Joseph E. Gagnon
Peterson Institute
Washington, United States
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Past articles by Joseph:
Fed previews slower pace of future rate hikes
The Federal Open Market Committee (FOMC or Fed) raised its policy interest rate 0.75 percentage point at the November 2 meeting, as expected, but surprised markets by highlighting the possibility that rates could rise by smaller amounts as soon as the December meeting. Bond yields fell on the announcement but fully rebounded after the press conference, in which Chair Jerome Powell stressed that… → Read More
25 years of excess unemployment in advanced economies: Lessons for monetary policy
For about 25 years before the COVID-19 pandemic, inflation was very low and stable in most advanced economies. A little noticed dark side of this impressive achievement is that unemployment rates were almost always higher than needed to keep inflation low. This widespread and persistent policy error arose because of a major flaw in standard macroeconomic models—the use of a linear Phillips… → Read More
The Fed signals that it will taper soon
The Federal Open Market Committee (FOMC or Fed) signaled on September 22 that it will probably start to taper off its bond purchases soon because it believes the US economy is likely to continue to perform strongly despite the Delta wave of COVID-19 infections. → Read More
Who are the better forecasters of inflation, bond traders or economists?
Consumer price index (CPI) inflation hit a multi-decade high of 5 percent in May 2021 (12-month change), sparking considerable speculation as to how long inflation will remain high. → Read More
Economists are slightly better at predicting inflation than consumers
The jump in consumer price index (CPI) inflation in April 2021—to 4.2 percent over the previous 12 months—has sparked numerous stories in the press about the potential inflationary impact of President Joseph R. → Read More
Currency manipulation rebounded in 2020 as pandemic concerns rose
Currency manipulation, the policy by which countries weaken their currencies to boost their trade surpluses, rebounded last year after several years of quiescence, and part of the explanation seems to lie in the COVID-19 pandemic. → Read More
Bond markets are shrugging off inflation fears, but what do they know that we don’t?
As the debate continues over the potential inflationary impact of President Joseph R. Biden Jr.’s $1.9 trillion “American Rescue Plan,” one key indicator suggests that markets are no more worried about excessive inflation than the Federal Reserve is. → Read More
Inflation fears and the Biden stimulus: Look to the Korean War, not Vietnam
The debate among economists over the size of President Joseph R. Biden Jr.’s proposed $1.9 trillion stimulus package has drawn attention to past cases of inflation spurred by big government spending. → Read More
Bond yields are not good predictors of inflation
President Joseph R. Biden Jr.’s audacious proposal for $1.9 trillion in additional stimulus this year has generated concern among some, including former Treasury Secretary Lawrence H. → Read More
Memo to the Biden administration on the US trade deficit and international financial policy
Background: A prerequisite for success in your domain is to strengthen relationships with your colleagues in the Group of 7 (G7[1]) advanced industrial democracies, the G20[2] leading econ → Read More
Who's afraid of zombie firms?
The COVID-19 pandemic has turned many profitable US businesses into money-losers that can stay afloat only because of abundant credit, in part reflecting emergency lending programs of the Federal Reserve and Treasury. → Read More
Currency manipulation remained low in 2019
Currency manipulation, the practice of countries acting to weaken the values of their currencies in order to boost their trade surpluses, remains near its lowest level since 2002. → Read More
The Fed Expands Emergency Lending by $2 Trillion
The unprecedented nature of the coronavirus-induced shutdown of the economy calls for unprecedented steps to keep firms and state and local governments alive and ready to resume normal operations as soon as it is safe to do so. → Read More
Low inflation bends the Phillips curve around the world
This paper models inflation by combining the multicountry framework of one of its authors (Forbes) with the nonlinear specification proposed by the other two (Gagnon and Collins). → Read More
The Fed expands its emergency lending facilities again
Faced with mounting dangers to the US economy, the Federal Reserve announced several new steps on March 23, 2020, to ensure adequate flows of credit through the financial system. → Read More
The Fed's big guns are welcome, but the United States needs more fiscal action
The Federal Reserve’s move on March 15 to drop the federal funds rate another percentage point to essentially zero, along with other steps to support credit markets and the economy, represents a substantial and appropriate easing of monetary policy at a time of health crisis. → Read More
The Case for Raising the Inflation Target Is Stronger than You Think
At a time when inflation has for years remained slightly below the Federal Reserve's target rate of 2 percent, a debate has broken out among macroeconomists over whether to raise inflation, and the target, further—for example, to 3 or 4 percent—by adopting an easier policy stance. → Read More
The Fed Cuts and Pauses
The Federal Open Market Committee (FOMC or Fed) cut the target range for the federal funds rate 0.25 percentage point to 1.50 to 1.75 percent at its October 2019 meeting, as many analysts anticipated. → Read More
A Hawkish Rate Cut? No.
The Federal Open Market Committee (FOMC or Fed) cut the target for the federal funds rate 0.25 percent at its September 18 meeting to a range of 1.75 to 2 percent, as widely expected. → Read More
Currency Manipulation Continues to Decline
Currency manipulation, the practice of countries acting to weaken the value of their currency in order to affect their trade balance, fell in 2018 to its lowest levels since 2001. → Read More