Weakening Global Growth, Increasing Inflationary Pressures—The International Monetary Fund's baseline projection of global growth for 2008 is 3.7 percent, down from 4.9 percent in 2007. Other analysts also forecast sluggish growth in the advanced economies in 2008 and 2009. The rapid expansion in the developing world, led by China and India, is expected to soften, but the pace will continue to be strong.

The Federal Open Market Committee decided today to lower its target for the federal funds rate 25 basis points to 2 percent.

Oil prices continued rising, with the benchmark West Texas Intermediate (WTI) crude oil setting new records week after week and strengthening by about 20 percent in April alone. On Tuesday, April 23, WTI surged to nearly $120 per barrel, eclipsing the previous inflation-adjusted high of $104.10 set in April 1980.

Texas manufacturing activity remained sluggish in April, according to the 112 business executives who responded to the Texas Manufacturing Outlook Survey. Indicators for current conditions were little changed from last month. The company outlook index improved, but the index for general business conditions moved slightly lower.

The Texas economy expanded moderately in February. The Dallas Fed's Texas Business-Cycle Index, a gauge of the region's current economic conditions, increased at a 3.1 percent annualized rate during the month. The current rate is somewhat slower than the 3.7 percent pace recorded in 2007.

On March 6, the Texas Workforce Commission released its annual revision to its Texas payroll employment estimates. The new data incorporate information from the broader (but delayed) Covered Employment and Wages survey into the payroll data.

On April 21, 2008, the Federal Reserve conducted an auction of $50 billion in 28-day credit through its Term Auction Facility. The results of the auction are on the Board website.

"Globalization and Monetary Policy: An Introduction"—Greater openness has become an almost universal feature of modern, developed economies. This paper develops a workhorse international model and explores the role of standard monetary policy rules applied to an open economy.

On April 21, 2008, the Federal Reserve will offer $50 billion in 28-day credit through its Term Auction Facility. Additional information regarding the auction is listed on the Board website.

Two of the most important underpinnings of Houston’s economy, national and global growth, have both pulled back significantly. Evidence is mixed on whether Houston has also slowed.

Opportunity Knocks: Selling Our Services to the World—Americans can maintain good jobs and high living standards by exporting their services to the world, according to the Federal Reserve Bank of Dallas' 2007 annual report essay.

"The United States, like Chicago, can continue to prosper only if it faces economic change head-on, choosing to compete rather than retreat, seeking out new opportunities in a globalizing economy, where goods, services, money and ideas flow freely across international borders."

Dallas Fed President and CEO Richard W. Fisher and Senior Vice President and Chief Economist W. Michael Cox discuss the service economy.

The Federal Reserve System's latest Beige Book survey has been released. The Dallas Beige Book, along with a link to the national summary and reports from other Federal Reserve Districts, is available online.

Vehicle Currency—Explores the nature of the efficiency gains arising from a vehicle currency and shows how this depends on the total number of currencies in existence, the size of the vehicle currency economy and the monetary policy followed by the vehicle currency's government.

Country Portfolios in Open Economy Macro Models—This paper develops a simple approximation method for computing equilibrium portfolios in dynamic general equilibrium open economy macro models.

"The Dynamics of Economic Functions: Modelling and Forecasting the Yield Curve"—The class of Functional Signal plus Noise models is introduced that provides a new, general method for modelling and forecasting time series of economic functions.

How Should Central Banks Define Price Stability?—Considers whether central banks should target broad or narrow measures of inflation and whether they should target headline or core measure of inflation. It also addresses whether central banks should define price stability as prevailing at some positive measured rate of inflation.

Accounting for Persistence and Volatility of Good-level Real Exchange Rates: The Role of Sticky Information—Volatile and persistent real exchange rates are observed not only in aggregate series but also on the individual good level data.

"We do not have the luxury of waiting for markets to stabilize before we think about the future. Indeed, many of the necessary changes that have been identified, including increasing transparency, improving risk management, and attaining better coordination among regulators, could provide important support to the process of normalizing our financial markets."

"In building the bridge to restore financial order and efficiency, my primary interest is to do the minimum necessary to get the job done. And no more. In so doing, my hope is that we restore the long-term faith of the millions of risk takers who make our economy so mighty."

"In light of the problems that have arisen in the subprime mortgage market, we are reminded of how critically important it is for individuals to become financially literate at an early age so that they are better prepared to make decisions and navigate an increasingly complex financial marketplace."

On April 7, 2008, the Federal Reserve conducted an auction of $50 billion in 28-day credit through its Term Auction Facility. The results of the auction are listed on the Board website.

On April 7, 2008, the Federal Reserve will offer $50 billion in 28-day credit through its Term Auction Facility. Additional information regarding the auction is listed on the Board website.

Recent evidence suggests that the overall outlook for global growth has deteriorated. Activity in most economies is decelerating, and, at the same time, inflationary pressures are rising. The U.S. continues to face increased threats to growth, and other economies are not immune, especially the euro zone and the United Kingdom.

Weakening Real Economy, Moderating Inflation—Data released over the past few weeks are mixed. The national economy has weakened further, but inflationary pressures appear to be moderating.

It now appears likely that real gross domestic product (GDP) will not grow much, if at all, over the first half of 2008 and could even contract slightly.

The Texas economy continues to slow. Economic growth is still moderate, but there is more evidence that some business leaders are expecting further weakness and engaging in reinforcing actions, such as cutting capital spending, paring down inventories and reducing or freezing employment.

The Federal Reserve System has announced the availability of a set of dynamic maps and data that illustrate subprime and alt-A mortgage loan conditions across the United States. |

"Intellectual Property Protection in a Globalizing Era," reports that globalization may reduce incentives to enact strong patent laws in many countries, and international agreements may help achieve the right level of intellectual property protection.

Texas manufacturing activity remained sluggish in March, according to the 112 business executives who responded to the Texas Manufacturing Outlook Survey. Although indicators for current conditions improved modestly, they continued to be weak. Indexes for general business conditions worsened.

Texas manufacturing activity remained sluggish in March, according to the 112 business executives who responded to the Texas Manufacturing Outlook Survey. Although indicators for current conditions improved modestly, they continued to be weak. Indexes for general business conditions worsened.

The Texas economy expanded at a measured pace in January, following solid growth in 2007. The Dallas Fed’s Texas Business-Cycle Index—a gauge of the region’s current economic conditions—increased at a 3.2 percent annualized rate during the month, somewhat less than the 3.9 percent pace recorded in 2007.

The Federal Reserve will conduct two auctions of 28-day credit through its Term Auction Facility (TAF) in April. It will offer $50 billion in an auction to be held on Monday, April 7 and $50 billion in an auction to be held on Monday, April 21.

The trimmed mean PCE inflation rate for February was an annualized 1.2 percent. According to the BEA, the overall PCE inflation rate for February was 1.5 percent, annualized, while the inflation rate for PCE excluding food and energy was 1.3 percent.

The Federal Open Market Committee decided today to lower its target for the federal funds rate 75 basis points to 2-1/4 percent.

Real Texas exports lost their positive momentum in the final quarter of 2007, edging down 0.4 percent, following two successive quarters of solid expansion. Despite the modest contraction, Texas exports are up 4 percent from year-ago levels.

The Federal Reserve has announced that the Term Auction Facility will be increased to $100 billion and that, beginning today, it will initiate a series of term repurchase transactions that are expected to cumulate to $100 billion.

The Federal Reserve System's latest Beige Book survey has been released. The Dallas Beige Book, along with a link to the national summary and reports from other Federal Reserve Districts, is available online.

"Reducing the rate of preventable foreclosures would promote economic stability for households, neighborhoods, and the nation as a whole. Although lenders and servicers have scaled up their efforts and adopted a wider variety of loss-mitigation techniques, more can, and should, be done."

The Texas economy enjoys advantages that will help it avoid a recession, according to "Texas Finds Cover from U.S. Economic Storm."

"Hot Housing Market Catching Cold in Texas" finds that a weakening Texas housing market still remains healthier than the national average.

In "Delving More Deeply into Globalization,"
vice president Mark A. Wynne, director of the Globalization and Monetary Policy Institute at the Dallas Fed, discusses the institute's goal of better understanding monetary policy in an open economy.

"A critical task for the Federal Reserve over the course of this year will be to assess whether the stance of monetary policy is properly calibrated to foster our mandated objectives of maximum employment and price stability in an environment of downside risks to growth, stressed financial conditions, and inflation pressures. In particular, the FOMC will need to judge whether the policy actions taken thus far are having their intended effects."

"Accounting for the Bond-Yield Conundrum" uses a macro-finance model to examine the phenomenon of falling long-term interest rates during periods of tightening in monetary policy.

NEW! International Economic Update—Global output is expanding at healthy, but noticeably declining, rates. Evidence of slower credit and real activity growth is materializing throughout the industrialized world. Headline inflation rates have picked up significantly across the globe, due in large part to energy and food prices. Core inflation has risen by about 50 base points in most industrialized countries over the past two years.

National Economic Update—Recent reports point to an outlook of sluggish economic growth and continued upward price pressures from food, energy and imports. Real GDP growth slowed from its 4.9 percent annual rate in the third quarter to a weak 0.6 percent in the fourth quarter.

Banco de México governor Guillermo Ortiz has joined the advisory board for the Globalization and Monetary Policy Institute at the Federal Reserve Bank of Dallas.

"At present, my baseline outlook involves a period of sluggish growth, followed by a somewhat stronger pace of growth starting later this year as the effects of monetary and fiscal stimulus begin to be felt."

Corpus Christi: An Economy in Transition—Although port activity and tourism remain important components of the Corpus Christi economy, some sectors are declining in importance, such as agriculture, oil and gas, petrochemicals and military, while others are expanding, such as health care, alternative energy and education.

On February 11, 2008, the Federal Reserve conducted an auction of $30 billion in 28-day credit through its Term Auction Facility.The results of the auction are listed on the Board's website.

The fourth quarter survey saw continued optimism in the Eleventh District agricultural sector. Above-average rainfall and favorable growing conditions in the fall significantly improved crop yields in most parts of the district. A near-record cotton crop coupled with high agricultural commodity prices boosted farm incomes in 2007. Bankers reported that this boom was not only enabling producers to pay off their debts but also encouraging them to invest in new farm equipment.

The Texas economy expanded moderately in December. The Dallas Fed's Texas Business-Cycle Index rose at an annualized pace of 2.5 percent, following revised growth of 2.8 percent in November. In 2007 the index rose at a rate of 4 percent, a slight deceleration from 2006’s 4.5 percent pace.

On February 11, 2008, the Federal Reserve will offer $30 billion in 28-day credit through its Term Auction Facility. Additional information regarding the auction is listed on the Board's website.

Neither Boom nor Bust: How Houston’s Housing Market Differs from Nation’s—Houston's housing market did not share in the rapid price appreciation seen by some large metros in the early 2000s or the sharp downturn of late 2006 and early 2007. But the tightening of credit standards since August has affected Houston disproportionately. Mortgage and housing markets have seen wide variations in performance as a result of the downturn, and this is Houston’s story in the context of the national housing market turmoil.

"Monetary policy acts with a lag. I liken it to a good single malt whiskey or perhaps truly great tequila: It takes time before you feel its full effect. The Fed has to be very careful now to add just the right amount of stimulus to the punchbowl without mixing in the potential to juice up inflation once the effect of the new punch kicks in." |

Oil prices rose sharply in early January, with the benchmark West Texas Intermediate crude oil almost reaching the $100 barrier. Escalating tension in the Middle East, fears of disruptions in Nigeria, a further slippage in the U.S. dollar (in early January), and a growing realization that oil resource development will likely not match the growth in oil demand accounted for the upward pressure on oil prices.

"Homeownership and Affordable Lending: A Case Study" highlights the importance of sound lending practices to help low- and moderate-income households preserve their assets. It presents the results of a study that examined the impact of the city of Dallas' Mortgage Assistance Program on participants and neighborhoods.

Texas’ high-tech sector remained on track in the fourth quarter of 2007. Texas high-tech employment increased by 2,400 jobs (3.2 percent), according to the data released by the Texas Workforce Commission, with seasonal and other adjustments made by the Dallas Fed. The fourth-quarter increase took 2007 gains in the sector to 3,100 jobs (1 percent).

The Federal Reserve will conduct two auctions of 28-day credit through its Term Auction Facility (TAF) in February. It will offer $30 billion in an auction to be held on Monday, February 11 and $30 billion in an auction to be held on Monday, February 25.

The trimmed mean PCE inflation rate for December was an annualized 2.4 percent. According to the BEA, the overall PCE inflation rate for December was 3.0 percent, annualized, while the inflation rate for PCE excluding food and energy was 2.8 percent.

The trimmed mean PCE inflation rate for December was an annualized 2.4 percent. According to the BEA, the overall PCE inflation rate for December was 3.0 percent, annualized, while the inflation rate for PCE excluding food and energy was 2.8 percent.

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 3 percent.

The papers presented at the 2006 conference, "Migration, Trade, and Development," examine the various dimensions in which trade and migration affect economic development, whether individually or jointly, through economic or political forces.

On January 28, 2008, the Federal Reserve conducted an auction of $30 billion in 28-day credit through its Term Auction Facility. The results of the auction are listed on the Board site.

Texas manufacturing activity remained soft in January, according to the 113 business executives who responded to the Texas Manufacturing Outlook Survey. After a seasonal dip in December, rebounds occurred in nearly all current indicators, including production, capacity utilization, volume of new orders and shipments. Upward price and wage pressures persist. Overall company business indicators suggest softening growth. General business conditions indexes improved slightly—but they remain negative.

On January 28, 2008, the Federal Reserve will offer $30 billion in 28-day credit through its Term Auction Facility. Additional information regarding the auction is listed on the Board site.

The Federal Open Market Committee has decided to lower its target for the federal funds rate 75 basis points to 3-1/2 percent.

The Houston economy is probably on track to add 100,000 new jobs in 2007, once all the revisions are complete. The local economy continues to click along, with the one notable exception of housing.

"...the FOMC does not intend to just squat and wait should economic data and sound risk management signal that monetary accommodation is required."

"To be useful, a fiscal stimulus package should be implemented quickly and structured so that its effects on aggregate spending are felt as much as possible within the next twelve months or so. Stimulus that comes too late will not help support economic activity in the near term, and it could be actively destabilizing if it comes at a time when growth is already improving."

The Federal Reserve System's latest Beige Book survey has been released. The Dallas Beige Book, along with a link to the national summary and reports from other Federal Reserve Districts, is available online.

The Poor, the Rich and the Enforcer: Institutional Choice and Growth
by Erwan Quintin, Thorsten Koeppl and Cyril Monnet

Deliverability and Regional Pricing in U.S. Natural Gas Markets
by Stephen P. A. Brown and Mine K. Yücel

On January 14, 2008, the Federal Reserve conducted an auction of $30 billion in 28-day credit through its Term Auction Facility. The results of the auction are listed on the Board website.