Milk Road Macro How Inflation and Unemployment Are Cornering the Fed w/ Samim Ghamami
Sep 9, 2025
Economist Samim Ghamami, a finance professor at NYU and former Goldman Sachs advisor, candidly discusses the current economic climate. He highlights the Fed's struggle against persistent inflation and a weakening labor market. The conversation examines the implications of Congress's spending spree and the potential for stagflation. Ghamami also dives into the future of treasury markets, stressing the need for reforms and collaboration between the Fed and Treasury to maintain market stability amid these growing challenges.
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Leverage Rules Crimp Treasury Market Liquidity
- The enhanced supplementary leverage ratio became a binding constraint that reduced banks' market-making capacity in Treasuries.
- Recalibrating it would restore banks' ability to absorb Treasury supply and stabilize liquidity.
Yield Moves Signal Fiscal Demand Stress
- Rising Treasury yields can reflect investor concerns about unsustainable fiscal trajectories and shrinking demand.
- That dynamic makes it harder for the Treasury to finance itself and raises market stress risks.
Structural Forces Make 2% Target Less Certain
- Inflation need not be purely monetary and structural forces like demographics and deglobalization can keep it elevated.
- Fixing the Fed's target rigidly at 2% lacks scientific certainty and could be impractical given these forces.