MARKETWATCH
"Empire State factory index signals improving conditions in September"
By Greg Robb
Published: Sept. 15, 2020 at 11:03 a.m. ET
The numbers:
The New York Fed’s Empire State business conditions index rose 13.3 points to 17 in September, the regional Fed bank said Tuesday.
Economists had expected a reading of 6, according to a survey by Econoday.
The gain reverses a 14 point decline in the prior month.
This is the third consecutive positive reading in the index.
Any reading above zero indicates improving conditions.
What happened:
The new-orders index climbed 8.8 points to 7.1 in September while shipments rose 7.4 points to 14.1.
Unfilled orders continued to decline but at a less rapid pace.
Inventories also remained in negative territory.
The index for number of employees held steady while the average workweek rose 13.5 points to 6.7.
Optimism about the six-month outlook rose 6 points to 40.3.
Big picture:
The New York index is the first look at manufacturing conditions in September.
Economists were expecting some improvement after the decline in August, one of the weakest for the regional surveys.
Economists are divided over the outlook for manufacturing.
Some see the gains seen since July moderating into the end of the year.
Others see the factory sector as a bright spot, noting the national ISM factory index hit a two-year high of 56 in August.
Manufacturers in the New York region report that they are optimistic, but they are not adding workers.
What they are saying?
“Manufacturing is growing, but momentum has stalled,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Market reaction:
U.S. stocks opened higher Tuesday, with the Dow Jones Industrial rose 168 points in late-morning trading.
https://www.marketwatch.com/story/empir ... y-politics
THE ECONOMY
Re: THE ECONOMY
MARKETWATCH
"U.S. retail sales climb in August for third straight month, but momentum is slowing"
By Jeffry Bartash
Published: Sept. 16, 2020 at 10:07 a.m. ET
The numbers:
Sales at retail stores across the country rose in August for the third month in a row in another display of the economy’s resilience, but the momentum appears to be waning after a big burst of demand earlier in the summer once the U.S. reopened for business in the wake of the coronavirus crisis.
Retail sales increased 0.6% last month, the government said Wednesday, a tick below the forecast of economists polled by MarketWatch.
Yet the pace of sales has slowed from earlier in the summer, when the economy reopened and many retailers experienced a sharp rebound in customer traffic.
Sales gains are likely to be harder to come by in the months ahead, especially after the end of generous federal aid for the unemployed and businesses struggling to survive.
Retail sales are a big part of consumer spending and typically increase when the economy improves and Americans feel more confident to spend.
Sales have exceeded pre-crisis levels since June, a turnaround that few economists would have predicted early in the pandemic.
What happened:
Sales rose 0.2% at auto dealers, which account for about one-fifth of all retail spending.
Gas station receipts also increased 0.4%, largely reflecting an increase in the cost of gasoline.
Yet it still costs a lot less to fill a tank than it did last summer.
People aren’t driving as much because of ongoing economic restrictions and tens of millions of people working from home.
If autos and gas are excluded, retail sales rose a slightly higher 0.7%.
Sales rose 4.7% at bars and restaurants as people went out to eat more or ordered more takeout food.
Higher spending at restaurants even in the face of ongoing limits on indoor seating is a good sign.
People tend to spend less at restaurants when they are more worried about the economy.
Sales rose more modestly at home centers, pharmacies, electronic and appliance stores and clothing outlets.
Internet retailers saw basically no change in sales levels, though receipts are up 22% from a year earlier.
Online sales have soared during the pandemic with most people working at home and limiting their trips out of the house.
Sales fell last month at department stores and groceries.
Grocery sales are still up 9% from a year earlier though.
Big picture:
Retail sales are about 2% higher now compared to pre-pandemic levels in February, but they would almost certainly be higher still had there been no viral outbreak.
While some retail segments have performed surprisingly well, many still have a long way to go.
Sales at restaurants are down 15% from a year earlier, for example, and receipts at clothing stores are off 20%.
These businesses simply can’t get back to normal until the coronavirus fades.
The end of federal benefits, meanwhile, could make it harder for retailers to keep up the momentum.
The massive infusion of federal aid gave a boost to consumer spending after the economy reopened.
Now it’s gone.
What they are saying?
“The recovery is still on track,” said senior economist Jennifer Lee of BMO Capital Markets.
“It is swaying a little, from left to right, but it is still on track.”
“The big picture is that the expiry of the enhanced unemployment benefits at the start of the month did not have the catastrophic impact on spending that some analysts were predicting,” said senior U.S. economist Andrew Hunter of Capital Economics.
Market reaction:
The Dow Jones Industrial Average and S&P 500 rose in Wednesday trades.
https://www.marketwatch.com/story/us-re ... 2020-09-16
"U.S. retail sales climb in August for third straight month, but momentum is slowing"
By Jeffry Bartash
Published: Sept. 16, 2020 at 10:07 a.m. ET
The numbers:
Sales at retail stores across the country rose in August for the third month in a row in another display of the economy’s resilience, but the momentum appears to be waning after a big burst of demand earlier in the summer once the U.S. reopened for business in the wake of the coronavirus crisis.
Retail sales increased 0.6% last month, the government said Wednesday, a tick below the forecast of economists polled by MarketWatch.
Yet the pace of sales has slowed from earlier in the summer, when the economy reopened and many retailers experienced a sharp rebound in customer traffic.
Sales gains are likely to be harder to come by in the months ahead, especially after the end of generous federal aid for the unemployed and businesses struggling to survive.
Retail sales are a big part of consumer spending and typically increase when the economy improves and Americans feel more confident to spend.
Sales have exceeded pre-crisis levels since June, a turnaround that few economists would have predicted early in the pandemic.
What happened:
Sales rose 0.2% at auto dealers, which account for about one-fifth of all retail spending.
Gas station receipts also increased 0.4%, largely reflecting an increase in the cost of gasoline.
Yet it still costs a lot less to fill a tank than it did last summer.
People aren’t driving as much because of ongoing economic restrictions and tens of millions of people working from home.
If autos and gas are excluded, retail sales rose a slightly higher 0.7%.
Sales rose 4.7% at bars and restaurants as people went out to eat more or ordered more takeout food.
Higher spending at restaurants even in the face of ongoing limits on indoor seating is a good sign.
People tend to spend less at restaurants when they are more worried about the economy.
Sales rose more modestly at home centers, pharmacies, electronic and appliance stores and clothing outlets.
Internet retailers saw basically no change in sales levels, though receipts are up 22% from a year earlier.
Online sales have soared during the pandemic with most people working at home and limiting their trips out of the house.
Sales fell last month at department stores and groceries.
Grocery sales are still up 9% from a year earlier though.
Big picture:
Retail sales are about 2% higher now compared to pre-pandemic levels in February, but they would almost certainly be higher still had there been no viral outbreak.
While some retail segments have performed surprisingly well, many still have a long way to go.
Sales at restaurants are down 15% from a year earlier, for example, and receipts at clothing stores are off 20%.
These businesses simply can’t get back to normal until the coronavirus fades.
The end of federal benefits, meanwhile, could make it harder for retailers to keep up the momentum.
The massive infusion of federal aid gave a boost to consumer spending after the economy reopened.
Now it’s gone.
What they are saying?
“The recovery is still on track,” said senior economist Jennifer Lee of BMO Capital Markets.
“It is swaying a little, from left to right, but it is still on track.”
“The big picture is that the expiry of the enhanced unemployment benefits at the start of the month did not have the catastrophic impact on spending that some analysts were predicting,” said senior U.S. economist Andrew Hunter of Capital Economics.
Market reaction:
The Dow Jones Industrial Average and S&P 500 rose in Wednesday trades.
https://www.marketwatch.com/story/us-re ... 2020-09-16
Re: THE ECONOMY
MARKETWATCH - The Fed
"Fed sees interest rates near zero until end of 2023, sets new economic conditions to be met before raising rates"
By Greg Robb
Published: Sept. 16, 2020 at 4:07 p.m. ET
The Federal Reserve on Wednesday said it doesn’t expect to raise rates until the end of 2023 at the earliest and it set out new economic conditions that must be met before it will raise them.
In a statement, the Fed said it decided to keep its policy interest rate at near zero and expects this will be appropriate until two things happen: labor market conditions return to the “maximum employment” and inflation has risen to 2% and “is on track to moderately exceed 2% for some time.”
Greg McBride, chief financial analyst at Bankrate.com, said this language means investors should “get used to the low rates because they are here to stay.”
However, Seth Carpenter, economist at UBS, said the Fed guidance was “vague.”
“The guidance means they need their own forecast for inflation to be above 2%, but they are not tying it to the realized level of inflation,” Carpenter said.
Powell defended the guidance as “powerful” and “durable.”
There were two dissents to the Fed forward guidance.
Dallas Fed President Rob Kaplan seemed to favor the prior guidance and wanted the Fed to retain greater flexibility once the economy was on track to meet its two goals.
Minneapolis Fed President Neel Kashkari proposed a much more streamlined guidance that the Fed would maintain rates close to zero until core inflation has reached 2% on a sustained basis.
Josh Shapiro, chief U.S. economist at MFR Inc. said it was “a bit unseemly” to have two dissents so soon after the committee adopted a new policy framework, but Powell said the dissents were a sign of a healthy debate.
“We’re the first major central bank to adopt this framework."
"There is no cookbook."
"And so of course there would be a wide range of views,” Powell said.
He said the Fed would work to earn credibility.
The Fed decision was something of a surprise as most economists thought the Fed would hold off on its forward guidance until November or December.
The Fed said again that the path of the economy will depend on the course of the coronavirus pandemic though.
Separately, the Fed released its economic forecasts to 2023.
The central bank’s so called “dot plot” of likely interest rates projects no hike through the end of 2023, with only 4 of 17 of the policy making officials penciling in a rate hike.
The Fed also said it will continue to purchase at least $120 billion per month of Treasurys and agency mortgage-backed securities to help smooth markets and help “foster accommodative financial conditions.”
The Fed statement reflects the central bank’s decision in August to adopt a new strategy to hit its 2% inflation target over time and not every year.
So if inflation under-performs, as it has for the past several years, the Fed will tolerate higher inflation for a time.
Stocks gave up most of their gains after the Fed announcement.
The Dow Jones Industrial Average closed up 43 points after being up by 200 points prior to the Fed decision.
https://www.marketwatch.com/story/fed-s ... od=the-fed
"Fed sees interest rates near zero until end of 2023, sets new economic conditions to be met before raising rates"
By Greg Robb
Published: Sept. 16, 2020 at 4:07 p.m. ET
The Federal Reserve on Wednesday said it doesn’t expect to raise rates until the end of 2023 at the earliest and it set out new economic conditions that must be met before it will raise them.
In a statement, the Fed said it decided to keep its policy interest rate at near zero and expects this will be appropriate until two things happen: labor market conditions return to the “maximum employment” and inflation has risen to 2% and “is on track to moderately exceed 2% for some time.”
Greg McBride, chief financial analyst at Bankrate.com, said this language means investors should “get used to the low rates because they are here to stay.”
However, Seth Carpenter, economist at UBS, said the Fed guidance was “vague.”
“The guidance means they need their own forecast for inflation to be above 2%, but they are not tying it to the realized level of inflation,” Carpenter said.
Powell defended the guidance as “powerful” and “durable.”
There were two dissents to the Fed forward guidance.
Dallas Fed President Rob Kaplan seemed to favor the prior guidance and wanted the Fed to retain greater flexibility once the economy was on track to meet its two goals.
Minneapolis Fed President Neel Kashkari proposed a much more streamlined guidance that the Fed would maintain rates close to zero until core inflation has reached 2% on a sustained basis.
Josh Shapiro, chief U.S. economist at MFR Inc. said it was “a bit unseemly” to have two dissents so soon after the committee adopted a new policy framework, but Powell said the dissents were a sign of a healthy debate.
“We’re the first major central bank to adopt this framework."
"There is no cookbook."
"And so of course there would be a wide range of views,” Powell said.
He said the Fed would work to earn credibility.
The Fed decision was something of a surprise as most economists thought the Fed would hold off on its forward guidance until November or December.
The Fed said again that the path of the economy will depend on the course of the coronavirus pandemic though.
Separately, the Fed released its economic forecasts to 2023.
The central bank’s so called “dot plot” of likely interest rates projects no hike through the end of 2023, with only 4 of 17 of the policy making officials penciling in a rate hike.
The Fed also said it will continue to purchase at least $120 billion per month of Treasurys and agency mortgage-backed securities to help smooth markets and help “foster accommodative financial conditions.”
The Fed statement reflects the central bank’s decision in August to adopt a new strategy to hit its 2% inflation target over time and not every year.
So if inflation under-performs, as it has for the past several years, the Fed will tolerate higher inflation for a time.
Stocks gave up most of their gains after the Fed announcement.
The Dow Jones Industrial Average closed up 43 points after being up by 200 points prior to the Fed decision.
https://www.marketwatch.com/story/fed-s ... od=the-fed
Re: THE ECONOMY
MARKETWATCH
"Philly Fed manufacturing index grows at slightly slower pace in September"
By Greg Robb
Published: Sept. 17, 2020 at 8:59 a.m. ET
The numbers:
The Philadelphia Fed said Thursday its gauge of business activity in its region dipped in September.
The regional Fed bank’s index fell to 15 from 17.2 in August.
Any reading above zero indicates improving conditions.
This is the fourth straight positive reading.
Economists polled by MarketWatch expected a 13 reading.
What happened:
The headline index is based on a single stand alone question about business conditions unlike the national ISM manufacturing index which is a composite based on underlying data.
The components of the Philly Fed index were stronger than the headline.
The barometer on new orders rose to 25.5 in September from 19 in the prior month.
The shipments index surged to 36.6 in September from 9.4.
Inventories moved deeper into negative territory.
The measure of the six-month business outlook rose 18 points to 56.6.
Big picture:
Economists see manufacturing continuing to expand but are divided about what the pace of growth will be going forward.
Some see the sector losing momentum, while others see strong activity becoming entrenched.
Last week, a similar survey conducted by the New York Fed showed manufacturing jumped with sentiment rising to 17 in September from 3.7 in August.
The regional data is useful for economists trying to gauge the health of the factory sector.
Last month, the manufacturing ISM index rose to 56, nearly a two-year high, from 54.2 in the prior month.
Market reaction:
Stock futures were pointing to losses on Thursday after the Fed projected no interest rate hikes for at least the next three years.
The Dow Jones Industrial Average was set to fall sharply on Thursday.
https://www.marketwatch.com/story/phill ... 2020-09-17
"Philly Fed manufacturing index grows at slightly slower pace in September"
By Greg Robb
Published: Sept. 17, 2020 at 8:59 a.m. ET
The numbers:
The Philadelphia Fed said Thursday its gauge of business activity in its region dipped in September.
The regional Fed bank’s index fell to 15 from 17.2 in August.
Any reading above zero indicates improving conditions.
This is the fourth straight positive reading.
Economists polled by MarketWatch expected a 13 reading.
What happened:
The headline index is based on a single stand alone question about business conditions unlike the national ISM manufacturing index which is a composite based on underlying data.
The components of the Philly Fed index were stronger than the headline.
The barometer on new orders rose to 25.5 in September from 19 in the prior month.
The shipments index surged to 36.6 in September from 9.4.
Inventories moved deeper into negative territory.
The measure of the six-month business outlook rose 18 points to 56.6.
Big picture:
Economists see manufacturing continuing to expand but are divided about what the pace of growth will be going forward.
Some see the sector losing momentum, while others see strong activity becoming entrenched.
Last week, a similar survey conducted by the New York Fed showed manufacturing jumped with sentiment rising to 17 in September from 3.7 in August.
The regional data is useful for economists trying to gauge the health of the factory sector.
Last month, the manufacturing ISM index rose to 56, nearly a two-year high, from 54.2 in the prior month.
Market reaction:
Stock futures were pointing to losses on Thursday after the Fed projected no interest rate hikes for at least the next three years.
The Dow Jones Industrial Average was set to fall sharply on Thursday.
https://www.marketwatch.com/story/phill ... 2020-09-17
Re: THE ECONOMY
MARKETWATCH
"U.S. jobless claims fall in mid-September, but the economy still suffering lots of layoffs"
By Jeffry Bartash
Published: Sept. 17, 2020 at 9:56 a.m. ET
The numbers:
The number of Americans who applied for unemployment benefits through state and federal programs fell in September for the first time in five weeks, but initial jobless claims are still very high and point to ongoing job losses due to the coronavirus pandemic.
Initial jobless claims filed traditionally through state employment offices fell to 860,000 in the week of Sept. 6 to Sept. 11, the Labor Department said Thursday.
Economists polled by MarketWatch had forecast new claims to fall to 870,000.
New claims also fell for the first time since mid-August if self-employed workers who applied for benefits under a separate federal program are included.
Some 658,737 people filed under the Pandemic Unemployment Assistance Act.
That put the number of actual or unadjusted new claims at 1.45 million, compared to 1.73 million in the prior week.
Federal filings declined for the first time in five weeks.
Continuing jobless claims, or the number of people already receiving benefits, fell by 916,000 to a seasonally adjusted 12.63 million in the seven days ended Sept. 5.
That’s the lowest level since April 4, just as the virus shut down most of the U.S. economy.
Those figures only include people who applied through state programs.
The number of people getting benefits is more than double when including those on federal assistance.
What happened:
A steady if erratic decline in jobless claims over the summer appears to have slowed in September.
Part of the reason may be an increase in layoffs at hotels, airlines and other service-oriented companies whose businesses have suffered a big loss of customers.
More companies have announced permanent job reductions after demand failed to return near to pre-crisis levels.
Applications for benefits under the federal program, meanwhile, could have risen after President Trump authorized temporary $300 bonus payments in early August using an executive order.
Congress let a more generous $600 stipend lapse after Democrats and Republicans were unable to agree on another aid package.
Whatever the case, the still-high number of people applying for or receiving benefits suggests the quick rebound in the economy earlier in the summer has given way to a more grudging recovery that’s going to take awhile.
Altogether, the number of people getting benefits through eight state and federal programs increased by 98,000 to an unadjusted 29.77 million as of Aug. 29, the latest data available.
Fewer than 2 million people were getting receiving unemployment checks before the pandemic started.
Big picture:
The U.S. economy bounced back stronger than expected after the initial onslaught of the coronavirus and it’s recovered almost half of the 22 million jobs lost, but it’s probably going to get a lot harder to get the rest of the jobs back.
Thousands of small businesses have already closed and large industries like the airlines are likely to remain on life support until the pandemic fades.
All the jobs and incomes lost will weigh down the rest of the economy and drag out a recovery.
The Federal Reserve on Wednesday estimated it will take more than three years before the unemployment rate falls close to pre-pandemic levels.
What they are saying?
“The labor market continues to heal from the viral recession, but unemployment remains extremely elevated and will remain a problem for at least a couple of years,” said chief economist Gus Faucher of PNC Financial Services in Pittsburgh.
“With initial claims at almost four times their pace before the pandemic, layoffs are far higher than normal.”
Market reaction:
The Dow Jones Industrial Average and S&P 500 were set to decline in Thursday trades.
https://www.marketwatch.com/story/us-jo ... latestnews
"U.S. jobless claims fall in mid-September, but the economy still suffering lots of layoffs"
By Jeffry Bartash
Published: Sept. 17, 2020 at 9:56 a.m. ET
The numbers:
The number of Americans who applied for unemployment benefits through state and federal programs fell in September for the first time in five weeks, but initial jobless claims are still very high and point to ongoing job losses due to the coronavirus pandemic.
Initial jobless claims filed traditionally through state employment offices fell to 860,000 in the week of Sept. 6 to Sept. 11, the Labor Department said Thursday.
Economists polled by MarketWatch had forecast new claims to fall to 870,000.
New claims also fell for the first time since mid-August if self-employed workers who applied for benefits under a separate federal program are included.
Some 658,737 people filed under the Pandemic Unemployment Assistance Act.
That put the number of actual or unadjusted new claims at 1.45 million, compared to 1.73 million in the prior week.
Federal filings declined for the first time in five weeks.
Continuing jobless claims, or the number of people already receiving benefits, fell by 916,000 to a seasonally adjusted 12.63 million in the seven days ended Sept. 5.
That’s the lowest level since April 4, just as the virus shut down most of the U.S. economy.
Those figures only include people who applied through state programs.
The number of people getting benefits is more than double when including those on federal assistance.
What happened:
A steady if erratic decline in jobless claims over the summer appears to have slowed in September.
Part of the reason may be an increase in layoffs at hotels, airlines and other service-oriented companies whose businesses have suffered a big loss of customers.
More companies have announced permanent job reductions after demand failed to return near to pre-crisis levels.
Applications for benefits under the federal program, meanwhile, could have risen after President Trump authorized temporary $300 bonus payments in early August using an executive order.
Congress let a more generous $600 stipend lapse after Democrats and Republicans were unable to agree on another aid package.
Whatever the case, the still-high number of people applying for or receiving benefits suggests the quick rebound in the economy earlier in the summer has given way to a more grudging recovery that’s going to take awhile.
Altogether, the number of people getting benefits through eight state and federal programs increased by 98,000 to an unadjusted 29.77 million as of Aug. 29, the latest data available.
Fewer than 2 million people were getting receiving unemployment checks before the pandemic started.
Big picture:
The U.S. economy bounced back stronger than expected after the initial onslaught of the coronavirus and it’s recovered almost half of the 22 million jobs lost, but it’s probably going to get a lot harder to get the rest of the jobs back.
Thousands of small businesses have already closed and large industries like the airlines are likely to remain on life support until the pandemic fades.
All the jobs and incomes lost will weigh down the rest of the economy and drag out a recovery.
The Federal Reserve on Wednesday estimated it will take more than three years before the unemployment rate falls close to pre-pandemic levels.
What they are saying?
“The labor market continues to heal from the viral recession, but unemployment remains extremely elevated and will remain a problem for at least a couple of years,” said chief economist Gus Faucher of PNC Financial Services in Pittsburgh.
“With initial claims at almost four times their pace before the pandemic, layoffs are far higher than normal.”
Market reaction:
The Dow Jones Industrial Average and S&P 500 were set to decline in Thursday trades.
https://www.marketwatch.com/story/us-jo ... latestnews
Re: THE ECONOMY
MARKETWATCH
"Fed’s Kashkari says warnings of runaway inflation are just ‘ghost stories’"
By Greg Robb
Published: Sept. 18, 2020 at 12:40 p.m. ET
Warnings that U.S. inflation is about to surge aren’t supported by any evidence, and are tantamount to “ghost stories,” said Minneapolis Federal Reserve President Neel Kashkari on Friday.
These has been talk since 2008 that once inflation started to climb, it would accelerate, forcing the Fed to slam on the brakes by raising its policy interest rate sharply, Kashkari said, in an essay posted on his regional bank’s website.
These theories are similar to ghost stories because there is no evidence that they are true yet they can’t be ruled out, he said.
Some economists worry that the consumer-price index is signaling higher inflation.
The CPI is up 6.3% annualized over past three months, the highest rate since 2008.
Core CPI, which excludes food and energy prices is up 5.1%, the highest since 1991.
Core commodities are up 8.1%, the highest since 1982.
In a separate interview Friday, Atlanta Fed President Raphael Bostic said the COVID-19 pandemic has generated “a lot of noise” in the inflation data.
“Month-to-month and quarter-to-quarter, the elements of the CPI are showing wide swings…so its hard to know what signal we’re seeing right now,” Bostic said, in an interview on Bloomberg Television.
Financial markets didn’t react much to the Fed’s pledge to allow inflation to overshoot its target, and analysts said this is due to price level being so quiet in recent years.
St. Louis Fed President James Bullard said Friday that Wall Street complacency about inflation may be tested.
“I actually think you may see more inflation than we have during the pre-pandemic era when inflation was very subdued,” he said.
In a discussion sponsored by the Boeing Center for Supply Chain Innovation at Washington University in St. Louis, Bullard said there were several factors that could push the price level higher: a more relaxed Fed, huge fiscal deficits and possible bottleneck pressures given the 30% annual growth rate expected in the June-September quarter.
Kashkari said that, stepping back, higher inflation would be a “high-class problem” for the Fed.
That’s because the Fed knows how to handle higher inflation - the problem is the central bank has limited tools to combat low inflation.
Persistent low inflation is posing challenges to advanced economies around the world, Kashkari noted.
This week, the Fed announced the final pieces of its strategy to avoid falling into the quicksand of low inflation.
The FOMC said it would keep interest rates close to zero until the labor market achieves maximum employment and inflation has risen to its 2% target “and is on track to moderately exceed 2% for some time.”
Kashkari dissented from the Fed’s new forward guidance at its policy meeting on Wednesday.
He proposed simpler language that the FOMC “expects to maintain the target range until core inflation has reached 2% on a sustained basis” and he defined “sustained basis” in this environment as lasting roughly a year.
Kashkari said his alternative forward guidance was stronger than the statement adopted.
The Minneapolis Fed President said the FOMC didn’t need to mention employment in its forward guidance and including it risks underestimating slack in the labor market.
Under his proposal, “we would only lift off once we had demonstrated that we really were at maximum employment because core inflation would have had to actually hit or exceed 2% on a sustained basis in order to lift off,” he said.
https://www.marketwatch.com/story/feds- ... 2020-09-18
"Fed’s Kashkari says warnings of runaway inflation are just ‘ghost stories’"
By Greg Robb
Published: Sept. 18, 2020 at 12:40 p.m. ET
Warnings that U.S. inflation is about to surge aren’t supported by any evidence, and are tantamount to “ghost stories,” said Minneapolis Federal Reserve President Neel Kashkari on Friday.
These has been talk since 2008 that once inflation started to climb, it would accelerate, forcing the Fed to slam on the brakes by raising its policy interest rate sharply, Kashkari said, in an essay posted on his regional bank’s website.
These theories are similar to ghost stories because there is no evidence that they are true yet they can’t be ruled out, he said.
Some economists worry that the consumer-price index is signaling higher inflation.
The CPI is up 6.3% annualized over past three months, the highest rate since 2008.
Core CPI, which excludes food and energy prices is up 5.1%, the highest since 1991.
Core commodities are up 8.1%, the highest since 1982.
In a separate interview Friday, Atlanta Fed President Raphael Bostic said the COVID-19 pandemic has generated “a lot of noise” in the inflation data.
“Month-to-month and quarter-to-quarter, the elements of the CPI are showing wide swings…so its hard to know what signal we’re seeing right now,” Bostic said, in an interview on Bloomberg Television.
Financial markets didn’t react much to the Fed’s pledge to allow inflation to overshoot its target, and analysts said this is due to price level being so quiet in recent years.
St. Louis Fed President James Bullard said Friday that Wall Street complacency about inflation may be tested.
“I actually think you may see more inflation than we have during the pre-pandemic era when inflation was very subdued,” he said.
In a discussion sponsored by the Boeing Center for Supply Chain Innovation at Washington University in St. Louis, Bullard said there were several factors that could push the price level higher: a more relaxed Fed, huge fiscal deficits and possible bottleneck pressures given the 30% annual growth rate expected in the June-September quarter.
Kashkari said that, stepping back, higher inflation would be a “high-class problem” for the Fed.
That’s because the Fed knows how to handle higher inflation - the problem is the central bank has limited tools to combat low inflation.
Persistent low inflation is posing challenges to advanced economies around the world, Kashkari noted.
This week, the Fed announced the final pieces of its strategy to avoid falling into the quicksand of low inflation.
The FOMC said it would keep interest rates close to zero until the labor market achieves maximum employment and inflation has risen to its 2% target “and is on track to moderately exceed 2% for some time.”
Kashkari dissented from the Fed’s new forward guidance at its policy meeting on Wednesday.
He proposed simpler language that the FOMC “expects to maintain the target range until core inflation has reached 2% on a sustained basis” and he defined “sustained basis” in this environment as lasting roughly a year.
Kashkari said his alternative forward guidance was stronger than the statement adopted.
The Minneapolis Fed President said the FOMC didn’t need to mention employment in its forward guidance and including it risks underestimating slack in the labor market.
Under his proposal, “we would only lift off once we had demonstrated that we really were at maximum employment because core inflation would have had to actually hit or exceed 2% on a sustained basis in order to lift off,” he said.
https://www.marketwatch.com/story/feds- ... 2020-09-18
Re: THE ECONOMY
MARKETWATCH
"Fed's Bullard says inflation may be stronger than Wall Street expects"
By Greg Robb
Published: Sept. 18, 2020 at 10:51 a.m. ET
Inflation may be stronger in coming quarters than Wall Street now expects, said St. Louis Fed President James Bullard on Friday.
"I actually think we're at a moment where you may see some inflation now," Bullard said, during a virtual discussion sponsored by the Boeing Center for Supply Chain Innovation at Washington University.
The Fed has signaled that it would allow inflation to overshoot its 2% target for some time.
The pledge has met with some skepticism on Wall Street because the central bank has failed to hit its 2% target in recent years.
Bullard said there were several factors that could push the price level higher: a more relaxed Fed, huge fiscal deficits and possible bottleneck pressures given the 30% annual growth rate expected in the June-September quarter.
"I actually think you may see more inflation than we have during the pre-pandemic era... when inflation was very subdued," he said.
https://www.marketwatch.com/story/feds- ... 2020-09-18
"Fed's Bullard says inflation may be stronger than Wall Street expects"
By Greg Robb
Published: Sept. 18, 2020 at 10:51 a.m. ET
Inflation may be stronger in coming quarters than Wall Street now expects, said St. Louis Fed President James Bullard on Friday.
"I actually think we're at a moment where you may see some inflation now," Bullard said, during a virtual discussion sponsored by the Boeing Center for Supply Chain Innovation at Washington University.
The Fed has signaled that it would allow inflation to overshoot its 2% target for some time.
The pledge has met with some skepticism on Wall Street because the central bank has failed to hit its 2% target in recent years.
Bullard said there were several factors that could push the price level higher: a more relaxed Fed, huge fiscal deficits and possible bottleneck pressures given the 30% annual growth rate expected in the June-September quarter.
"I actually think you may see more inflation than we have during the pre-pandemic era... when inflation was very subdued," he said.
https://www.marketwatch.com/story/feds- ... 2020-09-18
Re: THE ECONOMY
MARKETWATCH
"Consumer sentiment improves slightly in late August, but still near pandemic low"
By Jeffry Bartash
Published: Aug. 28, 2020 at 10:51 a.m. ET
Americans regained a small amount of confidence in the path of an economic recovery in late August, but they are still quite pessimistic about how long it will take to get back to normal, a new survey showed.
The final consumer sentiment survey in August rose to 74.1 from a preliminary reading of 72.8, the University of Michigan said Friday.
It was also up from July’s 72.5 score.
The survey is still near a pandemic low, however.
The index bottomed out at 71.8 in April, just two months after it had reached a nearly two-year high of 101.
What happened:
A fresh outbreak of the coronavirus during the summer dampened the spirits of Americans in July just as they were starting to feel a bit more optimistic.
Consumers showed little change in their attitude in August about how the economy is doing right now
An index that measures current conditions rose a just a touch to 82.9 from a preliminary 82.5 reading earlier in August.
The latest results incorporate responses from consumers in the latter part of the month.
They felt somewhat better about the rest of the year.
An index that measures expectations for the next six months climbed to 68.5 from a preliminary 66.5 reading and 65.9 in July.
Still, most Americans think it will be years before the economy returns to normal.
“Although half anticipates an improved economy, when asked to judge the performance of the economy, 62% judged that the overall conditions in the economy could be best described as unfavorable,” said Richard Curtin, the chief economist of the sentiment survey.
The big picture:
The amount of confidence Americans have in the economy and their own financial security has a good record of predicting the future.
The low level of sentiment points to a rockier road ahead for a U.S. recovery with unemployment still high, layoffs and furloughs on the rise again and Washington divided over what kind of additional aid to provide for the economy.
Market reaction:
The Dow Jones Industrial Average and S&P 500 rose in Friday trading.
https://www.marketwatch.com/story/consu ... cle_inline
"Consumer sentiment improves slightly in late August, but still near pandemic low"
By Jeffry Bartash
Published: Aug. 28, 2020 at 10:51 a.m. ET
Americans regained a small amount of confidence in the path of an economic recovery in late August, but they are still quite pessimistic about how long it will take to get back to normal, a new survey showed.
The final consumer sentiment survey in August rose to 74.1 from a preliminary reading of 72.8, the University of Michigan said Friday.
It was also up from July’s 72.5 score.
The survey is still near a pandemic low, however.
The index bottomed out at 71.8 in April, just two months after it had reached a nearly two-year high of 101.
What happened:
A fresh outbreak of the coronavirus during the summer dampened the spirits of Americans in July just as they were starting to feel a bit more optimistic.
Consumers showed little change in their attitude in August about how the economy is doing right now
An index that measures current conditions rose a just a touch to 82.9 from a preliminary 82.5 reading earlier in August.
The latest results incorporate responses from consumers in the latter part of the month.
They felt somewhat better about the rest of the year.
An index that measures expectations for the next six months climbed to 68.5 from a preliminary 66.5 reading and 65.9 in July.
Still, most Americans think it will be years before the economy returns to normal.
“Although half anticipates an improved economy, when asked to judge the performance of the economy, 62% judged that the overall conditions in the economy could be best described as unfavorable,” said Richard Curtin, the chief economist of the sentiment survey.
The big picture:
The amount of confidence Americans have in the economy and their own financial security has a good record of predicting the future.
The low level of sentiment points to a rockier road ahead for a U.S. recovery with unemployment still high, layoffs and furloughs on the rise again and Washington divided over what kind of additional aid to provide for the economy.
Market reaction:
The Dow Jones Industrial Average and S&P 500 rose in Friday trading.
https://www.marketwatch.com/story/consu ... cle_inline
Re: THE ECONOMY
MARKETWATCH
"U.S. current account deficit widens sharply to $170.5 billion in second quarter"
By Greg Robb
Published: Sept. 18, 2020 at 8:36 a.m. ET
The U.S. current-account deficit, a measure of the nation's debt to other countries, widened sharply in the second quarter.
The current-account deficit widened to $170 billion from a revised $111.5 billion in the first quarter.
This is a 52.9% increase.
The large widening reflected an expanded deficit of goods and reduced surpluses on primary income and on services, the government said.
The current account reveals if a country is a net lender or debtor.
The current account deficit was equal to 3.5% of GDP in the second quarter, up from 2.1% in the prior quarter.
The current-account deficit peaked in 2005 at 6.3%.
https://www.marketwatch.com/story/us-cu ... cle_inline
"U.S. current account deficit widens sharply to $170.5 billion in second quarter"
By Greg Robb
Published: Sept. 18, 2020 at 8:36 a.m. ET
The U.S. current-account deficit, a measure of the nation's debt to other countries, widened sharply in the second quarter.
The current-account deficit widened to $170 billion from a revised $111.5 billion in the first quarter.
This is a 52.9% increase.
The large widening reflected an expanded deficit of goods and reduced surpluses on primary income and on services, the government said.
The current account reveals if a country is a net lender or debtor.
The current account deficit was equal to 3.5% of GDP in the second quarter, up from 2.1% in the prior quarter.
The current-account deficit peaked in 2005 at 6.3%.
https://www.marketwatch.com/story/us-cu ... cle_inline
Re: THE ECONOMY
MARKETWATCH - The Fed
"Fed’s Kashkari decries ‘absurd’ U.S. financial system that needs bailout every 10 years"
By Greg Robb
Published: Sept. 18, 2020 at 4:34 p.m. ET
Minneapolis Fed President Neel Kashkari on Friday decried the U.S. financial system as “absurd” because it has needed a central bank bailout twice in less than 20 years.
“How can it possibly be this fragile?” Kashkari asked, in a speech to the Council of Institutional Investors.
In March when it became clear that the coronavirus pandemic would damage the U.S. economy, investors and institutions attempted to move to relatively safe assets, causing the U.S. funding markets to buckle.
The Fed moved in with trillions of dollars to support markets and, in the process, removed long-tail downside risks from aggressive trades held by firms.
“The funding markets that almost collapsed in March raise important and complex policy questions,” Kashkari said.
It is not as simple as addressing the risks of too-big-to-fail banks, where the clear and straightforward solution is to force them to fund themselves with more equity, he said.
“The solution of fragile funding markets is less obvious but also important,” Kashkari said.
“Fundamentally, I wonder why we allow firms, financial or otherwise, to fund themselves overnight?” he asked.
What societal value is there in repo markets that prove so fragile when risks emerge, he said.
Earlier Friday, Kashkari played down investor fears over runaway inflation, saying a spike in prices would be a “high-class problem” for the central bank struggling to fight persistent low inflation.
Kashkari, who was a key player in trying to avert a more severe financial crisis in 2008-2009, favors stronger financial market regulation than many of his colleagues.
But even former top Fed officials like Ben Bernanke and Janet Yellen have said the Fed needs to get its arms around why financial markets broke down in March.
Supporters of the financial system have argued that banks and shadow banks were not the cause of the crisis as they had been in 2008.
But Kashkari seemed to have little patience with large banks that benefitted from government aid.
“You might not realize it, but the banks got a lot of help,” Kashkari said.
He noted banks were key beneficiaries of the COVID-19 economic stimulus measures passed by Congress this year.
Without these one-time checks, more Americans would not have been able to make their credit card payments, he noted.
Analysis by the Minneapolis Fed suggests that banks should raise their capital levels given the risks they pose to the economy.
He said the analysis shows that banks should fund themselves with at least 24% of risk-weighted asset — up from 13% today.
The Dow Jones Industrial Average fell 200 points on Friday.
https://www.marketwatch.com/story/feds- ... latestnews
"Fed’s Kashkari decries ‘absurd’ U.S. financial system that needs bailout every 10 years"
By Greg Robb
Published: Sept. 18, 2020 at 4:34 p.m. ET
Minneapolis Fed President Neel Kashkari on Friday decried the U.S. financial system as “absurd” because it has needed a central bank bailout twice in less than 20 years.
“How can it possibly be this fragile?” Kashkari asked, in a speech to the Council of Institutional Investors.
In March when it became clear that the coronavirus pandemic would damage the U.S. economy, investors and institutions attempted to move to relatively safe assets, causing the U.S. funding markets to buckle.
The Fed moved in with trillions of dollars to support markets and, in the process, removed long-tail downside risks from aggressive trades held by firms.
“The funding markets that almost collapsed in March raise important and complex policy questions,” Kashkari said.
It is not as simple as addressing the risks of too-big-to-fail banks, where the clear and straightforward solution is to force them to fund themselves with more equity, he said.
“The solution of fragile funding markets is less obvious but also important,” Kashkari said.
“Fundamentally, I wonder why we allow firms, financial or otherwise, to fund themselves overnight?” he asked.
What societal value is there in repo markets that prove so fragile when risks emerge, he said.
Earlier Friday, Kashkari played down investor fears over runaway inflation, saying a spike in prices would be a “high-class problem” for the central bank struggling to fight persistent low inflation.
Kashkari, who was a key player in trying to avert a more severe financial crisis in 2008-2009, favors stronger financial market regulation than many of his colleagues.
But even former top Fed officials like Ben Bernanke and Janet Yellen have said the Fed needs to get its arms around why financial markets broke down in March.
Supporters of the financial system have argued that banks and shadow banks were not the cause of the crisis as they had been in 2008.
But Kashkari seemed to have little patience with large banks that benefitted from government aid.
“You might not realize it, but the banks got a lot of help,” Kashkari said.
He noted banks were key beneficiaries of the COVID-19 economic stimulus measures passed by Congress this year.
Without these one-time checks, more Americans would not have been able to make their credit card payments, he noted.
Analysis by the Minneapolis Fed suggests that banks should raise their capital levels given the risks they pose to the economy.
He said the analysis shows that banks should fund themselves with at least 24% of risk-weighted asset — up from 13% today.
The Dow Jones Industrial Average fell 200 points on Friday.
https://www.marketwatch.com/story/feds- ... latestnews