FED: Gov Miran: Stablecoin Adoption Could Lower R-Star Even More
Nov-07 21:15
Fed Gov Miran makes yet another argument in favor of his position that policy rates should move down substantially, saying that stablecoin adoption could also weigh on "r-star". Recall in a speech in September he made a rough estimate of nominal r-star for the Fed funds rate of between 2-2.5%, well below current rates.
- Miran says: "My thesis is that stablecoins are already increasing demand for U.S. Treasury bills and other dollar-denominated liquid assets by purchasers outside the Unted States and that this demand will continue growing. All else equal, this new demand lowers borrowing costs for the U.S. government. However, as a central banker, my focus is on what I believe may be a substantial and long-term force putting downward pressure on a crucial guideline for monetary policymakers known as r*."
- "I believe a range of different factors are putting downward pressure on r* and should be considered in formulating monetary policy. Some researchers have tried to estimate how much stablecoin growth might lower interest rates. In 2024, work by Marina Azzimonti and Vincenzo Quadrini estimated that if stablecoins are in widespread use and fully backed by U.S. securities, it could put as much as 40 basis points of downward pressure on interest rates."
- Added to his table below from September's speech, that suggests he may see further downside risks to r-star from his previous estimate - though he's already the most dovish member of the FOMC in terms of current rate-setting.
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ASIA: Coming Up In Asian Markets On Thursday
Oct-08 21:14
| 0730BST | 1430HKT | 1730AEDT | Philippines BSP Policy Announcement |
| 0900BST | 1600HKT | 1900AEDT | Taiwan Sep Trade Data |
Source: Bloomberg Finance L.P./MNI
ASIA: Coming Up In Asia Pac Markets On Thursday
Oct-08 21:09
| 2245BST | 0545HKT | 0845AEDT | Fed's Barr Speaks On Community Development |
| 0001BST | 0701HKT | 1001AEDT | UK Sep RICS House Price Balance |
| 0015BST | 0715HKT | 1015AEDT | Fed's Goolsbee Speaks At Payments Conference |
| 0030BST | 0730HKT | 1030AEDT | Fed's Goolsbee on Fox 32 Chicago |
| 0050BST | 0750HKT | 1050AEDT | Japan Weekly Offshore Investment Flows |
| 0100BST | 0800HKT | 1100AEDT | Australia Oct Inflation Expectations |
| 0100BST | 0800HKT | 1100AEDT | Australia 2030, 2040 Inflation Linked Bond Sale |
| 0235BST | 0935HKT | 1235AEDT | New Zealand 2031, 2034 Bond Sale |
| 0300BST | 1000HKT | 1300AEDT | Tokyo Sep Office Vacancies |
| 0330BST | 1030HKT | 1330AEDT | Japan 6mth Bill Sale |
| 0335BST | 1035HKT | 1335AEDT | Japan 5yr Bond Sale |
| 0700BST | 1400HKT | 1700AEDT | Japan Sep P Machine Tool Orders |
Source: Bloomberg Finance L.P./MNI
US FISCAL: FY2025 Deficit On Low Side, With Tariffs Offsetting Debt Servicing
Oct-08 20:01
The Congressional Budget Office (CBO) estimates in its Monthly Budget Review that the federal government posted a fiscal surplus of $160B in September, vs a $345B deficit in August. That would be much more positive than the $55B expected by Bloomberg consensus, if confirmed by the Treasury's monthly report (technically due out Friday as the 8th business day of the year, but the first release of the new fiscal year usually comes out later).
- September was also the final month of the 2025 fiscal year, which would make the full-year deficit $1.809T - $8B smaller than the 2024 deficit of $1.817T. Even so, that flatters the 2024 outcome relative to 2025, due to timing shifts at the start of FY2024 without which the FY2025 deficit would have been $80B smaller than 2024's.
- For the year, outlays rose $301B (+4%) to $7.0T as "higher in several areas, including the largest benefit programs and net interest on the public debt (which, for the first time, surpassed $1 trillion)", with receipts up $308B (+6%) to $5.2T.
- We await the full Treasury report but the standouts are that corporate income taxes fell 15% Y/Y ($77B) with individual taxes up 6% Y/Y ($260B) and customs duties (including tariffs) up 153% ($118B to $195B). Net interest on the public debt rose $80B to $1.03T.
- This is a smaller deficit than CBO's projection in January 2025 ($1.9T) and "all told, revenues and outlays alike were slightly more than the totals projected in January."
- By our estimates it's possible the deficit will come in just below 6% of GDP, depending on growth in the Jul-Sep quarter, for the first time since FY2022 (FY2024's deficit was 6.4% of GDP).
- The CBO's regular 10-year outlook serves as a benchmark for broader expectations of the longer-term fiscal dynamics and will be eyed upon its expected release in January 2026.
