CNBC
"Fed wants more confidence that inflation is moving toward 2% target, meeting minutes indicate"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, APR 10 2024
Federal Reserve officials at their March meeting expressed concern that inflation wasn’t moving lower quickly enough, though they still expected to cut interest rates at some point this year.
At a meeting in which the Federal Open Market Committee again voted to hold short-term borrowing rates steady, policymakers also showed misgivings that inflation, while easing, wasn’t doing so in a convincing enough fashion.
The Fed currently targets its benchmark rate between 5.25%-5.5%
As such, FOMC members voted to keep language in the post-meeting statement that they wouldn’t be cutting rates until they “gained greater confidence” that inflation was on a steady path back to the central bank’s 2% annual target.
“Participants generally noted their uncertainty about the persistence of high inflation and expressed the view that recent data had not increased their confidence that inflation was moving sustainably down to 2 percent,” the minutes said.
In what apparently was a lengthy discussion about inflation at the meeting, officials said geopolitical turmoil and rising energy prices remain risks that could push inflation higher.
They also cited the potential that looser policy could add to price pressures.
On the downside, they cited a more balanced labor market, enhanced technology along with economic weakness in China and a deteriorating commercial real estate market.
They also discussed higher-than-expected inflation readings in January and February.
Chair Jerome Powell said it’s possible the two months’ readings were caused by seasonal issues, though he added it’s hard to tell at this point.
There were members at the meeting who disagreed.
“Some participants noted that the recent increases in inflation had been relatively broad based and therefore should not be discounted as merely statistical aberrations,” the minutes stated.
That part of the discussion was partly relevant considering the release came the same day that the Fed received more bad news on inflation.
https://www.cnbc.com/2024/04/10/fed-mee ... ation.html
THE FEDERAL RESERVE
Re: THE FEDERAL RESERVE
REUTERS
"Fed looks to slice balance sheet runoff pace by half"
By Michael S. Derby
April 10, 2024
NEW YORK, April 10 (Reuters) - The Federal Reserve is preparing in short order to slow the rate at which it sheds Treasury securities from its balance sheet, with policymakers generally favoring cutting the recent pace by roughly half in an effort to extend the process of shrinking holdings and reducing the risk of market trouble.
According to minutes released on Wednesday of the Fed's latest policy meeting, held on March 19-20, officials are thinking about the future of their balance sheet winddown, known as quantitative tightening, or QT, with an eye toward the 2017 to 2019 period, when they last engaged in a similar process that ended up with significant market tumult.
Due to that experience, officials last month “broadly assessed it would be appropriate to take a cautious approach," and "the vast majority of participants thus judged it would be prudent to begin slowing the pace of runoff fairly soon.”
The Fed is currently allowing up to $60 billion per month in Treasury bonds and up to $35 billion per month in mortgage bonds to mature and not be replaced as part of the QT agenda.
“Participants generally favored reducing the monthly pace of runoff by roughly half from the recent overall pace,” the minutes said, and officials aim to do this by tweaking the runoff of Treasuries and leaving in place the cap on mortgage bond runoff.
For a variety of reasons, the Fed has struggled to see mortgages run off at the desired pace.
And as it ultimately wants as close to an all-Treasuries securities portfolio as it can get, it's government securities that will see the biggest effect in the looming taper.
By slowing the pace of the contraction, the minutes said officials believe they may gain some flexibility in how far they can reduce overall holdings, with the minutes noting "the decision to slow the pace of runoff does not mean that the balance sheet will ultimately shrink by less than it would otherwise."
Capital Economics economists said in a note that against the $95 billion monthly cap over the last 12 months the central bank had averaged a $76 billion per month drawdown, with the shortfall tied to mortgages.
Based on the guidance in the minutes, "officials appear to be considering cutting the Treasury-specific run-off to $30 billion per month," and given current levels of banking sector reserves, a reduced-speed QT will likely run for another year, the research firm said.
As for when the Fed will shift gears, J.P. Morgan economist Michael Feroli said “we continue to believe that the committee will announce a halving of the Treasury cap at the next FOMC meeting in early May, with implementation occurring in mid-May.”
RUNOFF REVISIONS
Fed officials had to a large degree already hinted at the planning effort revealed in the meeting minutes.
The current QT process has sought to unwind a massive expansion in Fed holdings that kicked off with the arrival of the coronavirus pandemic.
Starting in the spring of 2020, the Fed aggressively bought Treasury and mortgage securities, first to steady troubled markets and then to provide stimulus when the federal funds rate was at near zero levels and could be cut no further.
The purchases caused the size of Fed holdings to more the double, with the balance sheet moving from $4.4 trillion in March 2020 to $9 trillion by the summer of 2022.
Later that year, the Fed embarked on its QT effort which has allowed the Fed to shed about $1.5 trillion from its holdings.
The Fed’s goal for the drawdown is to drain liquidity from the financial system, moving from what it views as abundant reserves to ample ones.
Fed officials have been unable to define what level “ample” will be but believe it leaves enough liquidity in the financial system to allow for normal volatility in money market rates and firm central bank control over the federal funds rate.
Ahead of the Fed meeting, officials had been hinting at what is to come, and what the slowdown in the runoff might accomplish.
“A slower but still meaningful pace will provide more time for banks and money market participants to redistribute liquidity and for the FOMC to assess liquidity conditions,” Dallas Fed President Lorie Logan said on April 4.
Before taking the leadership spot at the Dallas Fed, Logan ran the process of implementing monetary policy at the New York Fed.
Speaking after the FOMC meeting last month Fed Chair Jerome Powell said officials are taking the debate in discrete steps.
For now, “what we’re really looking at is slowing the pace of runoff,” Powell said on March 20.
“We’re not discussing all the many other balance sheet issues."
"We will discuss those in due course,” he said.
Reporting by Michael S. Derby; Editing by Leslie Adler and Andrea Ricci
https://www.reuters.com/markets/us/fed- ... 024-04-10/
"Fed looks to slice balance sheet runoff pace by half"
By Michael S. Derby
April 10, 2024
NEW YORK, April 10 (Reuters) - The Federal Reserve is preparing in short order to slow the rate at which it sheds Treasury securities from its balance sheet, with policymakers generally favoring cutting the recent pace by roughly half in an effort to extend the process of shrinking holdings and reducing the risk of market trouble.
According to minutes released on Wednesday of the Fed's latest policy meeting, held on March 19-20, officials are thinking about the future of their balance sheet winddown, known as quantitative tightening, or QT, with an eye toward the 2017 to 2019 period, when they last engaged in a similar process that ended up with significant market tumult.
Due to that experience, officials last month “broadly assessed it would be appropriate to take a cautious approach," and "the vast majority of participants thus judged it would be prudent to begin slowing the pace of runoff fairly soon.”
The Fed is currently allowing up to $60 billion per month in Treasury bonds and up to $35 billion per month in mortgage bonds to mature and not be replaced as part of the QT agenda.
“Participants generally favored reducing the monthly pace of runoff by roughly half from the recent overall pace,” the minutes said, and officials aim to do this by tweaking the runoff of Treasuries and leaving in place the cap on mortgage bond runoff.
For a variety of reasons, the Fed has struggled to see mortgages run off at the desired pace.
And as it ultimately wants as close to an all-Treasuries securities portfolio as it can get, it's government securities that will see the biggest effect in the looming taper.
By slowing the pace of the contraction, the minutes said officials believe they may gain some flexibility in how far they can reduce overall holdings, with the minutes noting "the decision to slow the pace of runoff does not mean that the balance sheet will ultimately shrink by less than it would otherwise."
Capital Economics economists said in a note that against the $95 billion monthly cap over the last 12 months the central bank had averaged a $76 billion per month drawdown, with the shortfall tied to mortgages.
Based on the guidance in the minutes, "officials appear to be considering cutting the Treasury-specific run-off to $30 billion per month," and given current levels of banking sector reserves, a reduced-speed QT will likely run for another year, the research firm said.
As for when the Fed will shift gears, J.P. Morgan economist Michael Feroli said “we continue to believe that the committee will announce a halving of the Treasury cap at the next FOMC meeting in early May, with implementation occurring in mid-May.”
RUNOFF REVISIONS
Fed officials had to a large degree already hinted at the planning effort revealed in the meeting minutes.
The current QT process has sought to unwind a massive expansion in Fed holdings that kicked off with the arrival of the coronavirus pandemic.
Starting in the spring of 2020, the Fed aggressively bought Treasury and mortgage securities, first to steady troubled markets and then to provide stimulus when the federal funds rate was at near zero levels and could be cut no further.
The purchases caused the size of Fed holdings to more the double, with the balance sheet moving from $4.4 trillion in March 2020 to $9 trillion by the summer of 2022.
Later that year, the Fed embarked on its QT effort which has allowed the Fed to shed about $1.5 trillion from its holdings.
The Fed’s goal for the drawdown is to drain liquidity from the financial system, moving from what it views as abundant reserves to ample ones.
Fed officials have been unable to define what level “ample” will be but believe it leaves enough liquidity in the financial system to allow for normal volatility in money market rates and firm central bank control over the federal funds rate.
Ahead of the Fed meeting, officials had been hinting at what is to come, and what the slowdown in the runoff might accomplish.
“A slower but still meaningful pace will provide more time for banks and money market participants to redistribute liquidity and for the FOMC to assess liquidity conditions,” Dallas Fed President Lorie Logan said on April 4.
Before taking the leadership spot at the Dallas Fed, Logan ran the process of implementing monetary policy at the New York Fed.
Speaking after the FOMC meeting last month Fed Chair Jerome Powell said officials are taking the debate in discrete steps.
For now, “what we’re really looking at is slowing the pace of runoff,” Powell said on March 20.
“We’re not discussing all the many other balance sheet issues."
"We will discuss those in due course,” he said.
Reporting by Michael S. Derby; Editing by Leslie Adler and Andrea Ricci
https://www.reuters.com/markets/us/fed- ... 024-04-10/
Re: THE FEDERAL RESERVE
REUTERS
"Hot inflation may put Fed rate cut in thick of election season"
By Howard Schneider
April 11, 2024
WASHINGTON, April 11 (Reuters) - Hot U.S. inflation data has put the Federal Reserve's debate over a first interest rate cut on a potential collision course with the presidential election calendar, although a parade of top-level Fed-watching economists also predict the Fed won't make its move until after Americans go to the polls.
Rate futures markets now show investors see a first rate cut as most likely occurring at the Fed's Sept. 17-18 meeting after data showed inflation through the entire first quarter of 2024 was stiffer than expected and had demonstrably slowed progress on bringing it back to the Fed's 2% target.
A rate cut then - just seven weeks before Election Day - would shine a spotlight on the Fed, which goes to pains to keep itself out of the political tussle.
Not cutting by then won't necessarily dim that light, though.
Fed officials are adamant their policy decisions are fully divorced from political concerns or influence - be it incumbent President's Joe Biden's hope for a soft landing of low inflation and low unemployment to carry into heart of the campaign season this autumn, or presumptive Republican nominee - and former president - Donald Trump's brewing argument that if the Fed cuts rates it will only be doing so to help his Democratic rival.
No Fed official has offered a potential start date, but policymakers' projections last month indicated on balance they still expected to deliver three, quarter-percentage-point rate cuts this year, an outlook first presented last December.
With that as a guide, investors for months had settled on June for a first cut, with the two other reductions staggered over the rest of the year.
It was a timetable that had seemed well-phased around the hottest moments of the presidential campaign, but was thrown off this week when Consumer Price Index data for March extended a streak of unexpectedly strong readings, leading a growing number of Fed officials to say there would likely be no near-term move on rates.
At the same time, a core of professional Fed watchers now see an outcome where the Fed misses the presidential election cycle entirely, though that doesn't mean the central bank won't be a campaign focus.
In the hours since March inflation data came in hot, analysts from JP Morgan, Bank of America, Jefferies, Deutsche Bank and others tore up their prior predictions that rate cuts would be well underway by the election - a possible boon to Biden - and some pushed them back to year end or even 2025.
"We do not think the Fed will gain the confidence it needs to start cutting rates until December," Bank of America economists wrote, meaning Biden would be campaigning against the stigma of both higher borrowing costs and persistent inflation.
Biden, for his part, said he felt the Fed's baseline outlook for rate cuts this year would prove correct, even if recent data have thrown it into doubt.
"We don’t know what the Fed is going to do for certain," Biden said after Wednesday's inflation report, but "I do stand by my prediction that before the year is out there will a rate cut."
Reporting by Howard Schneider; Editing by Dan Burns and Andrea Ricci
https://www.reuters.com/world/us/hot-in ... 024-04-11/
"Hot inflation may put Fed rate cut in thick of election season"
By Howard Schneider
April 11, 2024
WASHINGTON, April 11 (Reuters) - Hot U.S. inflation data has put the Federal Reserve's debate over a first interest rate cut on a potential collision course with the presidential election calendar, although a parade of top-level Fed-watching economists also predict the Fed won't make its move until after Americans go to the polls.
Rate futures markets now show investors see a first rate cut as most likely occurring at the Fed's Sept. 17-18 meeting after data showed inflation through the entire first quarter of 2024 was stiffer than expected and had demonstrably slowed progress on bringing it back to the Fed's 2% target.
A rate cut then - just seven weeks before Election Day - would shine a spotlight on the Fed, which goes to pains to keep itself out of the political tussle.
Not cutting by then won't necessarily dim that light, though.
Fed officials are adamant their policy decisions are fully divorced from political concerns or influence - be it incumbent President's Joe Biden's hope for a soft landing of low inflation and low unemployment to carry into heart of the campaign season this autumn, or presumptive Republican nominee - and former president - Donald Trump's brewing argument that if the Fed cuts rates it will only be doing so to help his Democratic rival.
No Fed official has offered a potential start date, but policymakers' projections last month indicated on balance they still expected to deliver three, quarter-percentage-point rate cuts this year, an outlook first presented last December.
With that as a guide, investors for months had settled on June for a first cut, with the two other reductions staggered over the rest of the year.
It was a timetable that had seemed well-phased around the hottest moments of the presidential campaign, but was thrown off this week when Consumer Price Index data for March extended a streak of unexpectedly strong readings, leading a growing number of Fed officials to say there would likely be no near-term move on rates.
At the same time, a core of professional Fed watchers now see an outcome where the Fed misses the presidential election cycle entirely, though that doesn't mean the central bank won't be a campaign focus.
In the hours since March inflation data came in hot, analysts from JP Morgan, Bank of America, Jefferies, Deutsche Bank and others tore up their prior predictions that rate cuts would be well underway by the election - a possible boon to Biden - and some pushed them back to year end or even 2025.
"We do not think the Fed will gain the confidence it needs to start cutting rates until December," Bank of America economists wrote, meaning Biden would be campaigning against the stigma of both higher borrowing costs and persistent inflation.
Biden, for his part, said he felt the Fed's baseline outlook for rate cuts this year would prove correct, even if recent data have thrown it into doubt.
"We don’t know what the Fed is going to do for certain," Biden said after Wednesday's inflation report, but "I do stand by my prediction that before the year is out there will a rate cut."
Reporting by Howard Schneider; Editing by Dan Burns and Andrea Ricci
https://www.reuters.com/world/us/hot-in ... 024-04-11/
Re: THE FEDERAL RESERVE
REUTERS
"Fed officials in no rush to cut rates as inflation worries rise"
By Michael S. Derby and Howard Schneider
April 11, 2024
NEW YORK/WASHINGTON, April 11 (Reuters) - The ranks of Federal Reserve officials saying there is no rush to cut interest rates continue to grow, with still-too-hot-for-comfort U.S. inflation a rising concern at home and casting a shadow over expectations for policy easing abroad as well.
"There's no clear need to adjust monetary policy in the very near term," New York Fed President John Williams told reporters on Thursday, a day after disappointingly strong consumer price inflation prompted traders and some analysts to predict a later start to Fed rate cuts, and likely fewer of them.
“Recent data suggest it may take more time than I had previously thought to gain greater confidence in inflation’s downward trajectory, before beginning to ease policy,” Boston Fed President Susan Collins said at a different venue in New York, adding that a strong labor market "also reduces the urgency to ease."
The two were among several U.S. central bankers voicing caution in recent days about moving too quickly to cut interest rates when inflation appears to be - at best - on what Fed Chair Jerome Powell has called a "bumpy" path back to the central bank's 2% annual target.
Inflation is proving to be a stickier problem than U.S. central bank officials had anticipated it would be just a couple of months ago, while other measures of the economy show little signs of slowing down.
That combination has pushed the anticipated start of an easing cycle further down the road.
Richmond Fed President Thomas Barkin, who had already noted his concerns about the breadth of inflation being hard to "reconcile" with a near-term shift to rate cuts, said Thursday the latest numbers "did not increase my confidence" that price pressures were easing on a broader basis throughout the economy.
To be sure, both Collins and Williams, the vice chair of the central bank's rate-setting Federal Open Market Committee, believe rate cuts will be needed down the road, with Collins saying "later this year" and Williams saying "eventually."
And Williams said the recent "bumps" in inflation readings have not been unexpected, and that if there had been surprises it was over how fast price pressures eased last year.
SPILLOVERS
In Europe, where the labor market has begun to soften and growth is stagnating, central bankers left the policy rate unchanged on Thursday but signaled they remain on track to cut rates as soon as June.
But even as European Central Bank President Christine Lagarde asserted the ECB's independence from the vagaries of U.S. inflation, sources told Reuters the ECB could pause after June to await more clarity from the Fed on its rate decisions.
Meanwhile IMF chief Kristalina Georgieva said continued higher U.S. interest rates is "not great news" for the rest of the world because they act as a magnet for global financial flows and leave the rest of the world "somewhat struggling."
U.S. consumer price index data came in stronger than expected in March, prompting a broad resetting of expectations for when the Fed will be able to cut rates this year.
Financial markets are now pricing in a July or September start to Fed rate cuts, versus an earlier view of June.
Economists at a string of Wall Street firms, including Goldman Sachs, Bank of America, Barclays and Wells Fargo, also shifted their calls after the CPI data, predicting just one or two rate cuts for the year, instead of the previous three moves.
A few economists now say there may be no reductions in U.S. borrowing costs until 2025.
Reporting by Michael S. Derby in New York and Howard Schneider in Washington; Writing by Dan Burns and Ann Saphir; Editing by Paul Simao and Andrea Ricci
https://www.reuters.com/markets/us/feds ... 024-04-11/
"Fed officials in no rush to cut rates as inflation worries rise"
By Michael S. Derby and Howard Schneider
April 11, 2024
NEW YORK/WASHINGTON, April 11 (Reuters) - The ranks of Federal Reserve officials saying there is no rush to cut interest rates continue to grow, with still-too-hot-for-comfort U.S. inflation a rising concern at home and casting a shadow over expectations for policy easing abroad as well.
"There's no clear need to adjust monetary policy in the very near term," New York Fed President John Williams told reporters on Thursday, a day after disappointingly strong consumer price inflation prompted traders and some analysts to predict a later start to Fed rate cuts, and likely fewer of them.
“Recent data suggest it may take more time than I had previously thought to gain greater confidence in inflation’s downward trajectory, before beginning to ease policy,” Boston Fed President Susan Collins said at a different venue in New York, adding that a strong labor market "also reduces the urgency to ease."
The two were among several U.S. central bankers voicing caution in recent days about moving too quickly to cut interest rates when inflation appears to be - at best - on what Fed Chair Jerome Powell has called a "bumpy" path back to the central bank's 2% annual target.
Inflation is proving to be a stickier problem than U.S. central bank officials had anticipated it would be just a couple of months ago, while other measures of the economy show little signs of slowing down.
That combination has pushed the anticipated start of an easing cycle further down the road.
Richmond Fed President Thomas Barkin, who had already noted his concerns about the breadth of inflation being hard to "reconcile" with a near-term shift to rate cuts, said Thursday the latest numbers "did not increase my confidence" that price pressures were easing on a broader basis throughout the economy.
To be sure, both Collins and Williams, the vice chair of the central bank's rate-setting Federal Open Market Committee, believe rate cuts will be needed down the road, with Collins saying "later this year" and Williams saying "eventually."
And Williams said the recent "bumps" in inflation readings have not been unexpected, and that if there had been surprises it was over how fast price pressures eased last year.
SPILLOVERS
In Europe, where the labor market has begun to soften and growth is stagnating, central bankers left the policy rate unchanged on Thursday but signaled they remain on track to cut rates as soon as June.
But even as European Central Bank President Christine Lagarde asserted the ECB's independence from the vagaries of U.S. inflation, sources told Reuters the ECB could pause after June to await more clarity from the Fed on its rate decisions.
Meanwhile IMF chief Kristalina Georgieva said continued higher U.S. interest rates is "not great news" for the rest of the world because they act as a magnet for global financial flows and leave the rest of the world "somewhat struggling."
U.S. consumer price index data came in stronger than expected in March, prompting a broad resetting of expectations for when the Fed will be able to cut rates this year.
Financial markets are now pricing in a July or September start to Fed rate cuts, versus an earlier view of June.
Economists at a string of Wall Street firms, including Goldman Sachs, Bank of America, Barclays and Wells Fargo, also shifted their calls after the CPI data, predicting just one or two rate cuts for the year, instead of the previous three moves.
A few economists now say there may be no reductions in U.S. borrowing costs until 2025.
Reporting by Michael S. Derby in New York and Howard Schneider in Washington; Writing by Dan Burns and Ann Saphir; Editing by Paul Simao and Andrea Ricci
https://www.reuters.com/markets/us/feds ... 024-04-11/
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Collins sees no urgency to cut rates"
By Michael S. Derby
April 11, 2024
NEW YORK, April 11 (Reuters) - Federal Reserve Bank of Boston President Susan Collins said Thursday the strength of the economy and uneven retreat of inflation argues against a near term push to lower rates by the central bank.
“I do expect it will be appropriate to begin lowering the federal funds rate later this year,” Collins said in the text of a speech prepared for delivery before a gathering of the Economic Club of New York.
That said, “recent data suggest it may take more time than I had previously thought to gain greater confidence in inflation’s downward trajectory, before beginning to ease policy,” the official said.
What does it mean?
Collins weighed in as markets have been digesting stronger-than-expected inflation data over the start of the year.
Coupled with ongoing robust job gains, traders and investors have been marking down the prospects of Fed rate cuts and pushing back the start date of the easing, even as Fed officials say they think they’re still on track for some sort of lowering of what is now a 5.25% to 5.5% federal funds rate.
In her remarks, Collins said monetary policy is in a good position right now and there’s increasing evidence that despite the high level of the short-term rate target policy may not be providing as much restraint as expected.
“It may just take more time than previously thought for activity to moderate, and to see further progress in inflation returning durably to our target,” Collins said.
“Less concern about labor market fragilities, combined with the possibility that policy is only modestly restrictive, also reduces the urgency to ease,” she said.
Collins said that while it’s not a surprise that inflation’s retreat toward 2% hasn’t been as robust over recent months as it was last year, “disinflation may continue to be uneven.”
For the Fed, “this also implies that less easing of policy this year than previously thought may be warranted.”
While risks for the outlook abound, Collins said she was cautiously optimistic about the outlook.
“I expect to see further evidence that inflation is durably, if unevenly, returning toward 2 percent, and that the economy is coming into better balance, with demand and supply more closely aligned amid a healthy labor market,” the official said.
Reporting by Michael S. Derby; Editing by Chizu Nomiyama
https://www.reuters.com/markets/rates-b ... 024-04-11/
"Fed's Collins sees no urgency to cut rates"
By Michael S. Derby
April 11, 2024
NEW YORK, April 11 (Reuters) - Federal Reserve Bank of Boston President Susan Collins said Thursday the strength of the economy and uneven retreat of inflation argues against a near term push to lower rates by the central bank.
“I do expect it will be appropriate to begin lowering the federal funds rate later this year,” Collins said in the text of a speech prepared for delivery before a gathering of the Economic Club of New York.
That said, “recent data suggest it may take more time than I had previously thought to gain greater confidence in inflation’s downward trajectory, before beginning to ease policy,” the official said.
What does it mean?
Collins weighed in as markets have been digesting stronger-than-expected inflation data over the start of the year.
Coupled with ongoing robust job gains, traders and investors have been marking down the prospects of Fed rate cuts and pushing back the start date of the easing, even as Fed officials say they think they’re still on track for some sort of lowering of what is now a 5.25% to 5.5% federal funds rate.
In her remarks, Collins said monetary policy is in a good position right now and there’s increasing evidence that despite the high level of the short-term rate target policy may not be providing as much restraint as expected.
“It may just take more time than previously thought for activity to moderate, and to see further progress in inflation returning durably to our target,” Collins said.
“Less concern about labor market fragilities, combined with the possibility that policy is only modestly restrictive, also reduces the urgency to ease,” she said.
Collins said that while it’s not a surprise that inflation’s retreat toward 2% hasn’t been as robust over recent months as it was last year, “disinflation may continue to be uneven.”
For the Fed, “this also implies that less easing of policy this year than previously thought may be warranted.”
While risks for the outlook abound, Collins said she was cautiously optimistic about the outlook.
“I expect to see further evidence that inflation is durably, if unevenly, returning toward 2 percent, and that the economy is coming into better balance, with demand and supply more closely aligned amid a healthy labor market,” the official said.
Reporting by Michael S. Derby; Editing by Chizu Nomiyama
https://www.reuters.com/markets/rates-b ... 024-04-11/
Re: THE FEDERAL RESERVE
REUTERS
"Exclusive: Fed's Collins eyes about two rate cuts this year"
By Michael S. Derby
April 12, 2024
NEW YORK, April 12 (Reuters) - Federal Reserve Bank of Boston President Susan Collins is eyeing a couple of interest rate cuts this year amid expectations it could still take some time to get inflation back to targeted levels.
“I am still expecting that we're going to see some slowing in demand start and continue into 2024, and that will help to bring inflation down later in the year,” Collins said in an interview with Reuters on Thursday.
Her remarks followed a speech in which she said the Fed is likely to cut its policy rate at some point this year but that uncertainties and risks around inflation mean that the Fed needs to take its time before doing so.
The strength of the job market and the broader economy allow time for that patience, she said.
When it comes to the number of rate cuts the central bank is likely to deliver, Collins told Reuters she was “in the range of two,” referencing the quarterly forecast she submitted for the Fed's meeting in March.
The median estimate among policymaker projections released in both March and December was for three cuts totaling 75 basis points in 2024, an amount Collins had said in a SiriusXM Radio interview in February was "similar" to her baseline expectation.
As for when the Fed starts cutting rates, “the data continue to be volatile and noisy and a lot of uncertainties” abound, Collins said.
“We don't have a crystal ball in terms of how things will come out” and that means it’s not possible to say when the Fed will cut its interest rate target.
Collins was interviewed at a time when inflation data over the start of the year has shown that after last year’s swift decline in price pressures, covering the final distance toward the 2% target is proving more challenging.
At the Fed’s March policy meeting officials kept rates target steady at between 5.25% and 5.5%, where they have been since July.
Until this week, the prevailing view on Wall Street had been for cuts to begin in June, but stronger-than-expected inflation data coupled with very robust hiring reports have triggered a reset of expectations to September.
Economists at some big banks, meanwhile, have either reduced or eliminated altogether forecasts of Fed rate cuts for 2024.
Fed officials themselves still largely see cuts, and in her speech, Collins said the data means the window for an easing is now more distant, noting “it may just take more time than previously thought for activity to moderate, and to see further progress in inflation returning durably to our target.”
Some in the Fed, notably Governor Michelle Bowman, have even argued that if inflation doesn’t fall or gets worse the Fed may have to hike rates again.
Collins said a move higher is “not part of my baseline.”
With monetary policy not on a pre-set path, however, she added: “I don't think you can take possibilities as not being on the table, it really depends on where the data take us.”
Collins also told Reuters the Fed is continuing to work to make sure banks are in position to use the Fed’s lender of last resort Discount Window facility now that the Bank Term Funding Program, stood up just over a year ago to provide liquidity to banks amid a period of stress, is no longer making loans.
Collins said stigma issues still dog the Discount Window - banks have historically shunned borrowing there lest they signal to other financial institutions and regulators they’re in trouble - but progress is being made in getting banks ready to use it if needed.
The Fed is promoting preparedness and there’s “mutual interest” on the part of banks to be ready to access the facility if needed, she said.
Reporting by Michael S. Derby; Editing by Dan Burns and Diane Craft
https://www.reuters.com/markets/rates-b ... 024-04-12/
"Exclusive: Fed's Collins eyes about two rate cuts this year"
By Michael S. Derby
April 12, 2024
NEW YORK, April 12 (Reuters) - Federal Reserve Bank of Boston President Susan Collins is eyeing a couple of interest rate cuts this year amid expectations it could still take some time to get inflation back to targeted levels.
“I am still expecting that we're going to see some slowing in demand start and continue into 2024, and that will help to bring inflation down later in the year,” Collins said in an interview with Reuters on Thursday.
Her remarks followed a speech in which she said the Fed is likely to cut its policy rate at some point this year but that uncertainties and risks around inflation mean that the Fed needs to take its time before doing so.
The strength of the job market and the broader economy allow time for that patience, she said.
When it comes to the number of rate cuts the central bank is likely to deliver, Collins told Reuters she was “in the range of two,” referencing the quarterly forecast she submitted for the Fed's meeting in March.
The median estimate among policymaker projections released in both March and December was for three cuts totaling 75 basis points in 2024, an amount Collins had said in a SiriusXM Radio interview in February was "similar" to her baseline expectation.
As for when the Fed starts cutting rates, “the data continue to be volatile and noisy and a lot of uncertainties” abound, Collins said.
“We don't have a crystal ball in terms of how things will come out” and that means it’s not possible to say when the Fed will cut its interest rate target.
Collins was interviewed at a time when inflation data over the start of the year has shown that after last year’s swift decline in price pressures, covering the final distance toward the 2% target is proving more challenging.
At the Fed’s March policy meeting officials kept rates target steady at between 5.25% and 5.5%, where they have been since July.
Until this week, the prevailing view on Wall Street had been for cuts to begin in June, but stronger-than-expected inflation data coupled with very robust hiring reports have triggered a reset of expectations to September.
Economists at some big banks, meanwhile, have either reduced or eliminated altogether forecasts of Fed rate cuts for 2024.
Fed officials themselves still largely see cuts, and in her speech, Collins said the data means the window for an easing is now more distant, noting “it may just take more time than previously thought for activity to moderate, and to see further progress in inflation returning durably to our target.”
Some in the Fed, notably Governor Michelle Bowman, have even argued that if inflation doesn’t fall or gets worse the Fed may have to hike rates again.
Collins said a move higher is “not part of my baseline.”
With monetary policy not on a pre-set path, however, she added: “I don't think you can take possibilities as not being on the table, it really depends on where the data take us.”
Collins also told Reuters the Fed is continuing to work to make sure banks are in position to use the Fed’s lender of last resort Discount Window facility now that the Bank Term Funding Program, stood up just over a year ago to provide liquidity to banks amid a period of stress, is no longer making loans.
Collins said stigma issues still dog the Discount Window - banks have historically shunned borrowing there lest they signal to other financial institutions and regulators they’re in trouble - but progress is being made in getting banks ready to use it if needed.
The Fed is promoting preparedness and there’s “mutual interest” on the part of banks to be ready to access the facility if needed, she said.
Reporting by Michael S. Derby; Editing by Dan Burns and Diane Craft
https://www.reuters.com/markets/rates-b ... 024-04-12/
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Daly: absolutely no urgency to cut US interest rates"
By Reuters
April 12, 2024
April 12 (Reuters) - San Francisco Federal Reserve President Mary Daly said on Friday there is still "a lot of work to do" to make sure inflation is on track to the Fed's 2% goal, and there is "absolutely" no urgency to cut rates.
"Policy's in a good place right now, and I need to be fully confident that inflation is on track to come down to 2%, which is our definition of price stability, before we would consider a rate cut," Daly said at an event at the regional Fed bank.
With the labor market strong and inflation falling more slowly than it did last year, she said, the Fed will maintain its current stance "as long as necessary" to bring down inflation.
"There's absolutely, in my mind, no urgency to adjust the policy rate," she said, echoing a sentiment also expressed by several of her colleagues this week.
A government report earlier this week showed consumer price inflation was stronger than expected in March, a third upside monthly surprise this year that prompted traders and economists to pare their expectations for how soon the Fed will cut rates, and how deeply.
In March Fed policymakers generally anticipated three rate cuts, suggesting a June start to what many analysts had thought would be once-per-quarter rate reductions through year end.
After this week's inflation data financial markets are pricing in just two rate cuts.
Daly declined to say how the data affects her assessment of the number of rate cuts that will eventually be needed.
"I actually think there's too much discussion about is it going to be two or three or four or one, and not enough discussion on what are we trying to accomplish and are we still committed to accomplishing it?" she said.
Inflation's progress downward was always going to be bumpy she said, but "the commitment we have remains the same: restore price stability as gently as we can and maintain our policy stance as long as is necessary to be fully confident that we're on that path.
Reporting by Ann Saphir; editing by Diane Craft
https://www.reuters.com/markets/us/feds ... 024-04-12/
"Fed's Daly: absolutely no urgency to cut US interest rates"
By Reuters
April 12, 2024
April 12 (Reuters) - San Francisco Federal Reserve President Mary Daly said on Friday there is still "a lot of work to do" to make sure inflation is on track to the Fed's 2% goal, and there is "absolutely" no urgency to cut rates.
"Policy's in a good place right now, and I need to be fully confident that inflation is on track to come down to 2%, which is our definition of price stability, before we would consider a rate cut," Daly said at an event at the regional Fed bank.
With the labor market strong and inflation falling more slowly than it did last year, she said, the Fed will maintain its current stance "as long as necessary" to bring down inflation.
"There's absolutely, in my mind, no urgency to adjust the policy rate," she said, echoing a sentiment also expressed by several of her colleagues this week.
A government report earlier this week showed consumer price inflation was stronger than expected in March, a third upside monthly surprise this year that prompted traders and economists to pare their expectations for how soon the Fed will cut rates, and how deeply.
In March Fed policymakers generally anticipated three rate cuts, suggesting a June start to what many analysts had thought would be once-per-quarter rate reductions through year end.
After this week's inflation data financial markets are pricing in just two rate cuts.
Daly declined to say how the data affects her assessment of the number of rate cuts that will eventually be needed.
"I actually think there's too much discussion about is it going to be two or three or four or one, and not enough discussion on what are we trying to accomplish and are we still committed to accomplishing it?" she said.
Inflation's progress downward was always going to be bumpy she said, but "the commitment we have remains the same: restore price stability as gently as we can and maintain our policy stance as long as is necessary to be fully confident that we're on that path.
Reporting by Ann Saphir; editing by Diane Craft
https://www.reuters.com/markets/us/feds ... 024-04-12/
Re: THE FEDERAL RESERVE
CNBC
"Fed Chair Powell says there has been a ‘lack of further progress’ this year on inflation"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED TUE, APR 16 2024
KEY POINTS
* Fed Chair Jerome Powell said the U.S. economy has not seen inflation come back to the central bank’s goal, pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon.
* “The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said during a central banking forum.
Federal Reserve Chair Jerome Powell said Tuesday that the U.S. economy, while otherwise strong, has not seen inflation come back to the central bank’s goal, pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon.
Speaking to a policy forum focused on U.S.-Canada economic relations, Powell said that while inflation continues to make its way lower, it hasn’t moved quickly enough, and the current state of policy should remain intact.
“More recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal,” the Fed chief said during a panel talk.
Echoing recent statements by central bank officials, Powell indicated the current level of policy likely will stay in place until inflation gets closer to target.
Since July 2023, the Fed has kept its benchmark interest rate in a target range between 5.25%-5.5%, the highest in 23 years.
That was the result of 11 consecutive rate hikes that began in March 2022.
“The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said.
“That said, we think policy is well positioned to handle the risks that we face.”
Powell added that until inflation shows more progress, “We can maintain the current level of restriction for as long as needed.”
The comments follow inflation data through the first three months of 2024 that has been higher than expected.
A consumer price index reading for March, released last week, showed inflation running at a 3.5% annual rate — well off the peak around 9% in mid-2022 but drifting higher since October 2023.
Treasury yields rose as Powell spoke.
The benchmark 2-year note, which is especially sensitive to Fed rate moves, briefly topped 5%, while the benchmark 10-year yield rose 3 basis points.
The S&P 500 wavered after Powell’s remarks, briefly turning negative on the day before recovering.
https://www.cnbc.com/2024/04/16/powell- ... -goal.html
"Fed Chair Powell says there has been a ‘lack of further progress’ this year on inflation"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED TUE, APR 16 2024
KEY POINTS
* Fed Chair Jerome Powell said the U.S. economy has not seen inflation come back to the central bank’s goal, pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon.
* “The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said during a central banking forum.
Federal Reserve Chair Jerome Powell said Tuesday that the U.S. economy, while otherwise strong, has not seen inflation come back to the central bank’s goal, pointing to the further unlikelihood that interest rate cuts are in the offing anytime soon.
Speaking to a policy forum focused on U.S.-Canada economic relations, Powell said that while inflation continues to make its way lower, it hasn’t moved quickly enough, and the current state of policy should remain intact.
“More recent data shows solid growth and continued strength in the labor market, but also a lack of further progress so far this year on returning to our 2% inflation goal,” the Fed chief said during a panel talk.
Echoing recent statements by central bank officials, Powell indicated the current level of policy likely will stay in place until inflation gets closer to target.
Since July 2023, the Fed has kept its benchmark interest rate in a target range between 5.25%-5.5%, the highest in 23 years.
That was the result of 11 consecutive rate hikes that began in March 2022.
“The recent data have clearly not given us greater confidence, and instead indicate that it’s likely to take longer than expected to achieve that confidence,” he said.
“That said, we think policy is well positioned to handle the risks that we face.”
Powell added that until inflation shows more progress, “We can maintain the current level of restriction for as long as needed.”
The comments follow inflation data through the first three months of 2024 that has been higher than expected.
A consumer price index reading for March, released last week, showed inflation running at a 3.5% annual rate — well off the peak around 9% in mid-2022 but drifting higher since October 2023.
Treasury yields rose as Powell spoke.
The benchmark 2-year note, which is especially sensitive to Fed rate moves, briefly topped 5%, while the benchmark 10-year yield rose 3 basis points.
The S&P 500 wavered after Powell’s remarks, briefly turning negative on the day before recovering.
https://www.cnbc.com/2024/04/16/powell- ... -goal.html
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Powell says restrictive rates policy needs more time to work"
By Howard Schneider and Ann Saphir
April 16, 2024
WASHINGTON, April 16 (Reuters) - Top U.S. central bank officials including Federal Reserve Chair Jerome Powell backed away on Tuesday from providing any guidance on when interest rates may be cut, saying instead that monetary policy needs to be restrictive for longer and further dashing investors' hopes for meaningful reductions in borrowing costs this year.
Fed policymakers have said since the start of the year that rate cuts are contingent on gaining "greater confidence" that inflation is moving towards the central bank's 2% goal, but readings over the past few months show price pressures may even be moving in the opposite direction.
"The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence," Powell told a forum in Washington, in what is likely to be his last public appearance before the April 30-May 1 policy meeting.
"Right now, given the strength of the labor market and progress on inflation so far, it's appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us," he said.
U.S. central bankers are universally expected to leave rates unchanged at their upcoming meeting, but until early this month analysts and investors thought rate cuts would likely start with an initial quarter-percentage-point reduction at the Fed's June 11-12 meeting, with two more cuts happening by the end of 2024.
Now the first cut is expected in September and the odds of a second cut are dwindling.
"If higher inflation does persist, we can maintain the current level of restriction for as long as needed," Powell said.
"At the same time, we have significant space to ease should the labor market unexpectedly weaken."
In separate remarks earlier on Tuesday, Fed Vice Chair Philip Jefferson omitted any mention of rate cuts, and said the U.S. central bank was ready to keep its tight monetary policy in place "for longer" if inflation fails to slow as expected.
Jefferson noted the central bank was facing a strong economy and had seen little recent progress in bringing down inflation, excluding what had been a staple reference in Fed speeches to gaining "confidence" in lower inflation and then cutting rates.
"My baseline outlook continues to be that inflation will decline further, with the policy rate held steady at its current level, and that the labor market will remain strong, with labor demand and supply continuing to rebalance," Jefferson said.
In his last public remarks, on Feb. 22, Jefferson included what had been a staple of recent Fed communications - that "if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back our policy restraint later this year," a nod to the possibility of reducing the Fed's benchmark overnight interest rate from the current 5.25%-5.50% range to account for a slowing pace of price increases.
'MEASURED HAWKISH RESET'
Analysts and investors have been steadily marking down the likelihood and timing of Fed rate cuts as policymakers struggle to reconcile a gravity-defying economy with their assessment that monetary policy is "restrictive" and inflation likely on its way down.
Both of those ideas have been called into question by job growth, retail spending, inflation and other data that continue to challenge the Fed's sense that the economy was gliding towards lower demand, slower growth, and price increases nearing the 2% target.
Just over five weeks ago, Powell told a U.S. Senate panel that the Fed was "not far" from gaining the confidence in falling inflation needed to cut interest rates.
Powell not only omitted that characterization on Tuesday, but he also did not repeat his prior view, laid out after the Fed's March 19-20 meeting, that data in January and February had not changed the "overall story" of gradually slowing inflation.
Instead, he said the Fed's preferred measure of underlying inflation - the year-over-year change in the core personal consumption expenditures price index - likely rose 2.8% in March, unchanged from February, with three-month and six-month average measures "actually above that level."
"We view this as a measured hawkish reset of policy communication to a more neutral posture with less of an immediate bias to cut rates, though the basic idea of wanting to get more confidence inflation is moving lower before cutting rates remains intact," said Krishna Guha, vice chairman at Evercore ISI.
"But what has not changed is Powell's read of the underlying economics, and this prevents us from reading him too hawkish overall."
When inflation was in fast decline last year, Powell was reluctant to declare the fight against it won even as policymakers laid the groundwork for rate reductions beginning this year.
Officials at the Fed's March 19-20 meeting said they still expected to cut the policy rate by three-quarters of a percentage point by the end of 2024.
Powell at the time said disappointing inflation data in January and February "haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes-bumpy road toward 2%."
Yet the bumps continued through March, enough so that some officials at the last Fed meeting worried monetary policy was not having the sort of impact that would be typically expected from the highest interest rates in a quarter of a century.
Data since then have shown a massive 303,000 jobs were added in March, the pace of consumer price increases accelerated, and even low-income households continued to spend.
The strength of the economy, policymakers suggest, is one reason they could wait to cut rates and be sure inflation will resume its decline.
Reporting by Howard Schneider; Additional reporting by Ann Saphir and Lindsay Dunsmuir; Editing by Dan Burns and Paul Simao
https://www.reuters.com/markets/us/feds ... 024-04-16/
"Fed's Powell says restrictive rates policy needs more time to work"
By Howard Schneider and Ann Saphir
April 16, 2024
WASHINGTON, April 16 (Reuters) - Top U.S. central bank officials including Federal Reserve Chair Jerome Powell backed away on Tuesday from providing any guidance on when interest rates may be cut, saying instead that monetary policy needs to be restrictive for longer and further dashing investors' hopes for meaningful reductions in borrowing costs this year.
Fed policymakers have said since the start of the year that rate cuts are contingent on gaining "greater confidence" that inflation is moving towards the central bank's 2% goal, but readings over the past few months show price pressures may even be moving in the opposite direction.
"The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence," Powell told a forum in Washington, in what is likely to be his last public appearance before the April 30-May 1 policy meeting.
"Right now, given the strength of the labor market and progress on inflation so far, it's appropriate to allow restrictive policy further time to work and let the data and the evolving outlook guide us," he said.
U.S. central bankers are universally expected to leave rates unchanged at their upcoming meeting, but until early this month analysts and investors thought rate cuts would likely start with an initial quarter-percentage-point reduction at the Fed's June 11-12 meeting, with two more cuts happening by the end of 2024.
Now the first cut is expected in September and the odds of a second cut are dwindling.
"If higher inflation does persist, we can maintain the current level of restriction for as long as needed," Powell said.
"At the same time, we have significant space to ease should the labor market unexpectedly weaken."
In separate remarks earlier on Tuesday, Fed Vice Chair Philip Jefferson omitted any mention of rate cuts, and said the U.S. central bank was ready to keep its tight monetary policy in place "for longer" if inflation fails to slow as expected.
Jefferson noted the central bank was facing a strong economy and had seen little recent progress in bringing down inflation, excluding what had been a staple reference in Fed speeches to gaining "confidence" in lower inflation and then cutting rates.
"My baseline outlook continues to be that inflation will decline further, with the policy rate held steady at its current level, and that the labor market will remain strong, with labor demand and supply continuing to rebalance," Jefferson said.
In his last public remarks, on Feb. 22, Jefferson included what had been a staple of recent Fed communications - that "if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back our policy restraint later this year," a nod to the possibility of reducing the Fed's benchmark overnight interest rate from the current 5.25%-5.50% range to account for a slowing pace of price increases.
'MEASURED HAWKISH RESET'
Analysts and investors have been steadily marking down the likelihood and timing of Fed rate cuts as policymakers struggle to reconcile a gravity-defying economy with their assessment that monetary policy is "restrictive" and inflation likely on its way down.
Both of those ideas have been called into question by job growth, retail spending, inflation and other data that continue to challenge the Fed's sense that the economy was gliding towards lower demand, slower growth, and price increases nearing the 2% target.
Just over five weeks ago, Powell told a U.S. Senate panel that the Fed was "not far" from gaining the confidence in falling inflation needed to cut interest rates.
Powell not only omitted that characterization on Tuesday, but he also did not repeat his prior view, laid out after the Fed's March 19-20 meeting, that data in January and February had not changed the "overall story" of gradually slowing inflation.
Instead, he said the Fed's preferred measure of underlying inflation - the year-over-year change in the core personal consumption expenditures price index - likely rose 2.8% in March, unchanged from February, with three-month and six-month average measures "actually above that level."
"We view this as a measured hawkish reset of policy communication to a more neutral posture with less of an immediate bias to cut rates, though the basic idea of wanting to get more confidence inflation is moving lower before cutting rates remains intact," said Krishna Guha, vice chairman at Evercore ISI.
"But what has not changed is Powell's read of the underlying economics, and this prevents us from reading him too hawkish overall."
When inflation was in fast decline last year, Powell was reluctant to declare the fight against it won even as policymakers laid the groundwork for rate reductions beginning this year.
Officials at the Fed's March 19-20 meeting said they still expected to cut the policy rate by three-quarters of a percentage point by the end of 2024.
Powell at the time said disappointing inflation data in January and February "haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes-bumpy road toward 2%."
Yet the bumps continued through March, enough so that some officials at the last Fed meeting worried monetary policy was not having the sort of impact that would be typically expected from the highest interest rates in a quarter of a century.
Data since then have shown a massive 303,000 jobs were added in March, the pace of consumer price increases accelerated, and even low-income households continued to spend.
The strength of the economy, policymakers suggest, is one reason they could wait to cut rates and be sure inflation will resume its decline.
Reporting by Howard Schneider; Additional reporting by Ann Saphir and Lindsay Dunsmuir; Editing by Dan Burns and Paul Simao
https://www.reuters.com/markets/us/feds ... 024-04-16/
Re: THE FEDERAL RESERVE
REUTERS
"Fed could keep monetary policy tight for longer if needed, Jefferson says"
By Howard Schneider
April 16, 2024
WASHINGTON, April 16 (Reuters) - Federal Reserve Vice Chair Philip Jefferson, in remarks devoid of any mention of interest rate cuts, said on Tuesday "it will be appropriate to hold in place the current restrictive stance of policy for longer" if inflation fails to slow as expected.
"My baseline outlook continues to be that inflation will decline further, with the policy rate held steady at its current level, and that the labor market will remain strong, with labor demand and supply continuing to rebalance," Jefferson said in remarks prepared for a speech to a Fed research conference in Washington.
"Of course, the outlook is still quite uncertain, and if incoming data suggest that inflation is more persistent than I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer."
"I am fully committed to getting inflation back to 2%."
His comments did not include what has been a standard messaging point for Fed officials in recent months that rate cuts could begin once policymakers gained more confidence that inflation is still falling - a hurdle that's become steeper after inflation through the first quarter proved unexpectedly strong.
On Feb. 22, for example, Jefferson said "if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back our policy restraint later this year."
His remarks on Tuesday noted that while the baseline remained for inflation to slow, "inflation data over the past three months were above the low readings in the second half of last year," while job growth and retail spending remained stronger than expected.
"While we have seen considerable progress in lowering inflation, the job of sustainably restoring 2% inflation is not yet done," Jefferson said in his prepared remarks.
March, in fact, may prove another lost month for the Fed.
Jefferson said that staff estimates indicate the personal consumption expenditures price index, which the Fed uses to set its 2% inflation target, increased at a 2.7% annual rate in March, faster than in February.
The "core" rate excluding food and energy prices is estimated to have increased at a 2.8% rate, unchanged from the prior month.
The bulk of Jefferson's prepared remarks were devoted to a historical review of how policymakers deal with uncertainty, with just three paragraphs on the "current situation."
Fed Chair Jerome Powell is scheduled to field questions during an event in Washington at 1:15 p.m. EDT (1715 GMT) on Tuesday.
Reporting by Howard Schneider; Editing by Paul Simao
https://www.reuters.com/markets/us/fed- ... 024-04-16/
"Fed could keep monetary policy tight for longer if needed, Jefferson says"
By Howard Schneider
April 16, 2024
WASHINGTON, April 16 (Reuters) - Federal Reserve Vice Chair Philip Jefferson, in remarks devoid of any mention of interest rate cuts, said on Tuesday "it will be appropriate to hold in place the current restrictive stance of policy for longer" if inflation fails to slow as expected.
"My baseline outlook continues to be that inflation will decline further, with the policy rate held steady at its current level, and that the labor market will remain strong, with labor demand and supply continuing to rebalance," Jefferson said in remarks prepared for a speech to a Fed research conference in Washington.
"Of course, the outlook is still quite uncertain, and if incoming data suggest that inflation is more persistent than I currently expect it to be, it will be appropriate to hold in place the current restrictive stance of policy for longer."
"I am fully committed to getting inflation back to 2%."
His comments did not include what has been a standard messaging point for Fed officials in recent months that rate cuts could begin once policymakers gained more confidence that inflation is still falling - a hurdle that's become steeper after inflation through the first quarter proved unexpectedly strong.
On Feb. 22, for example, Jefferson said "if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back our policy restraint later this year."
His remarks on Tuesday noted that while the baseline remained for inflation to slow, "inflation data over the past three months were above the low readings in the second half of last year," while job growth and retail spending remained stronger than expected.
"While we have seen considerable progress in lowering inflation, the job of sustainably restoring 2% inflation is not yet done," Jefferson said in his prepared remarks.
March, in fact, may prove another lost month for the Fed.
Jefferson said that staff estimates indicate the personal consumption expenditures price index, which the Fed uses to set its 2% inflation target, increased at a 2.7% annual rate in March, faster than in February.
The "core" rate excluding food and energy prices is estimated to have increased at a 2.8% rate, unchanged from the prior month.
The bulk of Jefferson's prepared remarks were devoted to a historical review of how policymakers deal with uncertainty, with just three paragraphs on the "current situation."
Fed Chair Jerome Powell is scheduled to field questions during an event in Washington at 1:15 p.m. EDT (1715 GMT) on Tuesday.
Reporting by Howard Schneider; Editing by Paul Simao
https://www.reuters.com/markets/us/fed- ... 024-04-16/