What we’re reading (1/31)
“Fed Signals Cuts Are Possible But Not Imminent As It Holds Rates Steady” (Wall Street Journal). “The Federal Reserve signaled it was thinking about when to lower interest rates but hinted a cut wasn’t imminent when it held rates steady at its first policy meeting of the year on Wednesday. The central bank held its benchmark federal-funds rate steady in a range between 5.25% and 5.5%, the highest level in more than two decades, as it awaits more convincing evidence that a sharp downturn in inflation at the end of last year will endure.”
“Why Cut Rates In An Economy This Strong? A Big Question Confronts The Fed.” (New York Times). “Right now, officials think that the neutral rate is in the neighborhood of 2.5 percent. The Fed funds rate is around 5.4 percent, which is well above neutral even after being adjusted for inflation. In short, interest rates are high enough that officials would expect them to seriously weigh on the economy. So why isn’t growth slowing more markedly? It takes interest rates time to have their full effect, and those lags could be part of the answer. And the economy has slowed by some important measures. The number of job openings, for instance, has been steadily declining.”
“Beta Is Back” (Morningstar). A a big, bold controversial take that beta now works as it should.
“The Great American Natural Gas Reckoning Is Upon Us” (Vox). “The Biden administration last week announced that it was pausing the permitting process for some new natural gas export projects, including a facility that would be the second-largest gas export terminal in the United States. It’s a move the White House said will help the US meet its climate change goals, but it’s not clear how it will affect the economy, energy markets, or the environment.”
“The Nurture Of Nature And The Nature of Nurture: How Genes And Investments Interact In The Formation Of Skills” (Houmark, Ronda, and Rosholm, American Economic Review). “This paper studies the interplay between genetics and family investments in the process of skill formation. We model and estimate the joint evolution of skills and parental investments throughout early childhood. We document three genetic mechanisms: the direct effect of child genes on skills, the indirect effect of child genes via parental investments, and family genetic influences captured by parental genes. We show that genetic effects are dynamic, increase over time, and operate via environmental channels. Our paper highlights the value of integrating biological and social perspectives into a single unified framework.”
