Even though the first quarter of 2019 is only three-quarters over, practically all of the private-sector decisions that will determine the level of economic growth from the first quarter of 2018 to the first quarter of 2019 have already been made. Moreover, because of a statistical quirk 8/9 of the components of the growth rate have already occurred, and we have reasonable data on 2/3 of the components. So the Federal Reserve Bank of New York's forecast that the first-quarter growth rate will be only 1.4% is now a semi-solid thing: you cannot take it to the bank, but you can borrow on it (the last three month-out misses were 0, +0.2, and -0.4 respectively):

Nowcasting Report FEDERAL RESERVE BANK of NEW YORK

It's not a recession. But it is clear that even if 2.5% were the right target for the short safe nominal interest rate two months ago, it is not the right target for the short safe nominal interest rate now. The Fed should cut.

It is far from clear to me that the risk of a U.S. recession this year is low. The risk that a recession will be called is low. The risk that a recession will start is 30%:

Gavyn Davies: Alarm Bells Ring for the Goldilocks World Economy: "Markets seem willing to overlook the continuing slowdown in the advanced economies, which has taken the latest growth rate to only 0.8 per cent.... This is perversely seen as good news because it will reduce the likelihood of further interest rate increases.... The dovish turn in US monetary policy has been confirmed by an unusual volte-face in policy guidance by the Fed leadership in the space of a few weeks.... This phase of the cycle is often described as the Goldilocks zone, in which growth — like the heroine’s porridge in The Story of the Three Bears—is neither too hot nor too cold.... Meanwhile, growth is still high enough to indicate that the risk of outright recession in the next 12 months remains close to zero.... While the US is still clinging to the middle of the Goldilocks zone, the eurozone is flirting with the bottom boundary of its zone. Any further decline in the nowcast would see a large increase in the probability of a European recession this year. With the Japanese nowcast already in negative territory and Asian trade flows headed sharply downwards, the markets may not be able to ignore much further weakness in the world economy...


#noted

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