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Market-Based Solutions to Vital Economic Issues


Kenan Institute 2022 Annual Theme: Stakeholder Capitalism
Market-Based Solutions to Vital Economic Issues

economic outlook


UNC Kenan-Flagler Business School Finance Professor Stephen Arbogast discusses why embargoes on Russian oil aren’t working, why renewable energy sources aren’t the fix and how the missing link in increasing production could stabilize Europe’s energy outlook.

The Fed tried to show its inflation-fighting mettle by raising the federal funds rate, the short-term interest rate it directly controls, by 0.75 of a percentage point. This is the largest increase since 1994, though the funds rate remains at a quite low 1.625%, especially relative to the 8.6% inflation reading last week. The Fed seemed to be spooked by the inflation print — which, rather than declining as many forecasters (including myself) expected, rose to its highest level since 1981. More important, in my opinion, longer-term measures of consumer inflation expectations and uncertainty increased.

Higher prices for gas, groceries and nearly everything else are on consumers’ minds after a government report Friday showing that inflation is up 8.6% on a year-over-year basis, the largest jump since late 1981. Chief Economist Gerald Cohen tells WTVD-TV, “When people start saying, ‘I think inflation is going to continue to occur, that means that the Fed has to work harder and that it could end badly.”

After government statistics showed another big annualized jump in inflation Friday, talk turned to how aggressively the Federal Reserve will act in raising interest rates this week. “Many people are expecting a half a percentage point increase,” Chief Economist Gerald Cohen told WRAL-TV. “Perhaps this would raise the discussion of doing a three-quarters of a percent increase.”

The Kenan Institute of Private Enterprise’s new series of economic briefings returned June 3 following the release of the U.S. Department of Labor’s monthly employment report. In the 9 a.m. ET briefing, Executive Director Greg Brown provided insight on another relatively strong report and talked about how jobs numbers could help influence the Fed to either push past its expected target on interest rates or take a pause in its increases.

CHAPEL HILL, N.C. (May 31, 2022) — Learn how the Department of Labor’s monthly employment report and recent market gyrations will affect expectations for the Fed’s interest rate policy and views on the economic outlook when the Kenan Institute’s new series of virtual press briefings returns this week.

What is a stablecoin, and why did the one known as TerraUSD break the buck and crash? Kenan Institute Chief Economist Gerald Cohen moderates this timely crypto conversation with University of California-Berkeley Haas School of Business Professor Christine Parlour, UNC Kenan-Flagler Business School Professor Eric Ghysels and Chief Revenue Officer Michael Coscetta of Paxos.

The hits just keep coming for the cryptocurrency market following last week’s collapse of TerraUSD. The stablecoin, created to maintain its value equal to the U.S. dollar, today is worth an estimated 11 cents – a drop in market value from nearly $19 billion to roughly $1.3 billion. How could this have happened, and what could it – along with the wider market selloff – mean for the future of crypto? We invite you to join us at 11 a.m. ET this Friday, May 20, for a discussion with key experts.

First, the good news. Given what we know about current economic conditions, it is likely that the consumer inflation rate has peaked in the U.S. for the current cycle. Recent inflation reports on the Consumer Price Index (CPI) and Personal Consumption Expenditures (PCE) Implicit Price Deflator, which is the Federal Reserve’s preferred measure, show a jump to new 40-year highs in March but signs of moderation in coming months. For example, consumer goods with very large 12-month cost runups such as used cars and food away from home are starting to see prices moderate. Likewise, prices of important household goods like apparel, furnishings, prescription drugs and recreation commodities (think TVs and Pelotons) are flattening. Furthermore, some important energy prices such as crude oil and gasoline have stabilized in April after jumps in the first quarter. So, while inflation will surely remain elevated for some time, it is unlikely to get much worse.

The latest employment figures show a strong economy and indicate the U.S. is not at risk of recession, Chief Economist Gerald Cohen says in a story by WRAL TechWire’s Jason Parker.

The recent surge in inflation is making things worse for “a much larger number of people than one might think,” Urban Investment Strategies Center Director Jim Johnson tells The News & Observer.

The Kenan Institute of Private Enterprise launched its State of the Economy Press Briefing, a quick-response roundup of information and commentary following the U.S. Department of Labor’s monthly employment report, with a virtual presentation May 6. Areas for analysis included how the jobs numbers may affect GDP growth, inflation, and the Fed’s plans, with an eye toward what it all means for business.

In the 9 a.m. ET briefing, Chief Economist Gerald Cohen offered additional insights into the effects of COVID-19 on employment and the labor market’s continuing recovery. He also answered questions on the likelihood of a recession and the EU’s response to economic conditions.