Robert Kahn

Macro and Markets

Robert Kahn analyzes economic policies for an integrated world.

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Showing posts for "United States"

The President’s (Economic) Inbox

by Robert Kahn

The election of Donald Trump creates extraordinary uncertainty about the future course of U.S. economic policy. Markets don’t like extreme unknowns, and there are valid reasons to fear that Trump’s policy proposals on trade and our economic alliances would be seriously disruptive to the global economy. Global stocks fell sharply when signs of a Trump victory emerged Tuesday, but by mid afternoon Wednesday U.S. stocks were up as markets found their footing on hopes of fiscal stimulus.  Meanwhile, U.S. Treasury yields were up and the Mexican peso weakened. It is reasonable to expect that substantial market volatility will be the norm in coming weeks.

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Brexit’s Threat to Global Growth

by Robert Kahn

Thursday’s Brexit vote wasn’t a “Lehman moment”, as some have feared. Instead, it was a growth moment. And that may be the greater threat. If policymakers respond effectively, the benefits could be substantial: a stronger global economy, and an ebbing of the political and economic forces now pressuring UK and European policymakers. Conversely, failure to address the growth risks could cause broader and deeper global economic contagion.

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Economic Optimism in the State of the Union

by Robert Kahn

The central economic message from President Obama in his State of the Union (SOU) speech last night was that the U.S. economy was on a strong footing and well prepared to prosper in a dynamic and rapidly changing global environment. This is hardly a surprising message, but notable coming at a time when the 2016 presidential campaign is being driven by populist messages of economic decline and aversion to globalization. Running briefly through a list typical of SOUs, the president noted job growth including in manufacturing, developments in clean and conventional energy, educational improvements including rising high school graduation rates and student loan relief, improved medical insurance coverage, and the recent bipartisan agreement on No Child Left Behind among his achievements. Indeed, with unemployment at 5 percent and growth at around 2.5 percent backed by highly accommodative monetary policy, the president had a good macroeconomic story to tell, while acknowledging that a great deal more had to be done to boost middle class incomes and improve economic security.

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After the Fed

by Robert Kahn

The Federal Reserve today delivered exactly what was expected: a liftoff in interest rates from the zero lower bound, coupled with strong assurances that the future rise in interest rates will be moderate. Markets reacted hardly at all to the statement and Janet Yellen’s press conference, beyond a bit of short covering, by and large seeing the decision as a comforting first step towards normalization at a time of significant global tensions. In sum: Read more »

IMF Reform Moves Forward

by Robert Kahn

There are reports this morning that House and Senate legislators have included language authorizing U.S. support for International Monetary Fund (IMF) reform in the $1.1 trillion spending package funding the government for the rest of FY16.  If this language reaches the president’s desk and is signed into law, it would be an important achievement and a positive reflection on the perseverance of U.S Treasury officials and congressional leaders to get this deal done. The package—first agreed to by the Obama administration in 2010—changes voting shares and governance for the institution at a critical time, bolstering the IMF’s credibility and its ability to play a lead firefighting role at times of crisis.  Failure to pass the legislation had become a substantial irritant for U.S. influence internationally, and resolving this is a win for good global economic governance.

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A U.S. Budget Deal that Matters

by Robert Kahn

This is what governing looks like.

When outgoing speaker John Boehner promised to “clean the barn up a little bit” before leaving, there was understandable skepticism that a large number of must-pass pieces of legislation could be sheparded through a sharply divided congress.  From that perspective, last night’s agreement on a budget framework—if it holds—looks to be an important step forward. While far from ideal budgetary policy, it removes substantial tail risk from U.S. economic policymaking between now and the election.

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Fed Holds Fire—China Matters

by Robert Kahn

The Federal Reserve’s decision to not raise rates today was the market’s consensus expectation. Nonetheless, U.S. and foreign bond markets have rallied on revised expectations for Fed policy. With four members of the Federal Open Market Committee (FOMC) now forecasting that interest rates will lift off only in 2016 or later, markets are now putting significant weight on a rate hike only next year.

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The International Economic Agenda Facing the New Congress

by Robert Kahn

The initial post-election talk is understandably about whether the shift to a Republican controlled Senate makes it easier or harder to make progress on central economic challenges facing the United States, including energy, immigration, social spending, and infrastructure. There is understandable concern that this next Congress will face the same gridlock that we have now. But even before that, there is the mundane issue of what we borrow and spend. Partly out of fear of being seen as crying wolf one too many times, I have been wary to advertise my concern that we are facing a new series of economic cliffs. First up is a likely standoff on the budget (in December, and likely again in the spring of 2015). Then comes the debt limit, which will be reset on March 15, but given the usual and not-terribly-extraordinary “extraordinary measures” that are at the disposal of Treasury, they can likely pay the nation’s bills until perhaps the fall of 2015 before cash balances fall to zero. Of course, in the past deals have been done, often at the last minute, and we have not, with the exception of the 2013 government shutdown, gone off the cliff (though there have been a few unnecessary fender benders along the way). But with the Senate as polarized as ever, it is easy to see getting to deals on these issues will be difficult and potentially unsettling to markets.

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Addressing America’s Infrastructure Challenge

by Robert Kahn

America’s woeful lack of infrastructure spending is well appreciated.  What is missing is action to address it.  My colleague Heidi Crebo-Rediker writes that the Administration has now launched a new Transportation Investment Center to share best practice, provide technical assistance, and give support for accessing credit programs for new infrastructure projects. This one-stop shop within the Department of Transportation has much in common with (and looks to draw heavily on) Heidi’s earlier proposal for an “Infrastructure USA” initiative.  While no silver bullet, it’s a valuable first step.