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.

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The UK press’s timid reaction to Brexit is in marked contrast to the satire unleashed on Trump

For the BBC, it seems, to question leaving the EU is to be unpatriotic.

Faced with arguably their biggest political-cum-constitutional ­crisis in half a century, the press on either side of the pond has reacted very differently. Confronting a president who, unlike many predecessors, does not merely covertly dislike the press but rages against its supposed mendacity as a purveyor of “fake news”, the fourth estate in the US has had a pretty successful first 150-odd days of the Trump era. The Washington Post has recovered its Watergate mojo – the bloodhound tenacity that brought down Richard Nixon. The Post’s investigations into links between the Kremlin and Donald Trump’s associates and appointees have yielded the scalp of the former security adviser Michael Flynn and led to Attorney General Jeff Sessions recusing himself from all inquiries into Trump-Russia contacts. Few imagine the story will end there.

Meanwhile, the New York Times has cast off its image as “the grey lady” and come out in sharper colours. Commenting on the James Comey memo in an editorial, the Times raised the possibility that Trump was trying to “obstruct justice”, and called on Washington lawmakers to “uphold the constitution”. Trump’s denunciations of the Times as “failing” have acted as commercial “rocket fuel” for the paper, according to its CEO, Mark Thompson: it gained an “astonishing” 308,000 net digital news subscriptions in the first quarter of 2017.

US-based broadcast organisations such as CNN and ABC, once considered slick or bland, have reacted to Trump’s bullying in forthright style. Political satire is thriving, led by Saturday Night Live, with its devastating impersonations of the president by Alec Baldwin and of his press secretary Sean Spicer by the brilliant Melissa McCarthy.

British press reaction to Brexit – an epic constitutional, political and economic mess-up that probably includes a mind-bogglingly destructive self-ejection from a single market and customs union that took decades to construct, a move pushed through by a far-right faction of the Tory party – has been much more muted. The situation is complicated by the cheerleading for Brexit by most of the British tabloids and the Daily Telegraph. There are stirrings of resistance, but even after an election in which Theresa May spectacularly failed to secure a mandate for her hard Brexit, there is a sense, though the criticism of her has been intense, of the media pussy-footing around a government in disarray – not properly interrogating those who still seem to promise that, in relation to Europe, we can have our cake and eat it.

This is especially the case with the BBC, a state broadcaster that proudly proclaims its independence from the government of the day, protected by the famous “arm’s-length” principle. In the case of Brexit, the BBC invoked its concept of “balance” to give equal airtime and weight to Leavers and Remainers. Fair enough, you might say, but according to the economist Simon Wren-Lewis, it ignored a “near-unanimous view among economists that Brexit would hurt the UK economy in the longer term”.

A similar view of “balance” in the past led the BBC to equate views of ­non-scientific climate contrarians, often linked to the fossil-fuel lobby, with those of leading climate scientists. Many BBC Remainer insiders still feel incensed by what they regard as BBC betrayal over Brexit. Although the referendum of 23 June 2016 said nothing about leaving the single market or the customs union, the Today presenter Justin Webb, in a recent interview with Stuart Rose, put it like this: “Staying in the single market, staying in the customs union – [Leave voters would say] you might as well not be leaving. That fundamental position is a matter of democracy.” For the BBC, it seems, to question Brexit is somehow to be unpatriotic.

You might think that an independent, pro-democratic press would question the attempted use of the arcane and archaic “royal prerogative” to enable the ­bypassing of parliament when it came to triggering Article 50, signalling the UK’s departure from the EU. But when the campaigner Gina Miller’s challenge to the government was upheld by the high court, the three ruling judges were attacked on the front page of the Daily Mail as “enemies of the people”. Thomas Jefferson wrote that he would rather have “newspapers without a government” than “a government without newspapers”. It’s a fair guess he wasn’t thinking of newspapers that would brand the judiciary as “enemies of the people”.

It does seem significant that the United States has a written constitution, encapsulating the separation and balance of powers, and explicitly designed by the Founding Fathers to protect the young republic against tyranny. When James Madison drafted the First Amendment he was clear that freedom of the press should be guaranteed to a much higher degree in the republic than it had been in the colonising power, where for centuries, after all, British monarchs and prime ministers have had no qualms about censoring an unruly media.

By contrast, the United Kingdom remains a hybrid of monarchy and democracy, with no explicit protection of press freedom other than the one provided by the common law. The national impulse to bend the knee before the sovereign, to obey and not question authority, remains strangely powerful in Britain, the land of Henry VIII as well as of George Orwell. That the United Kingdom has slipped 11 places in the World Press Freedom Index in the past four years, down to 40th, has rightly occasioned outrage. Yet, even more awkwardly, the United States is three places lower still, at 43rd. Freedom of the press may not be doing quite as well as we imagine in either country.

Harry Eyres is the author of Horace and Me: Life Lessons from an Ancient Poet (2013)

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