The core inflation rate is low at 1.6% missing the target of 2% with federal fund rate hovering around 2.5%. Hopefully, as Mr. Powell discussed, low inflation number is temporary. The Fed balance sheet is down to $3.9T and has both Mortgage Backed Securities and Treasuries. The low inflation is worrisome since the US economy is in top gear. Unemployment at the lowest levels with one of the highest wage growth in recent years, low core inflation (excluding energy and food prices) smells trouble.
Inflation is of two types: the supply side and the demand side. Printing excess money did not yield in much inflation and we will have to wait and see the next quarter for the demand side effect to structure out. Monthly treasury securities reduction is down to $15B from $30B from this month. With low inflation, pruning security reduction makes sense although according to experts treasury security reduction did not cause liquidity crunch. FED is right in waiting for another quarter to understand the direction of inflation for a more decisive action.
Attaching the link to the balance sheet normalization plan of the FED.
Recently uploaded a video of my interview with Tinkesh on Twitter. I met Tinkesh at a gym in Pune and got impressed by his calm demeanor and true grit. In spite of adversity, he followed his childhood dream to become a fitness trainer through sheer determination. Tinkesh was electrocuted when he was a kid and lost both his legs and one arm. Over the course of his life, people helped him in his endeavor. A nonprofit, Aditya Mehta Foundation, sponsored his prosthesis for both limbs and Tinkesh successfully ran 10K and 5K long distance runs with Maj D. P. Singh “the Blade Runner” from India. Tinkesh follows a strict diet and strength training regime to keep fit. I spoke with him at my house in Pune, India.
I was planning to publish two videos to celebrate the essence of Easter before I got to know about terror attacks in Sri Lanka last evening. It shook me up and as a mark of respect for the victims, I have postponed both the articles for a bit. One article is a motivational interview of a physically challenged person and his success as a fitness trainer while another is about a French friend of mine and his artistic and versatile flair in music. (The video was shot while celebrating Easter in a café).
The report on remittance by the world bank is an eye-opener. Refer to the twitter feed wherein I had shared the report. India leads in remittance around the world is certainly not surprising but the 7% remittance fees are worth writing about here. It’s a pleasant surprise that reducing the remittance fees is part of sustainable development goals. Continue reading “Remittance and Black Hole”