REUTERS
"Powell sticks with Fed's cautious rate-cut strategy"
By Howard Schneider and Abhirup Roy
April 3, 2024
STANFORD, California, April 3 (Reuters) - Federal Reserve officials including U.S. central bank chief Jerome Powell on Wednesday continued focusing on the need for more debate and data before interest rates are cut, a move financial markets expect to occur in June.
"Recent readings on both job gains and inflation have come in higher than expected," Powell said in a speech to the Stanford Graduate School of Business, and while policymakers generally agree rates can fall later this year, that will only happen once they "have greater confidence that inflation is moving sustainably down" to the Fed's 2% target.
His remarks repeated language the Fed has adopted as it tries to balance the risks of cutting interest rates before inflation is truly controlled with the risks of suppressing economic activity more than is needed.
As new data arrive, however, as many questions have been raised as answered.
In separate comments to CNBC on Wednesday, Atlanta Fed President Raphael Bostic said rates should likely not be reduced until the fourth quarter of this year.
Bostic anticipates only one quarter-percentage-point cut will be appropriate in 2024, well below the three or more cuts most of his colleagues anticipate.
"We've seen inflation kind of become much more bumpy," Bostic said.
"If the economy evolves as I expect, and that's going to be seeing continued robustness in GDP and employment, and a slow decline in inflation over the course of the year, I think it will be appropriate for us to start moving down at the end of this year, the fourth quarter."
Fed Governor Adriana Kugler is due to speak later on Wednesday.
Powell's prepared remarks and answers to questions at the event in Stanford, California, broke no new policy ground.
As he did at his press conference at the end of the Fed's last policy meeting on March 20, Powell maintained the baseline outlook that rates will fall "later this year," and said that recent data did not "materially change the overall picture which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2% on a sometimes bumpy path."
But neither has he hinted at when the Fed might loosen its grip on credit, with upcoming jobs data, including the March nonfarm payrolls report on Friday, and incoming inflation readings next week important in shaping the outlook for the central bank's April 30-May 1 and June 11-12 policy meetings.
"Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy," Powell said, with decisions made "meeting by meeting.
Inflation, based on the Fed's preferred measure, remains half a percentage point or more above the central bank's 2% target, and recent progress has been minimal.
The Fed last month held its benchmark overnight interest rate steady in the 5.25%-5.50% range, where it has been since July.
Reporting by Howard Schneider; Additional reporting by Lindsay Dunsmuir; Editing by Paul Simao
https://www.reuters.com/markets/rates-b ... 024-04-03/
THE FEDERAL RESERVE
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Bostic says first rate cut should come in Q4 of this year"
By Reuters
April 3, 2024
April 3 (Reuters) - The Federal Reserve should not cut its benchmark interest rate until the end of this year, Atlanta Fed President Raphael Bostic said on Wednesday, as he maintained his view that the U.S. central bank should reduce borrowing costs only once over the course of 2024.
"We've seen inflation kind of become much more bumpy," Bostic said in an interview with broadcaster CNBC.
"If the economy evolves as I expect and that's going to be seeing continued robustness in GDP and employment, and a slow decline in inflation over the course of the year, I think it will be appropriate for us to start moving down at the end of this year, the fourth quarter."
The Fed held rates steady in the 5.25% to 5.5% range last month, with most policymakers still expecting at least three rate cuts this year, but its new projections reflected slower progress on inflation and continued robust economic growth and employment.
Two other Fed policymakers in separate appearances yesterday maintained their forecasts for three rate cuts.
Fed Chair Jerome Powell is set to speak later on Wednesday.
Bostic said that any weakening in the economy was incremental and once again highlighted his concerns that some secondary measures in the inflation numbers are much higher than they were before.
"I've got to make sure those are not hiding some extra upward pricing pressure before I'm going to want to move our policy rate," Bostic noted.
He now expects inflation to drop incrementally through 2024 and 2025 with the 2% target rate reached "sometime in early 2026."
Inflation by the Fed's targeted measure was 2.5% in February, far below its mid-2022 peak of around 7% but still above the 2% goal, with progress slower so far this year than for much of last year.
"If that trajectory slows down, in terms of inflation, then we are going to have to be more patient than I think many had expected," Bostic said.
Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama
https://www.reuters.com/business/financ ... 024-04-03/
"Fed's Bostic says first rate cut should come in Q4 of this year"
By Reuters
April 3, 2024
April 3 (Reuters) - The Federal Reserve should not cut its benchmark interest rate until the end of this year, Atlanta Fed President Raphael Bostic said on Wednesday, as he maintained his view that the U.S. central bank should reduce borrowing costs only once over the course of 2024.
"We've seen inflation kind of become much more bumpy," Bostic said in an interview with broadcaster CNBC.
"If the economy evolves as I expect and that's going to be seeing continued robustness in GDP and employment, and a slow decline in inflation over the course of the year, I think it will be appropriate for us to start moving down at the end of this year, the fourth quarter."
The Fed held rates steady in the 5.25% to 5.5% range last month, with most policymakers still expecting at least three rate cuts this year, but its new projections reflected slower progress on inflation and continued robust economic growth and employment.
Two other Fed policymakers in separate appearances yesterday maintained their forecasts for three rate cuts.
Fed Chair Jerome Powell is set to speak later on Wednesday.
Bostic said that any weakening in the economy was incremental and once again highlighted his concerns that some secondary measures in the inflation numbers are much higher than they were before.
"I've got to make sure those are not hiding some extra upward pricing pressure before I'm going to want to move our policy rate," Bostic noted.
He now expects inflation to drop incrementally through 2024 and 2025 with the 2% target rate reached "sometime in early 2026."
Inflation by the Fed's targeted measure was 2.5% in February, far below its mid-2022 peak of around 7% but still above the 2% goal, with progress slower so far this year than for much of last year.
"If that trajectory slows down, in terms of inflation, then we are going to have to be more patient than I think many had expected," Bostic said.
Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama
https://www.reuters.com/business/financ ... 024-04-03/
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Kugler says disinflation 'to continue'"
By Reuters
April 3, 2024
April 3 (Reuters) - Federal Reserve Governor Adriana Kugler on Wednesday said she believes inflation will continue to fall this year as households and businesses trim spending and the supply of goods and services continues to improve.
"I expect the disinflationary trend to continue" and help pave the way for rate cuts over the course of the year, Kugler said in comments prepared for delivery at Washington University in St. Louis.
"If disinflation and labor market conditions proceed as I am currently expecting, then some lowering of the policy rate this year would be appropriate," she said, without commenting on the timing or extent of policy easing she expects.
The Fed's policy rate has been at 5.25-to-5.50% since July, and most Fed officials anticipate three quarter-point rate cuts by the end of 2024.
They have been reluctant to signal a starting point, though, after progress towards lower inflation seemed to stall at the start of the year.
"January and February showed a bit of firming in the inflation data," Kugler said.
But she also said recent inflation numbers "featured some atypical or seasonal factors that suggest a need to withhold judgment" before deciding that last year's rapid progress back to the Fed's 2% target had indeed slowed.
Rather, Kugler said, she felt there was "still a bit of room" for supply improvements to slow the pace of price increases, "especially in the services sector, where solid labor supply growth will continue to ease wage and inflation pressures."
Demand, meanwhile, should ease.
"I expect consumption growth to slow some this year," she said, with households exhausting the savings buffers built during the coronavirus pandemic and now also facing "restrictive financial conditions."
Reporting by Howard Schneider; Editing by Dan Burns
https://www.reuters.com/markets/us/feds ... 024-04-03/
"Fed's Kugler says disinflation 'to continue'"
By Reuters
April 3, 2024
April 3 (Reuters) - Federal Reserve Governor Adriana Kugler on Wednesday said she believes inflation will continue to fall this year as households and businesses trim spending and the supply of goods and services continues to improve.
"I expect the disinflationary trend to continue" and help pave the way for rate cuts over the course of the year, Kugler said in comments prepared for delivery at Washington University in St. Louis.
"If disinflation and labor market conditions proceed as I am currently expecting, then some lowering of the policy rate this year would be appropriate," she said, without commenting on the timing or extent of policy easing she expects.
The Fed's policy rate has been at 5.25-to-5.50% since July, and most Fed officials anticipate three quarter-point rate cuts by the end of 2024.
They have been reluctant to signal a starting point, though, after progress towards lower inflation seemed to stall at the start of the year.
"January and February showed a bit of firming in the inflation data," Kugler said.
But she also said recent inflation numbers "featured some atypical or seasonal factors that suggest a need to withhold judgment" before deciding that last year's rapid progress back to the Fed's 2% target had indeed slowed.
Rather, Kugler said, she felt there was "still a bit of room" for supply improvements to slow the pace of price increases, "especially in the services sector, where solid labor supply growth will continue to ease wage and inflation pressures."
Demand, meanwhile, should ease.
"I expect consumption growth to slow some this year," she said, with households exhausting the savings buffers built during the coronavirus pandemic and now also facing "restrictive financial conditions."
Reporting by Howard Schneider; Editing by Dan Burns
https://www.reuters.com/markets/us/feds ... 024-04-03/
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Kashkari says 2024 rate cuts under threat if inflation continues to stall"
By Reuters
April 4, 2024
April 4 (Reuters) - Minneapolis Federal Reserve Bank President Neel Kashkari said on Thursday that at the U.S. central bank's meeting last month he penciled in two interest rate cuts this year but if inflation continues to stall, none may be required by year end.
"If we continue to see inflation moving sideways, then that would make me question whether we need to do those rate cuts at all," Kashkari said during an interview with Pensions & Investments.
"There's a lot of momentum in the economy right now."
Kashkari added that if inflation continued to come in stronger than hoped, he anticipates the Fed would hold its benchmark policy rate at the current 5.25%-5.50% range for a longer period of time.
If that still did not work, further rate increases are "not off the table, but they are also not a likely scenario given what we know right now," Kashkari said.
Reporting by Lindsay Dunsmuir; Editing by Chris Reese
https://www.reuters.com/markets/us/feds ... 024-04-04/
"Fed's Kashkari says 2024 rate cuts under threat if inflation continues to stall"
By Reuters
April 4, 2024
April 4 (Reuters) - Minneapolis Federal Reserve Bank President Neel Kashkari said on Thursday that at the U.S. central bank's meeting last month he penciled in two interest rate cuts this year but if inflation continues to stall, none may be required by year end.
"If we continue to see inflation moving sideways, then that would make me question whether we need to do those rate cuts at all," Kashkari said during an interview with Pensions & Investments.
"There's a lot of momentum in the economy right now."
Kashkari added that if inflation continued to come in stronger than hoped, he anticipates the Fed would hold its benchmark policy rate at the current 5.25%-5.50% range for a longer period of time.
If that still did not work, further rate increases are "not off the table, but they are also not a likely scenario given what we know right now," Kashkari said.
Reporting by Lindsay Dunsmuir; Editing by Chris Reese
https://www.reuters.com/markets/us/feds ... 024-04-04/
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Goolsbee says housing price pressures pose biggest inflation risk"
By Reuters
April 4, 2024
April 4 (Reuters) - The largest impediment to the U.S. central bank's efforts to return inflation to its 2% target rate is the persistence of outsized price increases in the housing services sector, Chicago Federal Reserve President Austan Goolsbee said on Thursday.
"The biggest danger to the inflation picture in my view... (is) the continued high inflation in housing services," Goolsbee said in remarks at an event hosted by local business associations in Oak Brook, Illinois.
He added that based on market data on rents for new leases, "I have been expecting it to come down more quickly than it has.'
"If it does not come down, we will have a very difficult time getting overall inflation back to the 2% target."
The Fed is currently awaiting more economic data as it mulls when to begin cutting its benchmark overnight interest rate, which has been held in the 5.25%-5.50% range since July in order to help bring inflation back to the 2% target.
Inflation, by the Fed's preferred measure, remains half a percentage point or more above that level, and recent progress has been minimal, causing jitters among policymakers as they seek more evidence that inflation will fully come down.
Most policymakers, including Goolsbee, are still expecting at least three rate cuts this year as the Fed tries to balance the risks of reducing borrowing costs before inflation is truly tamed with the risks of restraining economic activity more than is needed.
However, Atlanta Fed President Raphael Bostic said on Wednesday that he now anticipates just one cut this year, with that move coming in the fourth quarter.
Goolsbee has so far declined to say when he thinks a reduction in borrowing costs would likely begin.
He also said that disappointing inflation readings for January and February shouldn't be written off as "purely noise" but added that it did not necessarily mean the Fed was not still on the right path, as long as housing inflation began to soften, which he believes it would.
"Housing inflation remains my most valuable indicator for the immediate future," Goolsbee said.
He also cautioned against the central bank waiting too long to begin its cutting cycle.
"If we stay restrictive for too long, we will likely see the employment side of the mandate begin to deteriorate," Goolsbee noted.
The central bank has key data, including the March payrolls report on Friday, and inflation measures next week ahead of its next policy meeting on April 30-May 1.
Investors currently expect a first rate cut to come in June.
Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci and Paul Simao
https://www.reuters.com/markets/us/feds ... 024-04-04/
"Fed's Goolsbee says housing price pressures pose biggest inflation risk"
By Reuters
April 4, 2024
April 4 (Reuters) - The largest impediment to the U.S. central bank's efforts to return inflation to its 2% target rate is the persistence of outsized price increases in the housing services sector, Chicago Federal Reserve President Austan Goolsbee said on Thursday.
"The biggest danger to the inflation picture in my view... (is) the continued high inflation in housing services," Goolsbee said in remarks at an event hosted by local business associations in Oak Brook, Illinois.
He added that based on market data on rents for new leases, "I have been expecting it to come down more quickly than it has.'
"If it does not come down, we will have a very difficult time getting overall inflation back to the 2% target."
The Fed is currently awaiting more economic data as it mulls when to begin cutting its benchmark overnight interest rate, which has been held in the 5.25%-5.50% range since July in order to help bring inflation back to the 2% target.
Inflation, by the Fed's preferred measure, remains half a percentage point or more above that level, and recent progress has been minimal, causing jitters among policymakers as they seek more evidence that inflation will fully come down.
Most policymakers, including Goolsbee, are still expecting at least three rate cuts this year as the Fed tries to balance the risks of reducing borrowing costs before inflation is truly tamed with the risks of restraining economic activity more than is needed.
However, Atlanta Fed President Raphael Bostic said on Wednesday that he now anticipates just one cut this year, with that move coming in the fourth quarter.
Goolsbee has so far declined to say when he thinks a reduction in borrowing costs would likely begin.
He also said that disappointing inflation readings for January and February shouldn't be written off as "purely noise" but added that it did not necessarily mean the Fed was not still on the right path, as long as housing inflation began to soften, which he believes it would.
"Housing inflation remains my most valuable indicator for the immediate future," Goolsbee said.
He also cautioned against the central bank waiting too long to begin its cutting cycle.
"If we stay restrictive for too long, we will likely see the employment side of the mandate begin to deteriorate," Goolsbee noted.
The central bank has key data, including the March payrolls report on Friday, and inflation measures next week ahead of its next policy meeting on April 30-May 1.
Investors currently expect a first rate cut to come in June.
Reporting by Lindsay Dunsmuir; Editing by Andrea Ricci and Paul Simao
https://www.reuters.com/markets/us/feds ... 024-04-04/
Re: THE FEDERAL RESERVE
REUTERS
"Fed has time to mull rate cut in face of 'less encouraging' data, Barkin says"
By Howard Schneider
April 4, 2024
RICHMOND, April 4 (Reuters) - The U.S. central bank has "time for the clouds to clear" on inflation before starting to cut interest rates, Richmond Fed President Thomas Barkin said on Thursday, comments that endorsed a careful approach to the start of a monetary easing cycle.
Inflation data at the start of this year "has been a little less encouraging," Barkin told the Home Building Association of Richmond, and while that may be a result of weather-related or seasonal issues "it does raise the question of whether we are seeing a real shift in the economic outlook, or merely a bump along the way."
"I think it is smart for the Fed to take our time," said Barkin, who is a voting member of the Fed's policy-setting committee this year.
"No one wants inflation to reemerge."
"And given a strong labor market, we have time for the clouds to clear before beginning the process of toggling rates down."
"I'm still looking for the slowing in reported inflation to sustain and broaden," he said.
The Fed held its benchmark overnight interest rate steady in the 5.25%-5.50% range last month, with most officials anticipating three quarter-percentage-point rate cuts this year.
Markets expect an initial reduction to happen in June.
Barkin did not say when he thought rates might fall or how quickly. Fed officials looking at the same data, he said, could "come away with different conclusions" about where things stand.
Observers optimistic about a "soft landing" in which inflation slows without triggering a painful recession might note the economy's continued strength and the sharp decline in inflation since last year, Barkin noted.
Pessimists, on the other hand, might worry that the economy could slow faster than expected, or that inflation will prove persistent.
Barkin said overall he remained "optimistic that keeping rates somewhat restrictive can bring inflation back to target," and that if the economy does slow it will not be as painful as it has in the past as companies fight to hold onto workers.
Many firms, he said, have already prepared.
"If a slowdown does come, the economy should find itself less vulnerable," he said.
Reporting by Howard Schneider; Editing by Paul Simao
https://www.reuters.com/markets/rates-b ... 024-04-04/
"Fed has time to mull rate cut in face of 'less encouraging' data, Barkin says"
By Howard Schneider
April 4, 2024
RICHMOND, April 4 (Reuters) - The U.S. central bank has "time for the clouds to clear" on inflation before starting to cut interest rates, Richmond Fed President Thomas Barkin said on Thursday, comments that endorsed a careful approach to the start of a monetary easing cycle.
Inflation data at the start of this year "has been a little less encouraging," Barkin told the Home Building Association of Richmond, and while that may be a result of weather-related or seasonal issues "it does raise the question of whether we are seeing a real shift in the economic outlook, or merely a bump along the way."
"I think it is smart for the Fed to take our time," said Barkin, who is a voting member of the Fed's policy-setting committee this year.
"No one wants inflation to reemerge."
"And given a strong labor market, we have time for the clouds to clear before beginning the process of toggling rates down."
"I'm still looking for the slowing in reported inflation to sustain and broaden," he said.
The Fed held its benchmark overnight interest rate steady in the 5.25%-5.50% range last month, with most officials anticipating three quarter-percentage-point rate cuts this year.
Markets expect an initial reduction to happen in June.
Barkin did not say when he thought rates might fall or how quickly. Fed officials looking at the same data, he said, could "come away with different conclusions" about where things stand.
Observers optimistic about a "soft landing" in which inflation slows without triggering a painful recession might note the economy's continued strength and the sharp decline in inflation since last year, Barkin noted.
Pessimists, on the other hand, might worry that the economy could slow faster than expected, or that inflation will prove persistent.
Barkin said overall he remained "optimistic that keeping rates somewhat restrictive can bring inflation back to target," and that if the economy does slow it will not be as painful as it has in the past as companies fight to hold onto workers.
Many firms, he said, have already prepared.
"If a slowdown does come, the economy should find itself less vulnerable," he said.
Reporting by Howard Schneider; Editing by Paul Simao
https://www.reuters.com/markets/rates-b ... 024-04-04/
Re: THE FEDERAL RESERVE
CNBC
"Fed Governor Bowman says additional rate hike could be needed if inflation stays high"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED FRI, APR 5 2024
Federal Reserve Governor Michelle Bowman said Friday that it’s possible interest rates may have to move higher to control inflation, rather than the cuts her fellow officials have indicated are likely and that the market is expecting.
Noting a number of potential upside risks to inflation, Bowman said policymakers need to be careful not to ease policy too quickly.
“While it is not my baseline outlook, I continue to see the risk that at a future meeting we may need to increase the policy rate further should progress on inflation stall or even reverse,” she said in prepared remarks for a speech to a group of Fed watchers in New York.
“Reducing our policy rate too soon or too quickly could result in a rebound in inflation, requiring further future policy rate increases to return inflation to 2 percent over the longer run.”
As a member of the Board of Governors, Bowman is a permanent voting member of the rate-setting Federal Open Market Committee.
Since taking office in late 2018, her public speeches have put her on the more hawkish side of the FOMC, meaning she favors a more aggressive posture toward containing inflation.
Bowman said her most likely outcome remains that “it will eventually become appropriate to lower” rates, though she noted that “we are still not yet at the point” of cutting as “I continue to see a number of upside risks to inflation.”
The speech, to the Shadow Open Market Committee, comes with markets on edge about the near-term future of Fed policy.
Statements this week from multiple officials, including Chair Jerome Powell, have indicated a cautious approach to cutting rates.
Atlanta Fed President Raphael Bostic, an FOMC voter, told CNBC he likely sees just one reduction this year, and Minneapolis Fed President Neel Kashkari indicated no cuts could happen if inflation does not decelerate further.
Futures traders are pricing in three cuts this year, though it has become a close call between June and July for when they start.
FOMC members in March also penciled in three cuts this year, though one unidentified official in the “dot plot” indicated no decreases until 2026 and there was considerable dispersion otherwise about how aggressively the central bank would move.
“Given the risks and uncertainties regarding my economic outlook, I will continue to watch the data closely as I assess the appropriate path of monetary policy, and I will remain cautious in my approach to considering future changes in the stance of policy,” Bowman said.
Weighing inflation risks, she said that supply-side improvements that helped bring numbers down this year may not have the same impact going forward.
Moreover, she cited geopolitical risks and fiscal stimulus as other upside hazards, along with stubbornly higher housing prices and labor market tightness.
“Inflation readings over the past two months suggest progress may be uneven or slower going forward, especially for core services,” Bowman said.
Fed officials will get their next look at inflation data Wednesday, when the Labor Department releases the March consumer price index report.
https://www.cnbc.com/2024/04/05/fed-gov ... -high.html
"Fed Governor Bowman says additional rate hike could be needed if inflation stays high"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED FRI, APR 5 2024
Federal Reserve Governor Michelle Bowman said Friday that it’s possible interest rates may have to move higher to control inflation, rather than the cuts her fellow officials have indicated are likely and that the market is expecting.
Noting a number of potential upside risks to inflation, Bowman said policymakers need to be careful not to ease policy too quickly.
“While it is not my baseline outlook, I continue to see the risk that at a future meeting we may need to increase the policy rate further should progress on inflation stall or even reverse,” she said in prepared remarks for a speech to a group of Fed watchers in New York.
“Reducing our policy rate too soon or too quickly could result in a rebound in inflation, requiring further future policy rate increases to return inflation to 2 percent over the longer run.”
As a member of the Board of Governors, Bowman is a permanent voting member of the rate-setting Federal Open Market Committee.
Since taking office in late 2018, her public speeches have put her on the more hawkish side of the FOMC, meaning she favors a more aggressive posture toward containing inflation.
Bowman said her most likely outcome remains that “it will eventually become appropriate to lower” rates, though she noted that “we are still not yet at the point” of cutting as “I continue to see a number of upside risks to inflation.”
The speech, to the Shadow Open Market Committee, comes with markets on edge about the near-term future of Fed policy.
Statements this week from multiple officials, including Chair Jerome Powell, have indicated a cautious approach to cutting rates.
Atlanta Fed President Raphael Bostic, an FOMC voter, told CNBC he likely sees just one reduction this year, and Minneapolis Fed President Neel Kashkari indicated no cuts could happen if inflation does not decelerate further.
Futures traders are pricing in three cuts this year, though it has become a close call between June and July for when they start.
FOMC members in March also penciled in three cuts this year, though one unidentified official in the “dot plot” indicated no decreases until 2026 and there was considerable dispersion otherwise about how aggressively the central bank would move.
“Given the risks and uncertainties regarding my economic outlook, I will continue to watch the data closely as I assess the appropriate path of monetary policy, and I will remain cautious in my approach to considering future changes in the stance of policy,” Bowman said.
Weighing inflation risks, she said that supply-side improvements that helped bring numbers down this year may not have the same impact going forward.
Moreover, she cited geopolitical risks and fiscal stimulus as other upside hazards, along with stubbornly higher housing prices and labor market tightness.
“Inflation readings over the past two months suggest progress may be uneven or slower going forward, especially for core services,” Bowman said.
Fed officials will get their next look at inflation data Wednesday, when the Labor Department releases the March consumer price index report.
https://www.cnbc.com/2024/04/05/fed-gov ... -high.html
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Barkin: 'That's a quite strong jobs report'"
By Reuters
April 5, 2024
April 5 (Reuters) - Richmond Federal Reserve Bank President Thomas Barkin on Friday said the unexpected surge in employment in March and drop in the unemployment rate made for a "quite strong jobs report."
"Unemployment is at 3.8%."
"It's been 26 months in a row with unemployment below 4%," Barkin said at an event in Maryland.
"That's the first time that's happened since the late '60s."
"So the job market is very strong."
Barkin said companies are reluctant to layoff workers even with consumption showing signs of moderating because the experience of the ultra-tight job market in the early months of the pandemic remain fresh in employers' minds.
Shortly before Barkin spoke, the Labor Department had reported that a greater-than-expected 303,000 jobs had been created in March - the most since last May - and that the unemployment rate had dropped to 3.8% from 3.9%.
The remarks from Barkin, a voter this year on Fed interest rate policy, also came a day after he told Reuters that he was finding it hard to reconcile the breadth of inflation he was been observing with the "kind of progress you'd want to make" in returning overall inflation to the Fed's 2% target.
Investors are increasingly on the fence about when the Fed will begin cutting interest rates from the current level of 5.25%-to-5.50%, where they've been since July.
The most recent projections from Fed officials still showed the majority of policymakers expect three, one-quarter-percentage-point cuts by the end of this year.
Reporting By Dan Burns
https://www.reuters.com/markets/rates-b ... 024-04-05/
"Fed's Barkin: 'That's a quite strong jobs report'"
By Reuters
April 5, 2024
April 5 (Reuters) - Richmond Federal Reserve Bank President Thomas Barkin on Friday said the unexpected surge in employment in March and drop in the unemployment rate made for a "quite strong jobs report."
"Unemployment is at 3.8%."
"It's been 26 months in a row with unemployment below 4%," Barkin said at an event in Maryland.
"That's the first time that's happened since the late '60s."
"So the job market is very strong."
Barkin said companies are reluctant to layoff workers even with consumption showing signs of moderating because the experience of the ultra-tight job market in the early months of the pandemic remain fresh in employers' minds.
Shortly before Barkin spoke, the Labor Department had reported that a greater-than-expected 303,000 jobs had been created in March - the most since last May - and that the unemployment rate had dropped to 3.8% from 3.9%.
The remarks from Barkin, a voter this year on Fed interest rate policy, also came a day after he told Reuters that he was finding it hard to reconcile the breadth of inflation he was been observing with the "kind of progress you'd want to make" in returning overall inflation to the Fed's 2% target.
Investors are increasingly on the fence about when the Fed will begin cutting interest rates from the current level of 5.25%-to-5.50%, where they've been since July.
The most recent projections from Fed officials still showed the majority of policymakers expect three, one-quarter-percentage-point cuts by the end of this year.
Reporting By Dan Burns
https://www.reuters.com/markets/rates-b ... 024-04-05/
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Logan says 'much too soon' to think about interest rate cuts"
By Michael S. Derby
April 5, 2024
NEW YORK, April 5 (Reuters) - Dallas Federal Reserve President Lorie Logan said on Friday that an inflation landscape increasingly beset by upside risks argues against any imminent push toward easier monetary policy by the U.S. central bank.
"I believe it's much too soon to think about cutting interest rates," Logan said in remarks prepared for a speech at Duke University.
Before lowering rates, "I will need to see more of the uncertainty resolved about which economic path we're on."
"And, as always the (Federal Open Market Committee) should remain prepared to respond appropriately if inflation stops falling," she said.
Logan said she continues to be concerned about inflation, which had been falling back toward the Fed's 2% target last year but has made less progress in the first months of 2024.
"I'm increasingly concerned about upside risk to the inflation outlook," Logan said.
"The key risk is not that inflation might rise - though monetary policymakers must always remain on guard against that outcome - but rather that inflation will stall out and fail to follow the forecast path all the way back to 2% in a timely way," she said.
The Fed must act to ensure it gets inflation back to 2%, she said.
Logan spoke in the wake of the release on Friday of much stronger-than-expected hiring data for March, which showed a robust gain of 303,000 jobs in March and a decline in the jobless rate to 3.8% from 3.9% in February.
The report helped bolster the case that the Fed faces no urgency to cut rates, which is the message central bank policymakers have been sending to markets in comments this week.
The Fed last month kept its policy rate in the 5.25%-5.50% range, where it has been since last July, and policymakers continued to pencil in three rate cuts for this year, albeit with less conviction.
Financial markets have been dialing back expectations of rate cuts amid strong economic data and a lack of progress in the inflation data for January and February.
Logan said in her remarks that the Fed has made "substantial progress" toward getting inflation back to the 2% target, while adding "in the first two months of 2024, however, inflation data surprised to the upside."
Logan, who is not currently a voting member of the rate-setting FOMC, also said that she favors slowing the drawdown of the Fed's balance sheet before halting it altogether.
"It will soon be appropriate for the FOMC to decide when to slow - not stop - the runoff of our asset holdings," Logan said, adding that "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."
She also that "it's remarkable how resilient the economy has been to the increases in interest rates over the past two years," and noted that her business contacts have consistently told her that when it comes to the economic outlook, "they see a 'soft landing' as the most likely scenario."
Logan also said it's possible the economy may be shifting toward a higher state of productivity that could allow for higher levels of activity that don't generate increased price pressures.
She also said the level of interest that's neutral in its influence on the economy may have also risen.
Reporting by Michael S. Derby; Editing by Andrea Ricci and Paul Simao
https://www.reuters.com/markets/us/feds ... 024-04-05/
"Fed's Logan says 'much too soon' to think about interest rate cuts"
By Michael S. Derby
April 5, 2024
NEW YORK, April 5 (Reuters) - Dallas Federal Reserve President Lorie Logan said on Friday that an inflation landscape increasingly beset by upside risks argues against any imminent push toward easier monetary policy by the U.S. central bank.
"I believe it's much too soon to think about cutting interest rates," Logan said in remarks prepared for a speech at Duke University.
Before lowering rates, "I will need to see more of the uncertainty resolved about which economic path we're on."
"And, as always the (Federal Open Market Committee) should remain prepared to respond appropriately if inflation stops falling," she said.
Logan said she continues to be concerned about inflation, which had been falling back toward the Fed's 2% target last year but has made less progress in the first months of 2024.
"I'm increasingly concerned about upside risk to the inflation outlook," Logan said.
"The key risk is not that inflation might rise - though monetary policymakers must always remain on guard against that outcome - but rather that inflation will stall out and fail to follow the forecast path all the way back to 2% in a timely way," she said.
The Fed must act to ensure it gets inflation back to 2%, she said.
Logan spoke in the wake of the release on Friday of much stronger-than-expected hiring data for March, which showed a robust gain of 303,000 jobs in March and a decline in the jobless rate to 3.8% from 3.9% in February.
The report helped bolster the case that the Fed faces no urgency to cut rates, which is the message central bank policymakers have been sending to markets in comments this week.
The Fed last month kept its policy rate in the 5.25%-5.50% range, where it has been since last July, and policymakers continued to pencil in three rate cuts for this year, albeit with less conviction.
Financial markets have been dialing back expectations of rate cuts amid strong economic data and a lack of progress in the inflation data for January and February.
Logan said in her remarks that the Fed has made "substantial progress" toward getting inflation back to the 2% target, while adding "in the first two months of 2024, however, inflation data surprised to the upside."
Logan, who is not currently a voting member of the rate-setting FOMC, also said that she favors slowing the drawdown of the Fed's balance sheet before halting it altogether.
"It will soon be appropriate for the FOMC to decide when to slow - not stop - the runoff of our asset holdings," Logan said, adding that "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."
She also that "it's remarkable how resilient the economy has been to the increases in interest rates over the past two years," and noted that her business contacts have consistently told her that when it comes to the economic outlook, "they see a 'soft landing' as the most likely scenario."
Logan also said it's possible the economy may be shifting toward a higher state of productivity that could allow for higher levels of activity that don't generate increased price pressures.
She also said the level of interest that's neutral in its influence on the economy may have also risen.
Reporting by Michael S. Derby; Editing by Andrea Ricci and Paul Simao
https://www.reuters.com/markets/us/feds ... 024-04-05/
Re: THE FEDERAL RESERVE
CNBC
"The ‘supercore’ inflation measure shows Fed may have a real problem on its hands"
Brian Evans @BRIANSYNDICATES
PUBLISHED WED, APR 10 2024
KEY POINTS
* Markets are buzzing about an even more specific prices gauge contained within the data — the so-called supercore inflation reading.
* The gauge measures services inflation excluding food, energy and housing and has been roaring higher lately, up 4.8% year over year in March and more than 8% at a 3-month annualized pace.
* The picture is more complicated because some of the most stubborn components of services inflation are household necessities like car and housing insurance as well as property taxes.
A hotter-than-expected consumer price index reading rattled markets Wednesday, but markets are buzzing about an even more specific prices gauge contained within the data — the so-called supercore inflation reading.
Along with the overall inflation measure, economists also look at the core CPI, which excludes volatile food and energy prices, to find the true trend.
The supercore gauge, which also excludes shelter and rent costs from its services reading, takes it even a step further.
Fed officials say it is useful in the current climate as they see elevated housing inflation as a temporary problem and not as good a gauge of underlying prices.
Supercore accelerated to a 4.8% pace year over year in March, the highest in 11 months.
Tom Fitzpatrick, managing director of global market insights at R.J. O’Brien & Associates, said if you take the readings of the last three months and annualize them, you’re looking at a supercore inflation rate of more than 8%, far from the Federal Reserve’s 2% goal.
“As we sit here today, I think they’re probably pulling their hair out,” Fitzpatrick said.
An ongoing problem
CPI increased 3.5% year over year last month, above the Dow Jones estimate that called for 3.4%.
The data pressured equities and sent Treasury yields higher on Wednesday, and pushed futures market traders to extend out expectations for the central bank’s first rate cut to September from June, according to the CME Group’s FedWatch tool.
“At the end of the day, they don’t really care as long as they get to 2%, but the reality is you’re not going to get to a sustained 2% if you don’t get a key cooling in services prices, [and] at this point we’re not seeing it,” said Stephen Stanley, chief economist at Santander U.S.
Wall Street has been keenly aware of the trend coming from supercore inflation from the beginning of the year.
A move higher in the metric from January’s CPI print was enough to hinder the market’s “perception the Fed was winning the battle with inflation [and] this will remain an open question for months to come,” according to BMO Capital Markets head of U.S. rates strategy Ian Lyngen.
Another problem for the Fed, Fitzpatrick says, lies in the differing macroeconomic backdrop of demand-driven inflation and robust stimulus payments that equipped consumers to beef up discretionary spending in 2021 and 2022 while also stoking record inflation levels.
Today, he added, the picture is more complicated because some of the most stubborn components of services inflation are household necessities like car and housing insurance as well as property taxes.
“They are so scared by what happened in 2021 and 2022 that we’re not starting from the same point as we have on other occasions,” Fitzpatrick added.
“The problem is, if you look at all of this [together] these are not discretionary spending items, [and] it puts them between a rock and a hard place.”
Sticky inflation problem
Further complicating the backdrop is a dwindling consumer savings rate and higher borrowing costs which make the central bank more likely to keep monetary policy restrictive “until something breaks,” Fitzpatrick said.
The Fed will have a hard time bringing down inflation with more rate hikes because the current drivers are stickier and not as sensitive to tighter monetary policy, he cautioned.
Fitzpatrick said the recent upward moves in inflation are more closely analogous to tax increases.
While Stanley opines that the Fed is still far removed from hiking interest rates further, doing so will remain a possibility so long as inflation remains elevated above the 2% target.
“I think by and large inflation will come down and they’ll cut rates later than we thought,” Stanley said.
“The question becomes are we looking at something that’s become entrenched here?"
"At some point, I imagine the possibility of rate hikes comes back into focus.”
https://www.cnbc.com/2024/04/10/the-sup ... hands.html
"The ‘supercore’ inflation measure shows Fed may have a real problem on its hands"
Brian Evans @BRIANSYNDICATES
PUBLISHED WED, APR 10 2024
KEY POINTS
* Markets are buzzing about an even more specific prices gauge contained within the data — the so-called supercore inflation reading.
* The gauge measures services inflation excluding food, energy and housing and has been roaring higher lately, up 4.8% year over year in March and more than 8% at a 3-month annualized pace.
* The picture is more complicated because some of the most stubborn components of services inflation are household necessities like car and housing insurance as well as property taxes.
A hotter-than-expected consumer price index reading rattled markets Wednesday, but markets are buzzing about an even more specific prices gauge contained within the data — the so-called supercore inflation reading.
Along with the overall inflation measure, economists also look at the core CPI, which excludes volatile food and energy prices, to find the true trend.
The supercore gauge, which also excludes shelter and rent costs from its services reading, takes it even a step further.
Fed officials say it is useful in the current climate as they see elevated housing inflation as a temporary problem and not as good a gauge of underlying prices.
Supercore accelerated to a 4.8% pace year over year in March, the highest in 11 months.
Tom Fitzpatrick, managing director of global market insights at R.J. O’Brien & Associates, said if you take the readings of the last three months and annualize them, you’re looking at a supercore inflation rate of more than 8%, far from the Federal Reserve’s 2% goal.
“As we sit here today, I think they’re probably pulling their hair out,” Fitzpatrick said.
An ongoing problem
CPI increased 3.5% year over year last month, above the Dow Jones estimate that called for 3.4%.
The data pressured equities and sent Treasury yields higher on Wednesday, and pushed futures market traders to extend out expectations for the central bank’s first rate cut to September from June, according to the CME Group’s FedWatch tool.
“At the end of the day, they don’t really care as long as they get to 2%, but the reality is you’re not going to get to a sustained 2% if you don’t get a key cooling in services prices, [and] at this point we’re not seeing it,” said Stephen Stanley, chief economist at Santander U.S.
Wall Street has been keenly aware of the trend coming from supercore inflation from the beginning of the year.
A move higher in the metric from January’s CPI print was enough to hinder the market’s “perception the Fed was winning the battle with inflation [and] this will remain an open question for months to come,” according to BMO Capital Markets head of U.S. rates strategy Ian Lyngen.
Another problem for the Fed, Fitzpatrick says, lies in the differing macroeconomic backdrop of demand-driven inflation and robust stimulus payments that equipped consumers to beef up discretionary spending in 2021 and 2022 while also stoking record inflation levels.
Today, he added, the picture is more complicated because some of the most stubborn components of services inflation are household necessities like car and housing insurance as well as property taxes.
“They are so scared by what happened in 2021 and 2022 that we’re not starting from the same point as we have on other occasions,” Fitzpatrick added.
“The problem is, if you look at all of this [together] these are not discretionary spending items, [and] it puts them between a rock and a hard place.”
Sticky inflation problem
Further complicating the backdrop is a dwindling consumer savings rate and higher borrowing costs which make the central bank more likely to keep monetary policy restrictive “until something breaks,” Fitzpatrick said.
The Fed will have a hard time bringing down inflation with more rate hikes because the current drivers are stickier and not as sensitive to tighter monetary policy, he cautioned.
Fitzpatrick said the recent upward moves in inflation are more closely analogous to tax increases.
While Stanley opines that the Fed is still far removed from hiking interest rates further, doing so will remain a possibility so long as inflation remains elevated above the 2% target.
“I think by and large inflation will come down and they’ll cut rates later than we thought,” Stanley said.
“The question becomes are we looking at something that’s become entrenched here?"
"At some point, I imagine the possibility of rate hikes comes back into focus.”
https://www.cnbc.com/2024/04/10/the-sup ... hands.html