Personal income increased $70.5 billion (0.4 percent) in July according to estimates released today by the Bureau of Economic Analysis (tables 3 and 5). Disposable personal income (DPI) increased $39.9 billion (0.2 percent) and personal consumption expenditures (PCE) increased $267.6 billion (1.9 percent). Real DPI decreased 0.1 percent in July and Real PCE increased 1.6 percent (tables 5 and 7). The PCE price index increased 0.3 percent. Excluding food and energy, the PCE price index increased 0.3 percent.The increase in personal income in July was more than accounted for by compensation of employees as portions of … (full story)

The Federal Reserve’s new policy of inflation “averaging “ is a mistake. The trade-off nowadays is between inflation and financial stability. Buying more inflation will eventually create, if it has not already, financial imbalances that will trigger an economic crash. The parallel to this is the misguided policies of the 1970s. Back then policymakers found buying more employment with a little more inflation did not work. Facts Don’t Support Policy Change Federal Reserve policymaker’s argument for the policy change is that consumer inflation has been consistently running below its 2% target. Also, sustained … (full story)

In the build up to Fed chair Powell’s speech, the chatter was whether the Fed would meet the market’s dovish expectations. Reaction in the wake of the announcement was one of uncertainty, with significant swings across major forex. However, coming into today’s session there is a sense of risk positive and dollar negative forces playing out. The crux of Powell’s speech is that the Fed will be on hold with ultra-loose monetary policy for some time to come. In shifting to an average inflation targeting system, the FOMC will allow inflation to rise above 2% “for some time” to counter periods where inflation … (full story)

It’s a great pleasure to be participating in the virtual Jackson Hole conference. Well done to the Kansas City Fed for keeping up the tradition – albeit we have to imagine the beauty of Jackson Hole is around us. A tradition of the Jackson Hole conference is to encourage us to look forwards. This time is not only an opportunity to do just that, but in doing so to apply the lessons of the last few months, as well as the last decade or so since the financial crisis of 2007-09. I am going to do that through the lens mainly of monetary policy, but bringing in financial stability where relevant, with a particular … (full story)