The phrase “long and variable lags” coined by Milton Friedman refers to the difficulty of gauging precisely when higher interest rates will negatively affect economic growth. It is a maddeningly difficult thing to measure. During a press conference following the November 2022 FOMC meeting, Federal Reserve Chair Jay Powell used the word “lag” or some variation of it a combined 17 times as he pledged policymakers’ vigilance to monitoring it.
Sometimes, the impact of higher rates is quite obvious, such as the series of bank failures that occurred earlier this year. Other times, the impact of higher rates is harder to tease out and is not measured in an objective, quantifiable way like some bellwether indicators, such as the monthly jobs number or the core rate of PCE inflation. As it weighs policy decisions, the Federal Reserve seeks to better understand these more subtle ways that higher rates can creep into the economy. One of the more widely overlooked monitoring tools is a survey, conducted by the Fed, of up to 80 large domestic banks and 24 U.S. branches and agencies of foreign banks. Because this survey is a vital input for the FOMC meetings, it is conducted quarterly so that results are available for the January/February, April/May, August and October/November FOMC meetings.
Sometimes, a performance is so electrifying it demands an encore. Known at the FOMC and among its fan base of econ enthusiasts as the Senior Loan Office Opinion Survey (or SLOOS, for short), this indicator has the rare characteristic of additional, off-cycle releases. The Federal Reserve is known to occasionally conduct one or two additional surveys throughout any given year. Questions are intended to turn over every stone in an attempt to identify those variable lags influencing policy. These include changes in the standards and terms of the banks' lending as well as the state of business and household demand for loans. The survey can, and often does, include questions on one or two other topics of current interest.
Wells Fargo Economics & Financial Report / Jun 26, 2021
Supply chain bottlenecks continue to cause pain-in-the-necks. In spite of all the difficulties, the Economic whizzes in the WF Economics team have upgraded their forecast for full-year 2021 U.S.
Wells Fargo Economics & Financial Report / Mar 21, 2023
Retail sales declined 0.4% during February, while industrial production was flat (0.0%). Housing starts and permits jumped 9.8% and 13.8%, respectively.
Wells Fargo Economics & Financial Report / Apr 27, 2020
Oil prices went negative for the first time in history on Monday as the evaporation of demand collided with a supply glut. In the past five weeks, 26.5 million people have filed for unemployment insurance, or more than one out of every seven workers.
Wells Fargo Economics & Financial Report / Aug 11, 2020
There were more signs of global recovery this week and PMI surveys improved further across the world.
Wells Fargo Economics & Financial Report / Jan 18, 2021
Retail sales fell 0.7% in December, the third straight monthly decline. Sales are still up 2.9% over the year, however.
Wells Fargo Economics & Financial Report / May 29, 2022
U.S. retail sales topped expectations in April, while industrial production also grew more rapidly than economists expected. Data on housing starts, home sales and homebuilder sentiment, however, showed tentative signs of cooling.
Wells Fargo Economics & Financial Report / Jul 31, 2022
Unlike the local temperatures, data released this week showed U.S. economic growth modestly declined in Q2.
Wells Fargo Economics & Financial Report / Apr 26, 2021
This week\'s lighter economic calendar allowed forecasters more time to assess the implications from the prior week\'s blowout retail sales report.
Wells Fargo Economics & Financial Report / Jun 14, 2023
An unexpected spike in jobless claims is a sign that cracks are forming in the labor market. Higher mortgage rates look to be hindering a housing market rebound.
Wells Fargo Economics & Financial Report / Mar 27, 2022
The fact that capital goods shipments surprised on the upside was one of the few things that went right in this week\'s durable goods report.