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Real Time Economics: The Fed Isn’t Sure What to Do About Its Dots


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The Federal Reserve’s policy statement and press conference Wednesday are the week’s highlightings. We’ll also get a big dose of housing data and more details on White House spending plans. Good morning. Jeff Sparshott here to take you through key developments in the global economy. Send us your questions, comments and suggestions by replying to this email.


Federal Reserve officials are likely to end their session this week signaling little if any appetite to create interest rates this year, one of the purposes of a strategy designed to reduce threats to a sharp slowdown in global growth. The Fed boosted its short-term benchmark rate four times last year and as recently as December indicated as many as three more in 2019. New forecasts to be released Wednesday are likely to show officials now expect to raise rates just once, or not at all, Nick Timiraos reports.


The Fed will communicate rate expectations with its so-called dot plot. Every quarter, the central bank makes a chart of 19 officials’ individual projections for the benchmark rate, with a dot representing each person’s forecast. But the dots have caused investor embarrassment when the economy is at an intonation point. That’s because the rate forecast reflects a baseline outlook–the rate track if the economy behaves according to each individual’s expectations. It doesn’t show how officials gauge hazards, Nick Timiraos writes.

Top Fed leaders pivoted in January to signal that rate rises are on hold while they assess the risks to economy. The dot plot to be released Wednesday would muddy this message if it indicated several officials still expect to raise rates this year. Fed Chairman Jerome Powell in a recent speech downplayed the projections: “If you are too focused on a few dots, you may miss the larger picture, ” he said.


The National Association of Home Builders housing market index for March is expected to tick up to 63 from 62 a month earlier.( 10 a.m. ET)

The White House will release its full set of budget documents. The Trump administration last week proposed a $4.7 trillion spending plan. Today’s publications will offer more details and context.



China’s spending spree during the global financial crisis helped pull the world economy out of recession. Beijing’s latest stimulus might not pack the same punch. The government has announced tax-cut and spending measures that add up to 4.6 trillion yuan ($ 685 billion ), outstripping the 4-trillion-yuan pro-growth package from late 2008. However, China’s economy has become bigger since then, so a similar quantity of stimulus doesn’t go as far as it used to go. The 4-trillion-yuan package represented 13% of China’s GDP in 2008 and less than 5% now, Lingling Wei reports.

It’s not clear how much more stimulus China can afford. By 2018, total indebtednes outstanding of companies, central and local governments, and households hit nearly 250% of gdp, up from less than 150% a decade earlier. Debt growth like that is dangerous, the International Monetary Fund has warned repeatedly.


Here’s an economic experiment: What happened when you create minimum wage–a lot–when unemployment is high? Greece and Spain aim to find out. Spain, for example, has raised its EUR7 36 -a-month minimum wage by 22%, to EUR9 00 ($ 1,017 ). Critics say a higher minimum wage is the last thing these economies require, when millions are still struggling to find work. The unemployment rate is 14.1% in Spain and 18.5% in Greece, Nektaria Stamouli reports.

Counterpoint: “Higher wages fuel greater spending, which can have a positive impact in the economy and lead to more undertakings, ” said Raymond Torres, an economist at Madrid think tank Funcas.


The strong U.S. economy has created millions of jobs and pushed up wages for many Americans. It also helped many big-company CEOs secure another create and total compensation worth$ 1 million a month. Median compensation for 132 chief executive of S& P 500 companies reached $12.4 million in 2018, up from $11.7 million for the same group in 2017, according to a Wall Street Journal analysis. The gains were conducted in accordance with robust corporate profits and strong stock exchange returns for much of the year, Theo Francis reports.


U.S. manufacturing output declined for the second largest consecutive month in February, a fresh sign that a long-predicted slowdown is making the U.S. economy. The question now is how sharp and long-lasting the slowdown will be. Many economists ensure U.S. growth picking up afterward this year, but not to the rates experienced last year in the immediate aftermath of federal taxation cuts and spending increases, Sarah Chaney and Austen Hufford report.


The number of available employment opportunities in the U.S. rose in January to a near-record level, indicating employers have a strong demand for workers. There were 7.58 million unfilled tasks on the last business day of January, just below a record 7.63 million set in November. Separate Labor Department data released last week depicted payrolls rose by 20,000 in February, the smallest gain in more than a year. But with demand for employees high, February’s hiring slowdown could prove to be a blip, Eric Morath reports.


OPEC and a group of 10 oil-producing nations led by Russia are deepening their petroleum production cuts, but remain split on whether the curbs should remain in place through the end of the year. Saudi Arabia met with Russia and a few other countries in Azerbaijan to review how the 24 -nation coalition is complying with a December agreement to withhold 1.2 million barrels a day from global markets. The output cuts have led to a more than 25% rise in cost of Brent oil since the year began, Summer Said and Benoit Faucon report.


Real Time Economics has launched a downloadable Google calendar with concise previews, forecasts and analysis of major U.S. data releases.

To add to your Google Calendar on desktop, click here. To add to your Google calendar app on mobile, click here. If you prefer to opinion the calendar use a web browser, with the capabilities of adding select Real Time Economics entries to your calendar, click here. And here’s our how-to.

Let us know what you think. This is a pilot project, so we’d appreciate your feedback.


I’m not a fan of MMT–not at all. — Berkshire Hathaway CEO Warren Buffett, speaking about Modern Monetary Theory( via Bloomberg)


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Free college voices nifty, but a four-year degree isn’t for everyone. “The solution, according to a growing number of governors and mayors, Republican and Democratic, is to reboot the antiquated system of technical education. Loosely speaking, America’s 1,332 community colleges are the equivalent of Germany’s vocational institute. The biggest difference is that in Germany a trade is still highly valued. In America, the community college suffers from the’ soft bigotry of low expectations, ’ ” Edward Luce writes in the Financial Times.

The college-cheating scandal has focused attention on standardized testing–and the lengths students and mothers will go to get a good score on SATs and ACTs. The student paper for New Trier( Ill .) High School was on the lawsuit a year ago. “A number of kids feeling the academic pressure at New Trier try an Attention Deficit Hyperactivity Disorder( ADHD) diagnosis to give them an advantage on the ACT when private tutoring isn’t enough. Contrary to less affluent areas, parents are very well informed accommodation opportunities and the school is well equipped at get them for their children after a diagnosis, ” Ezra Wallach reported in the New Trier News.


U.S. factory orders for January are expected to rise 0.4% from the prior month.( 10 a.m. ET)

President Trump holds a joint press conference with Brazil President Jair Bolsonaro at 1:45 p.m. ET.

The Federal Reserve begins a two-day policy meeting.

The Bank of Japan releases minutes from its Jan. 22 -2 3 session at 6:50 p.m. ET.

Read more: blogs.wsj.com


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