests for a rate hike and not grant one. In non-crisis conditions, it appears that the Board will start seeing an increase in the number of requests for a change in the discount rate some months before making a rate decision. The threshold at which a rate decision becomes more likely seems to be around 6-8 requests, depending on economic conditions. We would not conclude that the Board makes the decision based on the strength of requests, but rather that these tend to coincide with turns in the economy and mounting evidence that a change in rates is appropriate -- in either direction.
Discount Rate Meeting Minutes - July 25 Mtg Had 8 Requests for Disc Rate Hike
On Tuesday, the Federal Reserve released the minutes of the discount rate meeting July 25. At the July pre-FOMC meeting, the minutes said, "Board members considered the primary credit rate and discussed, on a preliminary basis, their individual assessments of the appropriate rate and its communication, which would be discussed at the meeting of the Federal Open Market Committee this week. No sentiment was expressed for changing the primary credit rate before the Committee's meeting, and the existing rate was maintained. Thereafter, a discussion of economic and financial developments and issues related to possible policy actions took place." At the July 25 the Board had eight requests for an increase of 25 basis points in the discount rate to 1.25% from Boston, Philadelphia, Cleveland, Richmond, St. Louis, Kansas City, Dallas, and San Francisco. This was up from the six requests at the prior meeting on June 13.
Fixed Income Focus: Stuck In Ranges ... Month-End Auction Preview
Treasury yields were higher this past week, but still stuck within the same narrow ranges that have held since early-to-mid July. Yields climbed higher through the first half of this past week in response to rising risk assets, including stocks and oil prices. There was a bit of a relief rally after the minutes to the July FOMC meeting were released; weaker equities later in the week also provided some support to Treasuries. By week’s end, though, more hawkish comments from Fed officials were again weighing on Treasuries. In this comment, we also preview the upcoming 2-, 5- and 7-yer note auctions.
US Economic Chartbooks
Please see our Economic Week Ahead Chartbook for a discussion of next week's economic releases provided in a visually friendly format that includes graphs, brief descriptions of SMR's forecasts, and links to detailed data previews. If you missed anything from last week, see our Economic Week in Review Chartbook for a look back at the releases with links to full analyses.