322 posts on "Liberty Street Economics"
May 18, 2022
Global Supply Chain Pressure Index: May 2022 Update
Supply chain disruptions continue to be a major challenge as the world economy recovers from the COVID-19 pandemic. Furthermore, recent developments related to geopolitics and the pandemic (particularly in China) could put further strains on global supply chains. In a January post, we first presented the Global Supply Chain Pressure Index (GSCPI), a parsimonious global measure designed to capture supply chain disruptions using a range of indicators. We revisited our index in March, and today we are launching the GSCPI as a standalone product, with new readings to be published each month. In this post, we review GSCPI readings through April 2022 and briefly discuss the drivers of recent moves in the index.
Posted at 10:00 am in Inflation, International Economics, Macroeconomics, Pandemic, Supply Chain | Permalink | Comments (1)
May 17, 2022
Do Businesses in the Region Expect High Inflation to Persist?
As the economy continues to recover from the pandemic, a combination of strong demand, severe supply disruptions, widespread labor shortages, and surging energy prices has contributed to a rapid increase in inflation. Indeed, the inflation rate, as measured by the Consumer Price Index (CPI), has exceeded 8 percent over the past year, the fastest pace of price increase since the early 1980s. If businesses and consumers expect inflation to be high in the future because it is elevated today, they may change their behavior accordingly, which can make inflation even more persistent. In other words, expectations about the path of future inflation can affect how current inflation will actually evolve. In particular, among businesses, expectations about future inflation can shape how they set wages and prices. Our May regional business surveys asked firms what they expected inflation to be one year, three years, and five years from now. Responses indicate that while businesses, like consumers, expect high inflation to continue over the next year, such elevated levels of inflation are not expected to persist over longer time horizons.
May 12, 2022
First‑Time Buyers Were Undeterred by Rapid Home Price Appreciation in 2021
Tight inventories of homes for sale combined with strong demand pushed up national house prices by an eye-popping 19 percent, year over year, in January 2022. This surge in house prices created concerns that first-time buyers would increasingly be priced out of owning a home. However, using our Consumer Credit Panel, which is based on anonymized Equifax credit report data, we find that the share of purchase mortgages going to first-time buyers actually increased slightly from 2020 to 2021.
May 10, 2022
Refinance Boom Winds Down
Total household debt balances continued their upward climb in the first quarter of 2022 with an increase of $266 billion; this rise was primarily driven by a $250 billion increase in mortgage balances, according to the latest Quarterly Report on Household Debt and Creditfrom the New York Fed’s Center for Microeconomic Data. Mortgages, historically the largest form of household debt, now comprise 71 percent of outstanding household debt balances, up from 69 percent in the fourth quarter of 2019. Driving the increase in mortgage balances has been a high volume of new mortgage originations, which we define as mortgages that newly appear on credit reports and includes both purchase and refinance mortgages. There has been $8.4 trillion in new mortgage debt originated in the last two years, as a steady upward climb in purchase mortgages was accompanied by an historically large boom in mortgage refinances. Here, we take a close look at these refinances, and how they compare to recent purchase mortgages, using our Consumer Credit Panel, which is based on anonymized credit reports from Equifax.
April 21, 2022
Who Are the Federal Student Loan Borrowers and Who Benefits from Forgiveness?
The pandemic forbearance for federal student loans was recently extended for a sixth time—marking a historic thirty-month pause on federal student loan payments. The first post in this series uses survey data to help us understand which borrowers are likely to struggle when the pandemic forbearance ends. The results from this survey and the experience of some federal borrowers who did not receive forbearance during the pandemic suggest that delinquencies could surpass pre-pandemic levels after forbearance ends. These concerns have revived debates over the possibility of blanket forgiveness of federal student loans. Calls for student loan forgiveness entered the mainstream during the 2020 election with most proposals centering around blanket federal student loan forgiveness (typically $10,000 or $50,000) or loan forgiveness with certain income limits for eligibility. Several studies (examples here, here, and here) have attempted to quantify the costs and distribution of benefits of some of these policies. However, each of these studies either relies on data that do not fully capture the population that owes student loan debt or does not separate student loans owned by the federal government from those owned by commercial banks and are thus not eligible for forgiveness with most proposals. In this post, we use representative data from anonymized credit reports that allows us to identify federal loans, calculate the total cost of these proposals, explore important heterogeneity in who owes federal student loans, and examine who would likely benefit from federal student loan forgiveness.
What Might Happen When Student Loan Forbearance Ends?
Federal student loan relief was recently extended through August 31, 2022, marking the sixth extension during the pandemic. Such debt relief includes the suspension of student loan payments, a waiver of interest, and the stopping of collections activity on defaulted loans. The suspension of student loan payments was expected to help 41 million borrowers save an estimated $5 billion per month. This post is the first in a two-part series exploring the implications and distributional consequences of policies that aim to address the student debt burden. Here, we focus on the uneven consequences of student debt relief and its withdrawal. With the end-date of the student loan relief drawing near, a key question is whether and how the discontinuation of student debt relief might affect households. Moreover, will these effects vary by demographics?
Posted at 11:00 am in Credit, Education, Equitable Growth, Household Finance, Pandemic, Student Loans | Permalink
April 20, 2022
Inflation Persistence: How Much Is There and Where Is It Coming From?
The surge in inflation since early 2021 has sparked intense debate. Would it be short-lived or prove to be persistent? Would it be concentrated within a few sectors or become broader? The answers to these questions are not so clear-cut. In our view, one should ask how much of the inflation is persistent and how much of it is broad-based. In this post, we address this question through a quantitative lens. We find that the large ups and downs in inflation over the course of 2020 were largely the result of transitory shocks, often sector-specific. In contrast, sometime in the fall of 2021, inflation dynamics became dominated by the trend component, which is persistent and largely common across sectors.
April 18, 2022
Expected Home Price Increases Accelerate over the Short Term but Remain Stable over the Medium Term
The Federal Reserve Bank of New York’s 2022 SCE Housing Survey shows that expected changes in home prices in the year ahead increased relative to the corresponding timeframe in the February 2021 survey, while five-year expectations remained unchanged. Households reported that they would be less likely to buy if they were to move compared to the year-ago survey, marking the first annual decline since the series began in 2014. This drop was driven by current renters, who were much less likely to buy compared to renters in the 2021 survey. Renters also reported that they expect rents to be sharply higher twelve months from now, with the expected rate of increase more than twice that reported a year ago. The expected price of rent five years ahead also rose compared to expectations a year ago, but at a more moderate pace.
April 12, 2022
The Fed’s Balance Sheet Runoff: The Role of Levered NBFIs and Households
In a Liberty Street Economics post that appeared yesterday, we described the mechanics of the Federal Reserve’s balance sheet “runoff” when newly issued Treasury securities are purchased by banks and money market funds (MMFs). The same mechanics would largely hold true when mortgage-backed securities (MBS) are purchased by banks. In this post, we show what happens when newly issued Treasury securities are purchased by levered nonbank financial institutions (NBFIs)—such as hedge funds or nonbank dealers—and by households.
Posted at 7:00 am in Central Bank, COVID-19 Facilities, Federal Reserve, Monetary Policy, Nonbank (NBFI) | Permalink | Comments (1)
April 11, 2022
The Fed’s Balance Sheet Runoff and the ON RRP Facility
A 2017 Liberty Street Economics post described the balance sheet effects of the Federal Open Market Committee’s decision to cease reinvestments of maturing securities—that is, the mechanics of the Federal Reserve’s balance sheet “runoff.” At the time, the overnight reverse repo (ON RRP) facility was fairly small (less than $200 billion for most of July 2017) and was not mentioned in the post for the sake of simplicity. Today, by contrast, take-up at the ON RRP facility is much larger (over $1.5 trillion for most of 2022). In this post, we update the earlier analysis and describe how the presence of the ON RRP facility affects the mechanics of the balance sheet runoff.
Posted at 7:00 am in Central Bank, COVID-19 Facilities, Federal Reserve, Monetary Policy, Repo | Permalink | Comments (3)
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