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.
This Week's State Of The Economy - What Is Ahead? - 24 January 2020
Wells Fargo Economics & Financial Report / Jan 25, 2020
Fears of an escalating coronavirus outbreak reached the United States this week, as a Washington state man became the first confirmed domestic case and the international total reached more than 800.
This Week's State Of The Economy - What Is Ahead? - 30 August 2024
Wells Fargo Economics & Financial Report / Sep 04, 2024
Revisions to PCE were broad based across the goods and services components and make it less clear that the restrictive interest rate environment is poising a major impediment to household spending.
This Week's State Of The Economy - What Is Ahead? - 01 July 2022
Wells Fargo Economics & Financial Report / Jul 14, 2022
As with the Mets and Yankees when they ran into the Astros over the last couple days, consumers staying power is showing signs of running out as inflation persists and confidence moves sharply lower.
This Week's State Of The Economy - What Is Ahead? - 25 November 2020
Wells Fargo Economics & Financial Report / Nov 28, 2020
It may be a holiday-shortened week, but there have been as many developments and economic indicators packed into three days as we can recall seeing in any other week this year.
This Week's State Of The Economy - What Is Ahead? - 16 October 2021
Wells Fargo Economics & Financial Report / Oct 22, 2021
The first economic data released this week in the United States reinforced the theme that labor supply and demand are struggling to come into balance.
This Week's State Of The Economy - What Is Ahead? - 27 October 2023
Wells Fargo Economics & Financial Report / Nov 02, 2023
The U.S. economy expanded at a stronger-than-expected pace in Q3, with real GDP increasing at a robust 4.9% annualized rate.
This Week's State Of The Economy - What Is Ahead? - 31 March 2023
Wells Fargo Economics & Financial Report / Apr 08, 2023
This week brought glimpses of market stabilization after weeks of turmoil. Although consumers seem unfazed by the uproar, tighter credit conditions coming down the pipeline will likely weigh on growth.
This Week's State Of The Economy - What Is Ahead? - 07 October 2022
Wells Fargo Economics & Financial Report / Oct 10, 2022
higher interest rates and inflation appear to be weighing on manufacturing and construction, yet service sector activity remains fairly resilient.
This Week's State Of The Economy - What Is Ahead? - 20 January 2023
Wells Fargo Economics & Financial Report / Jan 20, 2023
The housing sector has borne the brunt of the Fed\'s efforts to slow the economy, and this week\'s data showed the industry continues to reel.
25 January 2021 Economic Outlook Report
Wells Fargo Economics & Financial Report / Jan 30, 2021
In the second installment of our series on economic risks in the foreseeable future, we analyze the potential for higher inflation in coming years stemming from excess demand.
