1. The following note was sent to clients on November 15, 2011.

    The Wall Street Journal reported that President Obama is considering nominating Jerome (Jay) Powell and Jeremy Stein for the Federal Reserve Board. Both would be outstanding choices, but their eventual appointments would not change monetary policy outcomes.
    • The nominations have been held up because of the need to have a “package deal,” with one candidate acceptable to Republicans and one to Democrats.
    • We give the President an A+ for his reported choices. These appointments would materially strengthen deliberations around the FOMC table. They would be active participants and highly respected by their colleagues.
    • Both potential nominees are well versed in finance and financial markets and would bring to the FOMC expertise in areas that it has rarely had.
    Jay Powell has an impressive background in financial markets and macro policy.
    • He is a visiting scholar at the Bipartisan Policy Center (BPC), where he has focused on state and local fiscal issues. Before working at the BPC, he practiced law and worked both in investment banking and private equity.
    • He served as Under Secretary of the Treasury for Domestic Finance under President George H.W. Bush.
    Jeremy Stein is a distinguished economics professor at Harvard with a worldwide reputation and a record of public service.
    • He has also taught at MIT and at the Harvard Business School. His specialties include finance, monetary policy, risk management, and banking.
    • He served earlier in the Obama Administration as a senior advisor to the Treasury Secretary and was on the staff of the National Economic Council.

    If nominated and confirmed, how would they change the dynamics of the FOMC?
    • The FOMC would gain two outstanding people whose areas of expertise would complement those of other Board and FOMC members.
    • Nonetheless, other than through their interaction with the Chairman, which we shouldn’t discount, Jay Powell and Jeremy Stein would not affect policy outcomes. The Chairman is and will continue to be the dominant force on the Committee.


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    Posted by Unknown
    Labels: Antulio Bomfim Ben Bernanke Bernanke confirmation Larry Meyer Laurence Meyer monetary policy MPI

  2. Under the Comprehensive Capital Analysis and Review for 2012 (CCAR) and Capital Plan Review (CapPR), banks with assets over $50 billion are required to conduct capital stress tests as outlined by the Federal Reserve to assess whether they would have sufficient capital to continue operations and to lend to households and businesses, even under adverse conditions. The Federal Reserve has published two scenarios; a Supervisory Baseline Scenario and a Supervisory Stress Scenario, which banks are required to use to test their capital adequacy. However, the scenarios published only include a very limited number of economic variables, leaving banks to read between the lines on exactly how these scenarios would affect their portfolios. In addition, banks are required to come up with their own baseline scenario, and their own stressed scenario. These are supposed to represent scenarios which the bank sees as the “most likely” economic scenario and the “most likely” adverse scenario.

    Macroeconomic Advisers’ Macroprudential Scenarios Service provides banks with over 400 economic variables that are consistent with the scenarios set forth by the Federal Reserve. In addition, MA provides the same details for the second set of scenarios developed by MA specifically for this purpose. This arms banks with model-based, internally consistent detailed data upon which to base their stress tests. Macroeconomic Advisers is known for its short-term forecasting and commentary on the Fed and markets. But, it is our disciplined, model-based approach which makes us well-equipped to assist clients in analyzing various scenarios that can be used to judge asset adequacy.

    Clients will receive four excel files (one for each scenario) with all variables included in our macroeconomic model. They will also receive related documentation, including a brief overview of our proprietary macroeconometric model, used for these scenarios, and brief descriptions of each of the scenarios. Forecasts for these scenarios extend three years. Scenarios are updated in December and June.

    For additional information please contact:

    Sales:

    Lisa Guirl, Director of Product Development
    lguirl@macroadvisers.com
    314-721-4747

    Technical information:

    Chris Varvares, Senior Managing Director and Co-Founder
    varvares@macroadvisers.com
    314-721-4747


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  3. Monthly GDP surged 1.3% higher in October, following two months of small declines. The sharp October gain was largely accounted for by a sharp increase in inventory investment, but domestic final sales and net exports posted decent gains, too. The level of GDP in October was 5.0% above the third-quarter average at an annual rate. Our latest tracking forecast of 3.7% GDP growth in the fourth quarter assumes that half of the increase in Monthly GDP in October is reversed in November, with that decline more than accounted for by an assumed decline in inventory investment.





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    Posted by Unknown
    Labels: monthly GDP



  4. Contact Macroeconomic Advisers
    Posted by Unknown
    Labels: Ben Bernanke discount rate employment FOMC FOMC Chatter inflation Larry Meyer Laurence Meyer monetary policy MPI Treasuries

  5. The FOMC is seeking to become more transparent about both its policy objectives and its strategy for achieving those objectives. The Chairman has emphasized that this is an ongoing process.

    This is from a commentary that was published on December 5, 2011.



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    Posted by Unknown
    Labels: Antulio Bomfim Ben Bernanke FOMC Larry Meyer monetary policy MPI

  6. Today, the most important assumption we have to make in our forecast is about the euro crisis. We tie this to the ECB because we believe it must be a player in any resolution.

    This is from a commentary that was published on December 2, 2011.


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    Posted by Unknown
    Labels: Antulio Bomfim euro crisis forecast Larry Meyer monetary policy
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