Delivering Global Macro Investment Insights

DeSaque Macro Research

DeSaque Macro Research Limited was formed by Said DeSaque in April 2012 with the view to delivering global macro investment insights aimed at providing new ideas to clients.

Said DeSaque has over 26 years of experience working as a professional economist in financial services. Prior to establishing DeSaque Macro Research, Said held positions as Senior Economist at Robert W Baird and William Blair. He began his career as a graduate at PaineWebber in 1986, where he eventually became Head of the London Economics Department.

Said takes a very keen interest in international relations, along with their implications for economic development. His research interests include the economic transformation of China and its implications for global capital markets, particularly in the United States. He is a member of Chatham House in London.

The US economy and capital markets have historically been Said’s main focus of attention. He frequently presents his views to institutional investors in diverse geographic locations. In recent years, Said has also been carefully monitoring economic developments in Asia, particularly China and Japan.

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Global Economist, DeSaque Macro Research

Said Desaque

Global Economist

Macroeconomics

<div>In the aftermath of the global financial crisis (GFC), the Fed had the difficult tasks of repairing household balance sheets and subsequently providing continued support for aggregate demand in the absence of consistent help from fiscal policy. The cause of the Great Lockdown was, however, fundamentally different to the Great Recession: Fed policy easing could not boost aggregate demand due to restrictions on social gatherings. Consequently, the Federal Open Market Committee (FOMC) took decisive action to ease potential stress on corporate balance sheets due to the shutting down of economic activity, while the responsibility of supporting aggregate demand was left to fiscal policy.</div>
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<div>The FOMC views transitory breaching of the 2% inflation target as a desired policy outcome, but the big issue for financial markets, in its aftermath, will be the economic cost that will be incurred to re-gain price stability. FOMC members are confident that any inflation overshoot can easily be brought back under control. </div>
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<div>The speed of the US economy entering inflationary territory will hinge critically on the size of the fiscal multiplier, estimates of which vary significantly. Meanwhile, different segments of the Biden Administration's fiscal stimulus will have idiosyncratic multiplier values, but the majority of costed measures are estimated to have magnitudes in excess of 1.</div>
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<div>The political backdrop over the next eighteen months could have a major impact on inflation if there is any further fiscal easing and the Fed refuses to alter forward guidance due to a tight nexus with the US Treasury. Some comparisons are already being made to the mid-to-late-1960s when prolonged easing of fiscal policy sowed the seeds for rising inflationary expectations that undermined Fed's credibility during the 1970s. Financial markets' inflationary expectations have recently been based on a much flatter Phillips Curve that has allowed the Fed leeway to keep policy easier for longer, but an adverse shift is possible if inflationary expectations become unhinged due to FOMC complacency, an outcome similar to events in the late-1960s.        </div>

In the aftermath of the global financial crisis (GFC), the Fed had the difficult tasks of repairing household balance sheets and subsequently providing continued support for aggregate demand in the absence of consistent help from fiscal policy. The cause of the Great Lockdown was, however, fundamentally different to the Great Recession: Fed policy easing could not boost aggregate demand due to restrictions on social gatherings. Consequently, the Federal Open Market Committee (FOMC) took decisive action to ease potential stress on corporate balance sheets due to the shutting down of economic activity, while the responsibility of supporting aggregate demand was left to fiscal policy.

The FOMC views transitory breaching of the 2% inflation target as a desired policy outcome, but the big issue for financial markets, in its aftermath, will be the economic cost that will be incurred to re-gain price stability. FOMC members are confident that any inflation overshoot can easily be brought back under control. 

The speed of the US economy entering inflationary territory will hinge critically on the size of the fiscal multiplier, estimates of which vary significantly. Meanwhile, different segments of the Biden Administration's fiscal stimulus will have idiosyncratic multiplier values, but the majority of costed measures are estimated to have magnitudes in excess of 1.

The political backdrop over the next eighteen months could have a major impact on inflation if there is any further fiscal easing and the Fed refuses to alter forward guidance due to a tight nexus with the US Treasury. Some comparisons are already being made to the mid-to-late-1960s when prolonged easing of fiscal policy sowed the seeds for rising inflationary expectations that undermined Fed's credibility during the 1970s. Financial markets' inflationary expectations have recently been based on a much flatter Phillips Curve that has allowed the Fed leeway to keep policy easier for longer, but an adverse shift is possible if inflationary expectations become unhinged due to FOMC complacency, an outcome similar to events in the late-1960s.        

Fed Credibility and Risks to Achieving Dual Mandate: Facing Ominous Comparisons to the Late-1960s