At the US Federal Reserve, when is a threshold not a threshold? When it's an embarrassment

The Federal Open Market Committee is keen to hold fund rates in spite of falling unemployment. It's the first act of a newer, stricter committee.

Let’s take the Fed first. When is a threshold not a threshold? Answer: when it becomes an embarrassment.

With the unemployment rate plummeting towards the 6.5 per cent "threshold" touted by the Fed as the point at which it would consider rate increases, we were told in the statement released after their December meeting that the FOMC "now anticipates that the funds rate will be held unchanged until 'well past' the time that the unemployment rate has fallen below its 6.5 per cent threshold".

This was a meeting at which a majority in favour of just lowering the threshold to 6.0 per cent, or even 5.5 per cent, obviously couldn’t be found. Thank goodness. This is certainly a testament to the sagacity of the committee, as moving the goal posts so soon after they were inserted into the ground would have been seriously detrimental to the Fed’s credibility. What’s to say the threshold wouldn’t suddenly become 5 per cent, or even be abandoned completely when it was subsequently convenient?

We should bear in mind that in many ways this was the outgoing, dovish Fed’s final act, with Helicopter Ben at the helm (or the cyclic, I guess). The FOMC composition became distinctly more hawkish at the January meeting. No surprise then that the January meeting saw another $10bn reduction in QE and no lowering of thresholds.

My guess would be that by the March meeting several clouds that have been obscuring the health of the US economy, and hammering risk assets, will have blown over. I don’t feel that by any means all emerging markets will have escaped the cosh, but I do feel that we will have avoided widespread contagion, a la the 1997/8 Asian/Russian Crises, and that the pressure will be seen as contained and upon the most vulnerable - Argentina, Brazil, Turkey, South Africa, say, whereas key Asian nations will be relatively calm - India, China, Indonesia, Korea and Taiwan.

I do feel that headline US unemployment will be lower by then and that there will be a burgeoning realisation that we shouldn’t devalue that because of low participation rates. Widespread academic research has highlighted that a large proportion of the fall in participation rates has been caused by demographics - to somewhat over-simplify, baby boomer retirees - and is not going to race back up cyclically. Finally, US economic data will finally be free of both government shutdown and weather distortions, and looking very healthy.

Here in the UK, the BOE faces a very similar dilemma and Wednesday’s release of the Bank's Quarterly Inflation Report (QIR) will surely unveil tweeks to forward guidance. As in the US, unemployment is crashing, and last week’s January UK Services PMI Reading, although only a tad lower at 58.3, from 58.8 in Dec, boasted sub-components that still made excellent reading, with the key employment index moving higher, along with the outstanding business index which, at 55.3, stands at its high since 1997. At this rate Q1 growth is looking like 1.0 per cent qoq.

I do not expect the QIR to announce a reduction in the unemployment threshold to 6.5 per cent, say, but I do expect to see a nod to other metrics, such as wage and productivity growth. There must also be a 25 per cent chance that they take a leaf out of the Fed's book and introduce a version of the Summary of Economic Projections, with a record of individual MPC members' views on the future path of the Bank's Base Rate. In short, RIP forward guidance, long live old-style insight into the MPC's thinking and reaction function.

Janet Yellen, Chair of the Board of Governors of the Federal Reserve System. Photograph: Getty Images.

Chairman of  Saxo Capital Markets Board

An Honours Graduate from Oxford University, Nick Beecroft has over 30 years of international trading experience within the financial industry, including senior Global Markets roles at Standard Chartered Bank, Deutsche Bank and Citibank. Nick was a member of the Bank of England's Foreign Exchange Joint Standing Committee.

More of his work can be found here.

Photo: Getty
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I’m in the kitchen with my children, finally learning how to sharpen a knife

For some reason, they have often given me sharp things as presents.

The children have been with me quite a bit lately: they are all going to be, by the time you read this, on their travels, and the Hovel is a useful staging-post for the start of their journeys. Staying here means an extra hour in bed when you have to take a coach from Victoria, or a plane from Stansted or, worse, Luton.

Their company never fails to delight, which is not how I imagined things would turn out. I was a surly clock-watcher at my own parents’ home, counting the days until I could cast off the oppressive yoke of having my meals cooked for me and my laundry done. That was how it was back then. Nowadays, parents try to close the gap between themselves and their children or, even if they don’t try, the gap seems to be closing anyway.

I suppose not being in situ for ten years, on the ground doing the daily heavy lifting, helps. I am not the monstrous, Freudian oppressor-figure: I am the messy layabout with a certain weird kind of authority but not one who assumes the moral high ground. But here they are, or were, and as they get older they get increasingly interesting, more pleasing to be with. And the interesting thing is that they now have skills that I can learn. The traffic of instruction is not one-way.

My daughter worked, for a while, in the kitchen of a restaurant in Berlin. She already knew how to cook, and how to get along with people, but there she also learned how to sharpen knives. I thought I could, but I can’t, not at all.

When you see a father – invariably a father – zinging a honing steel along the blade of a knife prior to carving the Sunday roast, he is not doing anything useful apart from establishing a sense of theatre, which is of debatable utility anyway. He might think he’s a cross between Zorro and Anthony Bourdain, the rather cool New York chef – there’s always a certain flourish in the wrist action – but the trained chef will raise an eyebrow.

For some reason my children have often given me sharp things as presents. For my first Christmas in the Hovel they gave me a Swiss Army Knife, which I still use, especially the corkscrew; one birthday they gave me a pizza-cutter in the shape of the original Starship Enterprise – which I still use. And last birthday, the boys clubbed together to get me a proper kitchen knife.

I had hitherto resisted the notion of getting one, despite the fact that I like cooking and also know how important a good knife is. Here is Bourdain himself, writing in his Les Halles Cookbook (the only one I ever use these days): “Your knife, more than any other piece of equipment in the kitchen, is an extension of the self, an expression of your skills, ability, experience, dreams and desires.”

I suppose this was why I put up with rubbish knives for so long: my dreams and desires were second-rate. I was cooking on an electric hob, mostly for myself; besides, I wasn’t going to be here forever. What the hell was I going to do with a decent knife? Also, I have a healthy respect for sharpness, and whenever I cut meat up with a good blade, I imagine that blade cutting into my own weak flesh, and see vividly, the wound it makes.

But a good knife needs to be looked after, and my daughter, who was given a Japanese chef’s knife as a parting gift from her fellow kitchen workers, learned how to use a water stone, and last weekend taught me.

It is fascinating, and soothing, sharpening a knife. You have to gauge the correct angle at which to place the blade against the stone. You have to feel, with the pads of your fingers, the sharpness of the knife itself, and the burr that results on one side of it after a few dozen passes over the stone. One is aware that sharpening is about shaving steel, almost by molecules at a time, a process that has no theoretical end, except when, one day, the knife itself is sharpened to invisibility.

I am reminded of the fabled measure of eternity: the bird who sharpens his beak against the rock of a mile-high mountain once every hundred years. When the mountain is worn down, a mere day of eternity will have passed.

Meanwhile, the daughter passes the knife across the stone, dips her fingers in a bowl of water, sprinkles it over the stone, and repeats the passing. The father sits there, absorbed in her skill, wondering at this inversion of the traditional learning process. “Here,” she says, handing over knife and stone. “You have a go.” 

Nicholas Lezard is a literary critic for the Guardian and also writes for the Independent. He writes the Down and Out in London column for the New Statesman.

This article first appeared in the 20 July 2017 issue of the New Statesman, The new world disorder