Behind Blue Skies
from Mind the Macro Hosted by Michael Roberts and Jeff Baldwin
This week, we discuss recent macroeconomic releases, including retail sales, pending home sales and the flash composite PMI, as well as Kevin Warsh’s Senate confirmation hearings and the war in Iran. At first glance, some of the data appeared to point to stronger growth. Under the hood, however, the figures continued to tilt toward stagflation. For instance, headline retail sales rose 1.7 percent, but the figure is not adjusted for inflation and is likely to look far less robust in real terms. Although we had expected Kevin Warsh to favor lower interest rates and look through recent inflation pressures, our view is that the FOMC is likely to resist that approach and keep rates unchanged, particularly after its policy mistakes in 2021, when the committee wrongly dismissed a surge in inflation as transitory. Finally, we discuss equity market froth and the war in Iran.
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