CNBC
"Consumer prices rose 3.5% from a year ago in March, more than expected"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, APR 10 2024
KEY POINTS
* The consumer price index, a key inflation gauge, rose 3.5% in March, higher than expectations and marking an acceleration for inflation.
* Shelter and energy costs drove the increase. Energy rose 1.1% after increasing 2.3% in February, while shelter costs were higher by 0.4% on the month and up 5.7% from a year ago.
* Following the report, traders pushed the first expected rate cut out to September, according to CME Group calculations.
The consumer price index accelerated at a faster-than-expected pace in March, pushing inflation higher and likely dashing hopes that the Federal Reserve will be able to cut interest rates anytime soon.
The CPI, a broad measure of goods and services costs across the economy, rose 0.4% for the month, putting the 12-month inflation rate at 3.5%, or 0.3 percentage point higher than in February, the Labor Department’s Bureau of Labor Statistics reported Wednesday.
Economists surveyed by Dow Jones had been looking for a 0.3% gain and a 3.4% year-over-year level.
Excluding volatile food and energy components, the core CPI also accelerated 0.4% on a monthly basis while rising 3.8% from a year ago, compared with respective estimates for 0.3% and 3.7%.
Stocks slumped after the report while Treasury yields spiked higher.
Shelter and energy costs drove the increase on the all-items index.
Energy rose 1.1% after climbing 2.3% in February, while shelter costs, which make up about one-third of the weighting in the CPI, were higher by 0.4% on the month and up 5.7% from a year ago.
Expectations for shelter-related costs to decelerate through the year have been central to the Fed’s thesis that inflation will cool enough to allow for interest rate cuts.
Food prices increased just 0.1% on the month and were up 2.2% on a year-over-year basis.
There were some big gains within the food category, however.
The measure for meat, fish, poultry and eggs climbed 0.9%, pushed by a 4.6% jump in egg prices.
Butter fell 5% and cereal and bakery products declined by 0.9%.
Food away from home increased 0.3%.
Elsewhere, used vehicle prices fell 1.1% and medical care services prices rose 0.6%.
Increasing inflation was also bad news for workers, as real average hourly earnings were flat on the month and increased just 0.6% over the past year, according to a separate BLS release.
The report comes with markets on edge and Fed officials expressing caution about the near-term direction for monetary policy.
Central bank policymakers have repeatedly called for patience on cutting rates, saying they have not seen enough evidence that inflation is on a solid path back to their 2% annual goal.
The March report likely confirmed worries that inflation is stickier than expected.
Markets had expected the Fed to start cutting interest rates in June with three reductions in total expected this year, but that shifted dramatically following the release.
Traders in the fed funds futures market pushed expectations for the first cut out to September, according to CME Group calculations.
“There’s not much you can point to that this is going to result in a shift away from the hawkish bent” from Fed officials, said Liz Ann Sonders, chief investment strategist at Charles Schwab.
“June to me is definitively off the table.”
The Fed also expects services inflation to ease through the year, but that has shown to be stubborn as well.
Excluding energy, the services index increased 0.5% in March and was at a 5.4% annual rate, inconsistent with the Fed’s target.
″This marks the third consecutive strong reading and means that the stalled disinflationary narrative can no longer be called a blip,” said Seema Shah, chief global strategist at Principal Asset Management.
“In fact, even if inflation were to cool next month to a more comfortable reading, there is likely sufficient caution within the Fed now to mean that a July cut may also be a stretch, by which point the US election will begin to intrude with Fed decision making.”
Later Wednesday, the Fed will release minutes from its March meeting, providing more insight into where officials stand on monetary policy.
Multiple Fed officials in recent days have expressed skepticism about lowering rates.
Atlanta Fed President Raphael Bostic told CNBC that he expects just one cut this year, likely not coming until the fourth quarter.
Governor Michelle Bowman said an increase may even be necessary if the data does not cooperate.
https://www.cnbc.com/2024/04/10/cpi-inf ... march.html
POLITICS
Re: POLITICS
REUTERS
"US consumer prices heat up in March; seen delaying Fed rate cut"
By Lucia Mutikani
April 10, 2024
Summary
* Consumer price index increases 0.4% in March
* CPI rises 3.5% year-on-year, biggest gain in six months
* Core CPI advances 0.4%; increases 3.8% year-on-year
WASHINGTON, April 10 (Reuters) - U.S. consumer prices increased more than expected in March as Americans continued to pay more for gasoline and rental housing, leading financial markets to anticipate that the Federal Reserve would delay cutting interest rates until September.
The third straight month of strong consumer price readings reported by the Labor Department on Wednesday also suggested that the pick up in inflation in January and February could not be solely attributed to businesses raising prices at the start of the year as economists had argued.
The report followed news last week that job growth accelerated in March, with the unemployment rate slipping to 3.8% from 3.9% in February.
The stubbornly higher cost of living looms large over the Nov. 5 presidential election.
Still, there were some silver linings, with food prices at the supermarket unchanged and the cost of motor vehicles declining, leading to the return of goods deflation.
"The data does not completely remove the possibility of Fed action this year, but it certainly lessens the chances the Fed is cutting the overnight rate in the next couple months," said Phillip Neuhart, director of market and economic research at First Citizens.
The consumer price index rose 0.4% last month after advancing by the same margin in February, the Labor Department's Bureau of Labor Statistics said.
Gasoline prices climbed 1.7% after increasing 3.8% in February.
Shelter costs, which include rents, rose 0.4%, matching February's gain.
Gasoline and shelter accounted for more than half of the increase in the CPI.
Food prices rose 0.1%, though grocery food inflation was unchanged amid declines in the costs of butter as well as cereals and bakery products, which recorded their largest monthly decrease since 1989.
But prices for meats and eggs rose.
There was a modest increase in the prices of fruits and vegetables.
In the 12 months through March, the CPI increased 3.5%, the most since September.
The CPI was also boosted by last year's low reading dropping out of the calculation.
It rose 3.2% in February.
Economists polled by Reuters had forecast the CPI gaining 0.3% on the month and advancing 3.4% year-on-year.
Though the annual increase in consumer prices has declined from a peak of 9.1% in June 2022, the disinflationary trend has virtually stalled in recent months.
The Fed has a 2% inflation target.
The measures it tracks for monetary policy are running considerably below the CPI rate.
President Joe Biden urged "corporations including grocery retailers to use record profits to reduce prices."
Biden who will face former President Donald Trump in a rematch in November also said he had a plan to lower housing costs by building and renovating more than two million homes.
A government watchdog, Accountable.US, decried what it called corporate greed for the persistently high inflation.
Shortly after the data, financial markets pushed back their expectations for the first rate cut to September from June, according to CME's FedWatch Tool.
They now expect only two rate cuts instead of the three envisaged by Fed officials last month.
A minority of economists see the window for rate cuts closing.
Minutes of the Fed's March 19-20 meeting published on Wednesday showed policymakers worried that progress on inflation might have stalled.
The central bank has kept its policy rate in the 5.25%-5.50% range since July.
It has raised the benchmark overnight interest rate by 525 basis points since March 2022.
"The strong inflation data ... should force the Fed to go back to the drawing board with regards to their monetary policy ambitions for the year," said Charlie Ripley, senior investment strategist at Allianz Investment Management in Minneapolis.
Stocks on Wall Street tumbled.
The dollar rallied against a basket of currencies.
U.S. Treasury yields rose.
NOT OUT OF CONTROL
Excluding the volatile food and energy components, the CPI gained 0.4% last month after a similar rise in February and January.
Before rounding, the so-called CPI increased 0.359%, which economists said indicated that inflation was not running out of control.
The monthly core CPI was boosted by rents.
Owners' equivalent rent (OER), a measure of the amount homeowners would pay to rent or would earn from renting their property, climbed 0.4% after a similar rise in February.
Motor vehicle insurance was another driver, surging 2.6%.
That was the largest rise since July 2020 and followed a 0.9% gain in February.
The cost of motor vehicle repairs jumped 3.1%, the most since August 2022.
Healthcare costs rose 0.5%.
There were also increases in the prices of apparel and personal care.
But prices for used cars and trucks, recreation and new vehicles fell.
Airline tickets cost less and the price of hotel and motel rooms was unchanged.
Goods prices edged up 0.1%, but declined 0.2% excluding food and energy.
The cost of services increased 0.5%.
Excluding rent of shelter, services shot up 0.8% after advancing 0.6% in February.
In the 12 months through March, the core CPI rose 3.8%, matching February's increase.
It increased at a 4.2% annualized rate in the first quarter, accelerating from the October-December quarter's 3.4% pace.
"The first quarter's stronger outturn reflects the often-choppy nature of monthly price measurement and that the pickup is likely to be a 'bump' on the road back toward the Fed's inflation target rather than a sign that slowing inflation is reversing course," said Sarah House, a senior economist at Wells Fargo in Charlotte, North Carolina.
Some of the drivers of the core CPI, including motor vehicle insurance, do not feed into the personal consumption expenditures price indexes, the inflation measures tracked by the Fed for its inflation target.
Economists estimated that core PCE inflation rose 0.3% in March after a similar gain in February, lowering the year-on-year increase to 2.7% from 2.8% in February.
March's producer price data on Thursday could change these forecasts.
"There are still embers of inflation here and there in the economy," said Joe Davis, chief global economist at Vanguard.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
https://www.reuters.com/markets/us/us-c ... 024-04-10/
"US consumer prices heat up in March; seen delaying Fed rate cut"
By Lucia Mutikani
April 10, 2024
Summary
* Consumer price index increases 0.4% in March
* CPI rises 3.5% year-on-year, biggest gain in six months
* Core CPI advances 0.4%; increases 3.8% year-on-year
WASHINGTON, April 10 (Reuters) - U.S. consumer prices increased more than expected in March as Americans continued to pay more for gasoline and rental housing, leading financial markets to anticipate that the Federal Reserve would delay cutting interest rates until September.
The third straight month of strong consumer price readings reported by the Labor Department on Wednesday also suggested that the pick up in inflation in January and February could not be solely attributed to businesses raising prices at the start of the year as economists had argued.
The report followed news last week that job growth accelerated in March, with the unemployment rate slipping to 3.8% from 3.9% in February.
The stubbornly higher cost of living looms large over the Nov. 5 presidential election.
Still, there were some silver linings, with food prices at the supermarket unchanged and the cost of motor vehicles declining, leading to the return of goods deflation.
"The data does not completely remove the possibility of Fed action this year, but it certainly lessens the chances the Fed is cutting the overnight rate in the next couple months," said Phillip Neuhart, director of market and economic research at First Citizens.
The consumer price index rose 0.4% last month after advancing by the same margin in February, the Labor Department's Bureau of Labor Statistics said.
Gasoline prices climbed 1.7% after increasing 3.8% in February.
Shelter costs, which include rents, rose 0.4%, matching February's gain.
Gasoline and shelter accounted for more than half of the increase in the CPI.
Food prices rose 0.1%, though grocery food inflation was unchanged amid declines in the costs of butter as well as cereals and bakery products, which recorded their largest monthly decrease since 1989.
But prices for meats and eggs rose.
There was a modest increase in the prices of fruits and vegetables.
In the 12 months through March, the CPI increased 3.5%, the most since September.
The CPI was also boosted by last year's low reading dropping out of the calculation.
It rose 3.2% in February.
Economists polled by Reuters had forecast the CPI gaining 0.3% on the month and advancing 3.4% year-on-year.
Though the annual increase in consumer prices has declined from a peak of 9.1% in June 2022, the disinflationary trend has virtually stalled in recent months.
The Fed has a 2% inflation target.
The measures it tracks for monetary policy are running considerably below the CPI rate.
President Joe Biden urged "corporations including grocery retailers to use record profits to reduce prices."
Biden who will face former President Donald Trump in a rematch in November also said he had a plan to lower housing costs by building and renovating more than two million homes.
A government watchdog, Accountable.US, decried what it called corporate greed for the persistently high inflation.
Shortly after the data, financial markets pushed back their expectations for the first rate cut to September from June, according to CME's FedWatch Tool.
They now expect only two rate cuts instead of the three envisaged by Fed officials last month.
A minority of economists see the window for rate cuts closing.
Minutes of the Fed's March 19-20 meeting published on Wednesday showed policymakers worried that progress on inflation might have stalled.
The central bank has kept its policy rate in the 5.25%-5.50% range since July.
It has raised the benchmark overnight interest rate by 525 basis points since March 2022.
"The strong inflation data ... should force the Fed to go back to the drawing board with regards to their monetary policy ambitions for the year," said Charlie Ripley, senior investment strategist at Allianz Investment Management in Minneapolis.
Stocks on Wall Street tumbled.
The dollar rallied against a basket of currencies.
U.S. Treasury yields rose.
NOT OUT OF CONTROL
Excluding the volatile food and energy components, the CPI gained 0.4% last month after a similar rise in February and January.
Before rounding, the so-called CPI increased 0.359%, which economists said indicated that inflation was not running out of control.
The monthly core CPI was boosted by rents.
Owners' equivalent rent (OER), a measure of the amount homeowners would pay to rent or would earn from renting their property, climbed 0.4% after a similar rise in February.
Motor vehicle insurance was another driver, surging 2.6%.
That was the largest rise since July 2020 and followed a 0.9% gain in February.
The cost of motor vehicle repairs jumped 3.1%, the most since August 2022.
Healthcare costs rose 0.5%.
There were also increases in the prices of apparel and personal care.
But prices for used cars and trucks, recreation and new vehicles fell.
Airline tickets cost less and the price of hotel and motel rooms was unchanged.
Goods prices edged up 0.1%, but declined 0.2% excluding food and energy.
The cost of services increased 0.5%.
Excluding rent of shelter, services shot up 0.8% after advancing 0.6% in February.
In the 12 months through March, the core CPI rose 3.8%, matching February's increase.
It increased at a 4.2% annualized rate in the first quarter, accelerating from the October-December quarter's 3.4% pace.
"The first quarter's stronger outturn reflects the often-choppy nature of monthly price measurement and that the pickup is likely to be a 'bump' on the road back toward the Fed's inflation target rather than a sign that slowing inflation is reversing course," said Sarah House, a senior economist at Wells Fargo in Charlotte, North Carolina.
Some of the drivers of the core CPI, including motor vehicle insurance, do not feed into the personal consumption expenditures price indexes, the inflation measures tracked by the Fed for its inflation target.
Economists estimated that core PCE inflation rose 0.3% in March after a similar gain in February, lowering the year-on-year increase to 2.7% from 2.8% in February.
March's producer price data on Thursday could change these forecasts.
"There are still embers of inflation here and there in the economy," said Joe Davis, chief global economist at Vanguard.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
https://www.reuters.com/markets/us/us-c ... 024-04-10/
Re: POLITICS
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: POLITICS
REUTERS
"US wholesale inventories increase strongly in February"
By Reuters
April 10, 2024
WASHINGTON, April 10 (Reuters) - U.S. wholesale inventories rebounded solidly in February, suggesting that inventories could contribute to economic growth in the first quarter.
The Commerce Department's Census Bureau said on Wednesday that wholesale inventories rose 0.5% as estimated last month.
Stocks at wholesalers fell 0.2% in January.
Economists polled by Reuters had expected that inventories would be unrevised.
Inventories are a key part of gross domestic product.
They dropped 1.5% on a year-on-year basis in February.
Private inventory investment cut 0.47% percentage point from GDP growth in the fourth quarter after providing a big boost in the third quarter.
The economy grew at a 3.4% annualized rate in the October-December quarter.
Growth estimates for the first quarter are currently as high as a 2.5% pace.
Wholesale motor vehicle inventories rose 0.9%.
There were increases in stocks of lumber and professional equipment as well as metals and machinery.
But stocks of farm products and petroleum fell.
Excluding autos, wholesale inventories increased 0.5% in February.
This component goes into the calculation of GDP.
Sales at wholesalers rose 2.3% after declining 1.4% in January.
February's sales pace it would take wholesalers 1.34 months to clear shelves, down from 1.36 months in January.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/us-w ... 024-04-10/
"US wholesale inventories increase strongly in February"
By Reuters
April 10, 2024
WASHINGTON, April 10 (Reuters) - U.S. wholesale inventories rebounded solidly in February, suggesting that inventories could contribute to economic growth in the first quarter.
The Commerce Department's Census Bureau said on Wednesday that wholesale inventories rose 0.5% as estimated last month.
Stocks at wholesalers fell 0.2% in January.
Economists polled by Reuters had expected that inventories would be unrevised.
Inventories are a key part of gross domestic product.
They dropped 1.5% on a year-on-year basis in February.
Private inventory investment cut 0.47% percentage point from GDP growth in the fourth quarter after providing a big boost in the third quarter.
The economy grew at a 3.4% annualized rate in the October-December quarter.
Growth estimates for the first quarter are currently as high as a 2.5% pace.
Wholesale motor vehicle inventories rose 0.9%.
There were increases in stocks of lumber and professional equipment as well as metals and machinery.
But stocks of farm products and petroleum fell.
Excluding autos, wholesale inventories increased 0.5% in February.
This component goes into the calculation of GDP.
Sales at wholesalers rose 2.3% after declining 1.4% in January.
February's sales pace it would take wholesalers 1.34 months to clear shelves, down from 1.36 months in January.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/us-w ... 024-04-10/
Re: POLITICS
REUTERS
"After issuing factory capacity warning to China, Yellen faces tariff decisions"
By David Lawder
April 10, 2024
BEIJING, April 10 (Reuters) - U.S. Treasury Secretary Janet Yellen hammered home a stern warning to China's economic leaders that their overinvestment in factory capacity for clean energy goods is unacceptable throughout her four-day visit to Guangzhou and Beijing.
She did it while appearing to charm her Chinese hosts this past week, but now comes the hard part: deciding whether to advise U.S. President Joe Biden to move toward raising U.S. tariffs on Chinese electric vehicles, solar panels and other clean energy goods to protect U.S. producers and workers.
U.S. stocks fell on Wednesday after hotter-than-expected inflation data threw cold water on hopes the Federal Reserve would begin cutting interest rates as early as June.
Her other option is to press for time to allow a new U.S.-China dialogue on the issue to generate other solutions.
Yellen and her main counterpart, vice premier He Lifeng, launched the talks on "balanced growth," including industrial capacity and weak Chinese and global demand, on Saturday in the southern factory hub of Guangzhou.
Previous U.S.-China dialogues, including one launched in 2006 by former Treasury secretary Hank Paulson and a successor forum during Barack Obama's administration, largely failed to persuade China to shift away from its state-driven, investment-led economic model to a more market-driven path despite years of regular meetings.
On what may be her last trip to China as Treasury chief, Yellen saw pushback on her core complaint that a massive export wave of cheap EVs and solar panels, fuelled by state-supported production capacity that far exceeds domestic demand, was threatening competitors all over the world.
China trade experts say that the new dialogue may need to take place alongside a new Biden administration trade action, such as a new "Section 301" tariff investigation or World Trade Organization complaint.
Former president Donald Trump used Section 301 of the Trade Act of 1974, which covers unfair trade practices, to impose tariffs on hundreds of billions of dollars worth of Chinese imports in 2018.
The Biden administration is now nearing completion of a lengthy review of whether to renew those duties.
"This dialogue isn't meant to be a negotiation, so I don't expect the U.S. to sit on its hands," said Scott Kennedy, a China economics expert at the Center for Strategic and International Studies in Washington.
"Washington will continue to amass evidence to be prepared to take action."
SOCIAL MEDIA STAR
While in China, Yellen won plaudits from Chinese officials, academics and social media users.
She publicly savoured Chinese cuisine and culture, sipping a beer made with American hops at a Beijing microbrewery and showing off her chopstick skills at a Cantonese restaurant in Guangzhou, the southern export hub.
Chinese Premier Li Qiang took note of the social media attention, telling Yellen: "The Chinese 'netizens' have been following your trip since the moment you landed in Guangzhou, and that shows the high expectations they have for the outcome of your visit."
They spoke for nearly three times the 30 minutes scheduled for their bilateral meeting on Sunday.
Unlike her first trip to China in July 2023, Yellen took time out to socialize with her hosts and visit cultural sites, including Beijing's Forbidden City on a private, after-hours tour.
Yellen and He exchanged gifts on a Pearl River boat cruise, in the southern export hub of Guangzhou.
She received a ceramic platter with an image of her official photo, and presented him with a signed painting print of cherry blossoms at Washington's Tidal Basin, an attendee said.
"She has a particularly high level of credibility within the Chinese government," American Chamber of Commerce in China Chair Sean Stein said of Yellen.
"She maintains a focus on economics and talks about things in a dispassionate way."
WHAT PROBLEM?
While the goodwill opened doors, pushback from state media and Chinese officials show disagreement with Yellen's core assertion that China's green energy manufacturing capacity far outstrips local demand and is flooding global markets with cheap exports from money-losing firms.
Chinese Commerce Minister Wang Wentao on Monday called such claims baseless and said Chinese EV makers' success is due to innovation, not subsidies.
A Chinese government adviser told Reuters that industrial overcapacity is a topic for discussion with U.S. officials, "but not something that can be resolved."
"There will be no global trade if there is no overcapacity" and assertions of excess output in new energy sectors are "outrageous," the adviser said on condition of anonymity.
Still, Yellen's trip and the growing relationship with Chinese officials give her an "elevated voice" in the Biden tariff debate, said Wendy Cutler, a former U.S. trade negotiator who heads the Asia Society Policy Institute.
But Cutler said it would be hard for Yellen to argue in favour of more time for dialogue during a hotly contested U.S. presidential election year amid rising anti-China sentiment in the United States.
Reporting by David Lawder in Beijing; additional reporting by Kevin Yao and Joe Cash in Beijing and Marius Zaharia in Hong Kong; editing by Shri Navaratnam, William Maclean
https://www.reuters.com/markets/asia/af ... 024-04-10/
"After issuing factory capacity warning to China, Yellen faces tariff decisions"
By David Lawder
April 10, 2024
BEIJING, April 10 (Reuters) - U.S. Treasury Secretary Janet Yellen hammered home a stern warning to China's economic leaders that their overinvestment in factory capacity for clean energy goods is unacceptable throughout her four-day visit to Guangzhou and Beijing.
She did it while appearing to charm her Chinese hosts this past week, but now comes the hard part: deciding whether to advise U.S. President Joe Biden to move toward raising U.S. tariffs on Chinese electric vehicles, solar panels and other clean energy goods to protect U.S. producers and workers.
U.S. stocks fell on Wednesday after hotter-than-expected inflation data threw cold water on hopes the Federal Reserve would begin cutting interest rates as early as June.
Her other option is to press for time to allow a new U.S.-China dialogue on the issue to generate other solutions.
Yellen and her main counterpart, vice premier He Lifeng, launched the talks on "balanced growth," including industrial capacity and weak Chinese and global demand, on Saturday in the southern factory hub of Guangzhou.
Previous U.S.-China dialogues, including one launched in 2006 by former Treasury secretary Hank Paulson and a successor forum during Barack Obama's administration, largely failed to persuade China to shift away from its state-driven, investment-led economic model to a more market-driven path despite years of regular meetings.
On what may be her last trip to China as Treasury chief, Yellen saw pushback on her core complaint that a massive export wave of cheap EVs and solar panels, fuelled by state-supported production capacity that far exceeds domestic demand, was threatening competitors all over the world.
China trade experts say that the new dialogue may need to take place alongside a new Biden administration trade action, such as a new "Section 301" tariff investigation or World Trade Organization complaint.
Former president Donald Trump used Section 301 of the Trade Act of 1974, which covers unfair trade practices, to impose tariffs on hundreds of billions of dollars worth of Chinese imports in 2018.
The Biden administration is now nearing completion of a lengthy review of whether to renew those duties.
"This dialogue isn't meant to be a negotiation, so I don't expect the U.S. to sit on its hands," said Scott Kennedy, a China economics expert at the Center for Strategic and International Studies in Washington.
"Washington will continue to amass evidence to be prepared to take action."
SOCIAL MEDIA STAR
While in China, Yellen won plaudits from Chinese officials, academics and social media users.
She publicly savoured Chinese cuisine and culture, sipping a beer made with American hops at a Beijing microbrewery and showing off her chopstick skills at a Cantonese restaurant in Guangzhou, the southern export hub.
Chinese Premier Li Qiang took note of the social media attention, telling Yellen: "The Chinese 'netizens' have been following your trip since the moment you landed in Guangzhou, and that shows the high expectations they have for the outcome of your visit."
They spoke for nearly three times the 30 minutes scheduled for their bilateral meeting on Sunday.
Unlike her first trip to China in July 2023, Yellen took time out to socialize with her hosts and visit cultural sites, including Beijing's Forbidden City on a private, after-hours tour.
Yellen and He exchanged gifts on a Pearl River boat cruise, in the southern export hub of Guangzhou.
She received a ceramic platter with an image of her official photo, and presented him with a signed painting print of cherry blossoms at Washington's Tidal Basin, an attendee said.
"She has a particularly high level of credibility within the Chinese government," American Chamber of Commerce in China Chair Sean Stein said of Yellen.
"She maintains a focus on economics and talks about things in a dispassionate way."
WHAT PROBLEM?
While the goodwill opened doors, pushback from state media and Chinese officials show disagreement with Yellen's core assertion that China's green energy manufacturing capacity far outstrips local demand and is flooding global markets with cheap exports from money-losing firms.
Chinese Commerce Minister Wang Wentao on Monday called such claims baseless and said Chinese EV makers' success is due to innovation, not subsidies.
A Chinese government adviser told Reuters that industrial overcapacity is a topic for discussion with U.S. officials, "but not something that can be resolved."
"There will be no global trade if there is no overcapacity" and assertions of excess output in new energy sectors are "outrageous," the adviser said on condition of anonymity.
Still, Yellen's trip and the growing relationship with Chinese officials give her an "elevated voice" in the Biden tariff debate, said Wendy Cutler, a former U.S. trade negotiator who heads the Asia Society Policy Institute.
But Cutler said it would be hard for Yellen to argue in favour of more time for dialogue during a hotly contested U.S. presidential election year amid rising anti-China sentiment in the United States.
Reporting by David Lawder in Beijing; additional reporting by Kevin Yao and Joe Cash in Beijing and Marius Zaharia in Hong Kong; editing by Shri Navaratnam, William Maclean
https://www.reuters.com/markets/asia/af ... 024-04-10/
Re: POLITICS
The New York Post
"Kathy Hochul goes all in — with NY taxpayer cash — on Biden’s new feed-the-rich program"
Opinion by Paige Terryberry
11 APRIL 2024
AOC wants to tax the rich.
Bernie Sanders wants to eat the rich.
Now President Biden wants taxpayers to feed the rich with a free-for-all school-lunch program that includes six- and seven-figure income earners.
When governments shuttered schools in 2020, state agencies mailed Electronic Benefits Transfer cards to families whose children qualified for taxpayer-funded meals during the school year.
The federal government then extended the program into the summer months as “temporary” assistance.
The Pandemic-EBT program stacked on top of the food-stamp program, already available to needy families year-round, amounts to nearly $1,000 per month for a family of four.
Like most “temporary” government programs, Pandemic-EBT, now called Summer EBT, is here to stay.
The decision to implement Summer EBT is ultimately up to states.
Gov. Hochul, of course, took the bait.
This is a federal-government program, but New York will still be on the hook for half the state’s administrative costs.
Team Biden’s new plan would drastically expand who is eligible for free school lunch during summer months by using the Community Eligibility Provision, not individual income as the food-stamp program uses.
In fact, students who attend a qualifying school would not need to submit an application for free meals at all.
CEP says if a certain number of students in a school qualify for free lunch based on their families’ low incomes, all students in that school qualify, even those whose higher family incomes would normally make them ineligible.
Since Biden bureaucrats just months ago lowered this eligibility level, a school needs to have only one-quarter of students eligible for a taxpayer-funded lunch to make the entire school eligible — down from 40%.
The US Department of Agriculture admits this expansion won’t be financially viable for many schools.
Hochul recently committed $134 million in state taxpayer funds to push schools to implement CEP.
Under these new guidelines, more than 70% of public-school children — 35 million students — could be eligible for taxpayer-funded summer lunches with no application or income requirements.
These students are already newly eligible for a taxpayer-funded lunch during the school year, no matter their family’s income.
USDA “stands ready” to apply this unfettered standard to Summer EBT.
It’s clear the Biden administration wants the Summer EBT program’s relaxed criteria to mirror those of the Pandemic-EBT — which would mean sending EBT cards to high-income families.
The true cost is still unknown.
Team Biden knows permanently expanding welfare means expanding the Democratic voter base in an election year.
And in the rush to cast a wider net to entice voters with free food, high-income families will get scooped up into a now-permanent free-lunch program originally pitched to help needy families forced into remote learning.
Thirty-seven states and Washington, DC, have opted into Summer EBT, the reincarnation of a provision from Biden’s failed Build Back Better plan.
That count could change, with some state lawmakers fighting legislatively to force adoption of the taxpayer-funded meal program that would send an extra $40 per child per month to families each summer.
And the Biden administration, along with prominent Democrats, has resorted to bullying GOP-led states that aren’t playing along, with those like Nebraska changing their minds about joining the expanded federal program.
Truly needy families already qualify for generous food-stamp benefits year-round.
And under the Biden administration, those recipients received a 27% raise in a move that circumvented Congress and drove up grocery prices.
Many states also have their own summer-meal programs, and state budgets give substantial money to food banks.
The reality is Summer EBT is not about childhood hunger.
The plan all along has been universal taxpayer-funded meals to students, regardless of income.
Permanent Summer EBT, along with lowering CEP eligibility, has been on Biden’s agenda since his Build Back Better failure.
Conditioning students to receive pre-loaded EBT cards before they leave the nest will create a new generation of dependency rather than helping those who truly need it.
Unfortunately, standing up for policies that promote self-sufficiency and independence has always been more difficult than selling “free” money.
The 13 holdout states deserve a tremendous amount of credit for rejecting Biden’s plan to use tax dollars to feed high-income families.
It’s welfare expansion at its worst.
Too many of their peers have forgotten that there’s no such thing as a free lunch.
Paige Terryberry is a senior research fellow at the Foundation for Government Accountability.
https://www.msn.com/en-us/money/markets ... f1c9&ei=75
"Kathy Hochul goes all in — with NY taxpayer cash — on Biden’s new feed-the-rich program"
Opinion by Paige Terryberry
11 APRIL 2024
AOC wants to tax the rich.
Bernie Sanders wants to eat the rich.
Now President Biden wants taxpayers to feed the rich with a free-for-all school-lunch program that includes six- and seven-figure income earners.
When governments shuttered schools in 2020, state agencies mailed Electronic Benefits Transfer cards to families whose children qualified for taxpayer-funded meals during the school year.
The federal government then extended the program into the summer months as “temporary” assistance.
The Pandemic-EBT program stacked on top of the food-stamp program, already available to needy families year-round, amounts to nearly $1,000 per month for a family of four.
Like most “temporary” government programs, Pandemic-EBT, now called Summer EBT, is here to stay.
The decision to implement Summer EBT is ultimately up to states.
Gov. Hochul, of course, took the bait.
This is a federal-government program, but New York will still be on the hook for half the state’s administrative costs.
Team Biden’s new plan would drastically expand who is eligible for free school lunch during summer months by using the Community Eligibility Provision, not individual income as the food-stamp program uses.
In fact, students who attend a qualifying school would not need to submit an application for free meals at all.
CEP says if a certain number of students in a school qualify for free lunch based on their families’ low incomes, all students in that school qualify, even those whose higher family incomes would normally make them ineligible.
Since Biden bureaucrats just months ago lowered this eligibility level, a school needs to have only one-quarter of students eligible for a taxpayer-funded lunch to make the entire school eligible — down from 40%.
The US Department of Agriculture admits this expansion won’t be financially viable for many schools.
Hochul recently committed $134 million in state taxpayer funds to push schools to implement CEP.
Under these new guidelines, more than 70% of public-school children — 35 million students — could be eligible for taxpayer-funded summer lunches with no application or income requirements.
These students are already newly eligible for a taxpayer-funded lunch during the school year, no matter their family’s income.
USDA “stands ready” to apply this unfettered standard to Summer EBT.
It’s clear the Biden administration wants the Summer EBT program’s relaxed criteria to mirror those of the Pandemic-EBT — which would mean sending EBT cards to high-income families.
The true cost is still unknown.
Team Biden knows permanently expanding welfare means expanding the Democratic voter base in an election year.
And in the rush to cast a wider net to entice voters with free food, high-income families will get scooped up into a now-permanent free-lunch program originally pitched to help needy families forced into remote learning.
Thirty-seven states and Washington, DC, have opted into Summer EBT, the reincarnation of a provision from Biden’s failed Build Back Better plan.
That count could change, with some state lawmakers fighting legislatively to force adoption of the taxpayer-funded meal program that would send an extra $40 per child per month to families each summer.
And the Biden administration, along with prominent Democrats, has resorted to bullying GOP-led states that aren’t playing along, with those like Nebraska changing their minds about joining the expanded federal program.
Truly needy families already qualify for generous food-stamp benefits year-round.
And under the Biden administration, those recipients received a 27% raise in a move that circumvented Congress and drove up grocery prices.
Many states also have their own summer-meal programs, and state budgets give substantial money to food banks.
The reality is Summer EBT is not about childhood hunger.
The plan all along has been universal taxpayer-funded meals to students, regardless of income.
Permanent Summer EBT, along with lowering CEP eligibility, has been on Biden’s agenda since his Build Back Better failure.
Conditioning students to receive pre-loaded EBT cards before they leave the nest will create a new generation of dependency rather than helping those who truly need it.
Unfortunately, standing up for policies that promote self-sufficiency and independence has always been more difficult than selling “free” money.
The 13 holdout states deserve a tremendous amount of credit for rejecting Biden’s plan to use tax dollars to feed high-income families.
It’s welfare expansion at its worst.
Too many of their peers have forgotten that there’s no such thing as a free lunch.
Paige Terryberry is a senior research fellow at the Foundation for Government Accountability.
https://www.msn.com/en-us/money/markets ... f1c9&ei=75
Re: POLITICS
CNBC
"Wholesale prices rose 0.2% in March, less than expected"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED THU, APR 11 2024
KEY POINTS
* The producer price index, a measure of inflation at the wholesale level, increased 0.2% for the month, less than the 0.3% estimate from the Dow Jones consensus.
* However, on a 12-month basis, the PPI rose 2.1%, the biggest gain since April 2023, indicating pipeline pressures that could keep inflation elevated.
* Initial filings for jobless benefits fell to 211,000, a decline of 11,000 from the previous week’s upwardly revised level and below the 217,000 estimate.
A measure of wholesale prices increased less than expected in March, providing some potential relief from worries that inflation will hold higher for longer than many economists had expected.
The producer price index rose 0.2% for the month, less than the 0.3% estimate from the Dow Jones consensus and not as much as the 0.6% increase in February, according to a release Thursday from the Labor Department’s Bureau of Labor Statistics.
However, on a 12-month basis, the PPI climbed 2.1%, the biggest gain since April 2023, indicating pipeline pressures that could keep inflation elevated.
Excluding food and energy, the core PPI also rose 0.2%, meeting expectations.
Excluding trade services from the core level, the increase was 0.2% monthly but 2.8% from a year ago.
The release comes a day after the BLS reported that consumer prices again rose more than expected in March, raising concerns that the Federal Reserve will be unable to lower interest rates anytime soon.
On the producer price side, March’s gain was pushed by services, which saw a 0.3% increase on the month.
Within that category, the index for securities brokerage and other investment-related fees jumped 3.1%.
Conversely, goods prices decreased 0.1%, flipping a 1.2% increase in February.
Final demand costs for energy, which have been on the rise lately, actually fell 1.6% on the month.
However, wholesale prices for final demand food and goods less food and energy climbed 0.8% and 0.1%, respectively.
Though prices have been rising at the pump, the final demand index for gasoline fell 3.6%.
That contrasted with the consumer price index, which showed gasoline up 1.7% on the month.
Markets showed little reaction to the data, with futures tied to major stock indexes slightly higher though Treasury yields declined.
In other economic news Thursday, initial filings for jobless benefits fell to 211,000, a decline of 11,000 from the previous week’s upwardly revised level and below the 217,000 estimate from Dow Jones.
Continuing claims, which run a week behind, increased to 1.82 million, up 28,000 for the period, according to the Labor Department release.
The economic data points are being watched closely as the Federal Reserve contemplates its next moves on monetary policy.
Wednesday’s CPI release jolted markets, which had been anticipating an aggressive series of interest rate cuts this year.
The report showed annual inflation running at 3.5%, well above the Fed’s 2% target.
The market now is pricing in the possibility of just two cuts this year, likely not starting until September, according to CME Group data.
https://www.cnbc.com/2024/04/11/ppi-inf ... march.html
"Wholesale prices rose 0.2% in March, less than expected"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED THU, APR 11 2024
KEY POINTS
* The producer price index, a measure of inflation at the wholesale level, increased 0.2% for the month, less than the 0.3% estimate from the Dow Jones consensus.
* However, on a 12-month basis, the PPI rose 2.1%, the biggest gain since April 2023, indicating pipeline pressures that could keep inflation elevated.
* Initial filings for jobless benefits fell to 211,000, a decline of 11,000 from the previous week’s upwardly revised level and below the 217,000 estimate.
A measure of wholesale prices increased less than expected in March, providing some potential relief from worries that inflation will hold higher for longer than many economists had expected.
The producer price index rose 0.2% for the month, less than the 0.3% estimate from the Dow Jones consensus and not as much as the 0.6% increase in February, according to a release Thursday from the Labor Department’s Bureau of Labor Statistics.
However, on a 12-month basis, the PPI climbed 2.1%, the biggest gain since April 2023, indicating pipeline pressures that could keep inflation elevated.
Excluding food and energy, the core PPI also rose 0.2%, meeting expectations.
Excluding trade services from the core level, the increase was 0.2% monthly but 2.8% from a year ago.
The release comes a day after the BLS reported that consumer prices again rose more than expected in March, raising concerns that the Federal Reserve will be unable to lower interest rates anytime soon.
On the producer price side, March’s gain was pushed by services, which saw a 0.3% increase on the month.
Within that category, the index for securities brokerage and other investment-related fees jumped 3.1%.
Conversely, goods prices decreased 0.1%, flipping a 1.2% increase in February.
Final demand costs for energy, which have been on the rise lately, actually fell 1.6% on the month.
However, wholesale prices for final demand food and goods less food and energy climbed 0.8% and 0.1%, respectively.
Though prices have been rising at the pump, the final demand index for gasoline fell 3.6%.
That contrasted with the consumer price index, which showed gasoline up 1.7% on the month.
Markets showed little reaction to the data, with futures tied to major stock indexes slightly higher though Treasury yields declined.
In other economic news Thursday, initial filings for jobless benefits fell to 211,000, a decline of 11,000 from the previous week’s upwardly revised level and below the 217,000 estimate from Dow Jones.
Continuing claims, which run a week behind, increased to 1.82 million, up 28,000 for the period, according to the Labor Department release.
The economic data points are being watched closely as the Federal Reserve contemplates its next moves on monetary policy.
Wednesday’s CPI release jolted markets, which had been anticipating an aggressive series of interest rate cuts this year.
The report showed annual inflation running at 3.5%, well above the Fed’s 2% target.
The market now is pricing in the possibility of just two cuts this year, likely not starting until September, according to CME Group data.
https://www.cnbc.com/2024/04/11/ppi-inf ... march.html
Re: POLITICS
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: POLITICS
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: POLITICS
REUTERS
"Tame US producer price data soothes inflation concerns"
By Lucia Mutikani
April 11, 2024
WASHINGTON, April 11 (Reuters) - U.S. producer prices increased moderately in March as a rise in the cost of services was softened by a fall in goods prices, calming fears of a resurgence in inflation.
The report from the Labor Department on Thursday led economists to anticipate milder increases in the inflation measures tracked by the Federal Reserve for monetary policy relative to the strong consumer price readings in March.
High inflation and persistent labor market strength have prompted financial markets and most economists to push back expectations for an initial Fed interest rate cut to September from June.
The minutes of the U.S. central bank's March 19-20 policy meeting, which were released on Wednesday, also showed policymakers were concerned that progress on inflation might have stalled.
"Producer prices tell us that inflation is not worsening, yet," said Christopher Rupkey, chief economist at FWDBONDS.
"Policymakers can remain vigilant as they await more data on where inflation is heading next."
"Tamer producer prices may spell some relief for consumers in coming months."
The producer price index for final demand rose 0.2% last month after increasing by an unrevised 0.6% in February, the Labor Department's Bureau of Labor Statistics said.
Economists polled by Reuters had forecast the PPI would gain 0.3%.
In the 12 months through March, the PPI advanced 2.1% after rising 1.6% in February.
Consumer prices increased more than expected in March for the third straight month, government data showed on Wednesday.
Since March of 2022, the Fed has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range, where it has been since last July.
The cost of services increased 0.3% in March after rising by the same margin in February, the PPI report showed.
That was driven by a 3.1% surge in the cost of securities brokerage, dealing, investment advice and related services.
Portfolio management fees gained 0.5%.
There were also increases in the prices of professional and commercial equipment wholesaling, investment banking as well as computer hardware, software and supplies retailing.
Airline fares rose 2.2% after climbing 2.7% in February.
But the cost of hotel and motel rooms fell 3.8%.
Health and medical insurance rose 0.2%.
GOODS PRICES FALL
Portfolio management fees, healthcare, hotel and motel accommodation, and airline fares are among the components that go into the calculation of the personal consumption expenditures (PCE) price index, which the Fed uses to track it 2% inflation target.
Goods prices slipped 0.1% after jumping 1.2% in February.
The decline reflected a 3.6% drop in wholesale gasoline prices.
There were also decreases in the prices of eggs, carbon steel scrap, jet fuel, fresh fruit and melons.
But prices for processed poultry jumped 10.7%, likely reflecting shortages triggered by outbreaks of bird flu.
Prices for fresh and dry vegetables, residential electric power and motor vehicles also increased.
Excluding food and energy, goods prices edged up 0.1% after advancing 0.3% in February.
Based on the PPI and CPI data, economists estimated a moderate pace of increase in the core PCE price index, with unrounded estimates ranging from 0.21% to 0.28%.
Core inflation rose 0.3% in February.
The annual increase in core inflation is estimated to have slowed to 2.7%, which would be the smallest gain in three years, from 2.8% in February.
Overall PCE inflation was forecast to have climbed 0.28%, which would lift the year-on-year increase to 2.6%.
PCE inflation rose 0.3% in February and advanced 2.5% on a year-on-year basis.
"Although the pace of disinflation has slowed, fears of a resurgence in inflation look overdone," said Paul Ashworth, chief North America economist at Capital Economics.
Stocks on Wall Street were trading higher.
The dollar rose marginally against a basket of currencies.
U.S. Treasury prices were mixed, with the yield on the two-year note hitting 5% for the first time since November.
Despite the promising producer price data, the last mile in the road to low inflation will likely remain tough amid a persistently tight labor market.
In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 211,000 for the week ended April 6.
Economists had forecast 215,000 claims for the latest week.
Unadjusted claims increased 17,037 to 214,386 last week.
There was a surge of 4,190 in filings in New Jersey, likely the result of temporary layoffs related to spring breaks at public schools.
There were also notable increases in claims in New York, Texas, Oregon and Pennsylvania.
The Easter and Passover holidays, whose timing shifts every year, also tend to inject volatility into the claims data.
Nonetheless, last week's data suggested the labor market remained healthy early in the second quarter.
Job growth accelerated in March, while the unemployment rate slipped to 3.8% from 3.9% in February.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 28,000 to 1.817 million during the week ending March 30, the highest level since January, the claims report showed.
The uninsured unemployment rate was unchanged at 1.2%.
"Even though hiring is slowing, net payroll growth remains strong thanks to the low level of layoffs in the economy, and there is no sign from the claims data that the story is changing," said Michael Pearce, deputy chief U.S. economist at Oxford Economics.
Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao
https://www.reuters.com/markets/us/us-w ... 024-04-11/
"Tame US producer price data soothes inflation concerns"
By Lucia Mutikani
April 11, 2024
WASHINGTON, April 11 (Reuters) - U.S. producer prices increased moderately in March as a rise in the cost of services was softened by a fall in goods prices, calming fears of a resurgence in inflation.
The report from the Labor Department on Thursday led economists to anticipate milder increases in the inflation measures tracked by the Federal Reserve for monetary policy relative to the strong consumer price readings in March.
High inflation and persistent labor market strength have prompted financial markets and most economists to push back expectations for an initial Fed interest rate cut to September from June.
The minutes of the U.S. central bank's March 19-20 policy meeting, which were released on Wednesday, also showed policymakers were concerned that progress on inflation might have stalled.
"Producer prices tell us that inflation is not worsening, yet," said Christopher Rupkey, chief economist at FWDBONDS.
"Policymakers can remain vigilant as they await more data on where inflation is heading next."
"Tamer producer prices may spell some relief for consumers in coming months."
The producer price index for final demand rose 0.2% last month after increasing by an unrevised 0.6% in February, the Labor Department's Bureau of Labor Statistics said.
Economists polled by Reuters had forecast the PPI would gain 0.3%.
In the 12 months through March, the PPI advanced 2.1% after rising 1.6% in February.
Consumer prices increased more than expected in March for the third straight month, government data showed on Wednesday.
Since March of 2022, the Fed has raised its benchmark overnight interest rate by 525 basis points to the current 5.25%-5.50% range, where it has been since last July.
The cost of services increased 0.3% in March after rising by the same margin in February, the PPI report showed.
That was driven by a 3.1% surge in the cost of securities brokerage, dealing, investment advice and related services.
Portfolio management fees gained 0.5%.
There were also increases in the prices of professional and commercial equipment wholesaling, investment banking as well as computer hardware, software and supplies retailing.
Airline fares rose 2.2% after climbing 2.7% in February.
But the cost of hotel and motel rooms fell 3.8%.
Health and medical insurance rose 0.2%.
GOODS PRICES FALL
Portfolio management fees, healthcare, hotel and motel accommodation, and airline fares are among the components that go into the calculation of the personal consumption expenditures (PCE) price index, which the Fed uses to track it 2% inflation target.
Goods prices slipped 0.1% after jumping 1.2% in February.
The decline reflected a 3.6% drop in wholesale gasoline prices.
There were also decreases in the prices of eggs, carbon steel scrap, jet fuel, fresh fruit and melons.
But prices for processed poultry jumped 10.7%, likely reflecting shortages triggered by outbreaks of bird flu.
Prices for fresh and dry vegetables, residential electric power and motor vehicles also increased.
Excluding food and energy, goods prices edged up 0.1% after advancing 0.3% in February.
Based on the PPI and CPI data, economists estimated a moderate pace of increase in the core PCE price index, with unrounded estimates ranging from 0.21% to 0.28%.
Core inflation rose 0.3% in February.
The annual increase in core inflation is estimated to have slowed to 2.7%, which would be the smallest gain in three years, from 2.8% in February.
Overall PCE inflation was forecast to have climbed 0.28%, which would lift the year-on-year increase to 2.6%.
PCE inflation rose 0.3% in February and advanced 2.5% on a year-on-year basis.
"Although the pace of disinflation has slowed, fears of a resurgence in inflation look overdone," said Paul Ashworth, chief North America economist at Capital Economics.
Stocks on Wall Street were trading higher.
The dollar rose marginally against a basket of currencies.
U.S. Treasury prices were mixed, with the yield on the two-year note hitting 5% for the first time since November.
Despite the promising producer price data, the last mile in the road to low inflation will likely remain tough amid a persistently tight labor market.
In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 11,000 to a seasonally adjusted 211,000 for the week ended April 6.
Economists had forecast 215,000 claims for the latest week.
Unadjusted claims increased 17,037 to 214,386 last week.
There was a surge of 4,190 in filings in New Jersey, likely the result of temporary layoffs related to spring breaks at public schools.
There were also notable increases in claims in New York, Texas, Oregon and Pennsylvania.
The Easter and Passover holidays, whose timing shifts every year, also tend to inject volatility into the claims data.
Nonetheless, last week's data suggested the labor market remained healthy early in the second quarter.
Job growth accelerated in March, while the unemployment rate slipped to 3.8% from 3.9% in February.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 28,000 to 1.817 million during the week ending March 30, the highest level since January, the claims report showed.
The uninsured unemployment rate was unchanged at 1.2%.
"Even though hiring is slowing, net payroll growth remains strong thanks to the low level of layoffs in the economy, and there is no sign from the claims data that the story is changing," said Michael Pearce, deputy chief U.S. economist at Oxford Economics.
Reporting by Lucia Mutikani; Editing by Andrea Ricci and Paul Simao
https://www.reuters.com/markets/us/us-w ... 024-04-11/