REUTERS
"Fed's Mester warns high rents mean inflation may not yet have peaked"
Reuters
September 7, 2022
Sept 7 (Reuters) - The high cost of rental accommodation in the United States has not yet fully filtered through to inflation measures, suggesting inflation may still rise further, Cleveland Federal Reserve Bank President Loretta Mester said on Wednesday.
"I'm not even convinced that inflation's peaked yet," Mester said in a webcast with Market News International, saying her focus is on the services sector.
"That tends to be much more persistent and rents are still very elevated and it takes a while for rents to show up in underlying inflation."
"There's still more that's going to show up on that side...I haven't seen much in the way of suggesting that's starting to come back down."
Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/feds ... 022-09-07/
THE FEDERAL RESERVE
Re: THE FEDERAL RESERVE
REUTERS
"U.S. firms see tentative progress on inflation and labor supply, Fed says"
Reuters
September 7, 2022
Sept 7 (Reuters) - U.S. firms reported economic activity was unchanged in July through late August, with further softening expected over the next year even as they saw some tentative greenshoots in the ongoing battle against labor shortages and price pressures, a Federal Reserve report showed on Wednesday.
The U.S. central bank released its latest summary of feedback from business contacts nationwide as it mulls whether to proceed with a third straight 75-basis-point interest rate hike at its Sept. 20-21 policy meeting or go with a still larger-than-usual 50-basis-point rise in its bid to quash high inflation.
"Overall labor market conditions remained tight, although nearly all Districts highlighted some improvement in labor availability," the Fed said in its survey, known as the "Beige Book," which was conducted across its 12 districts through Aug. 29.
"Price levels remained highly elevated, but nine Districts reported some degree of moderation in their rate of increase."
Fed Vice Chair Lael Brainard earlier on Wednesday said the central bank would maintain tight monetary policy "for as long as it takes" to get inflation down but did not address the upcoming policy meeting.
Fed Chair Jerome Powell is scheduled to speak at 9:10 a.m. EDT (1310 GMT) on Thursday.
A much-anticipated monthly measure of inflation is due on Sept. 13.
The Fed has raised interest rates by 225 basis points since March as it lifts its benchmark overnight interest rate to a level consistent with dampening demand across the economy enough to alleviate price pressures and bring inflation back down to its 2% goal.
Those moves are filtering through to expectations for the year ahead.
"The outlook for future economic growth remained generally weak, with contacts noting expectations for further softening of demand over the next six to twelve months," the Fed's report said.
RECESSION FEARS
Inflation has been running at 40-year highs and more than three times the Fed's target.
While there are some positive signs that supply chain issues are improving and tight labor market conditions loosening, policymakers remain fearful higher inflation expectations could become entrenched among businesses and consumers.
They have also flagged rising risks that the aggressive series of rate hikes needed to bring inflation down may cause a recession.
In the Fed's Chicago district, those jitters were apparent, with "many" contacts expressing concerns about the potential for a recession, while one staffing firm in the Philadelphia Fed's district reported a slowdown in orders "approaching levels consistent with prior recessions."
U.S. employers hired more workers than expected in August, the Labor Department reported on Friday in its closely-watched monthly jobs report, but moderate wage growth and a rise in the unemployment rate also suggested labor shortages may be easing.
Elsewhere in the Beige Book, the Fed's stated aim of cooling inflation without causing a sharp spike in unemployment still appeared possible.
"Generally softer economic conditions and slight relief from supply disruptions appeared to alleviate some inflationary pressures," the Cleveland Fed district said.
"Though still high, both the share of contacts reporting higher input costs and the share reporting higher selling prices dipped to their lowest levels in more than a year."
Reporting by Lindsay Dunsmuir; Editing by Paul Simao
https://www.reuters.com/markets/us/us-f ... 022-09-07/
"U.S. firms see tentative progress on inflation and labor supply, Fed says"
Reuters
September 7, 2022
Sept 7 (Reuters) - U.S. firms reported economic activity was unchanged in July through late August, with further softening expected over the next year even as they saw some tentative greenshoots in the ongoing battle against labor shortages and price pressures, a Federal Reserve report showed on Wednesday.
The U.S. central bank released its latest summary of feedback from business contacts nationwide as it mulls whether to proceed with a third straight 75-basis-point interest rate hike at its Sept. 20-21 policy meeting or go with a still larger-than-usual 50-basis-point rise in its bid to quash high inflation.
"Overall labor market conditions remained tight, although nearly all Districts highlighted some improvement in labor availability," the Fed said in its survey, known as the "Beige Book," which was conducted across its 12 districts through Aug. 29.
"Price levels remained highly elevated, but nine Districts reported some degree of moderation in their rate of increase."
Fed Vice Chair Lael Brainard earlier on Wednesday said the central bank would maintain tight monetary policy "for as long as it takes" to get inflation down but did not address the upcoming policy meeting.
Fed Chair Jerome Powell is scheduled to speak at 9:10 a.m. EDT (1310 GMT) on Thursday.
A much-anticipated monthly measure of inflation is due on Sept. 13.
The Fed has raised interest rates by 225 basis points since March as it lifts its benchmark overnight interest rate to a level consistent with dampening demand across the economy enough to alleviate price pressures and bring inflation back down to its 2% goal.
Those moves are filtering through to expectations for the year ahead.
"The outlook for future economic growth remained generally weak, with contacts noting expectations for further softening of demand over the next six to twelve months," the Fed's report said.
RECESSION FEARS
Inflation has been running at 40-year highs and more than three times the Fed's target.
While there are some positive signs that supply chain issues are improving and tight labor market conditions loosening, policymakers remain fearful higher inflation expectations could become entrenched among businesses and consumers.
They have also flagged rising risks that the aggressive series of rate hikes needed to bring inflation down may cause a recession.
In the Fed's Chicago district, those jitters were apparent, with "many" contacts expressing concerns about the potential for a recession, while one staffing firm in the Philadelphia Fed's district reported a slowdown in orders "approaching levels consistent with prior recessions."
U.S. employers hired more workers than expected in August, the Labor Department reported on Friday in its closely-watched monthly jobs report, but moderate wage growth and a rise in the unemployment rate also suggested labor shortages may be easing.
Elsewhere in the Beige Book, the Fed's stated aim of cooling inflation without causing a sharp spike in unemployment still appeared possible.
"Generally softer economic conditions and slight relief from supply disruptions appeared to alleviate some inflationary pressures," the Cleveland Fed district said.
"Though still high, both the share of contacts reporting higher input costs and the share reporting higher selling prices dipped to their lowest levels in more than a year."
Reporting by Lindsay Dunsmuir; Editing by Paul Simao
https://www.reuters.com/markets/us/us-f ... 022-09-07/
Re: THE FEDERAL RESERVE
CNBC
"Fed Chair Powell vows to raise rates to fight inflation ‘until the job is done’"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED THU, SEP 8 2022
KEY POINTS
* Federal Reserve Chair Jerome Powell said Thursday he is “strongly committed” to fighting inflation.
* The Fed has raised benchmark interest rates four times this year, with the fed funds rate now set in a range between 2.25%-2.50%.
* This was the Fed chief’s last publicly scheduled appearance before the central bank’s Sept. 20-21 meeting.
Federal Reserve Chair Jerome Powell in an appearance Thursday emphasized the importance of getting inflation down now before the public gets too used to higher prices and comes to expect them as the norm.
In his latest comments underlining his commitment to the inflation fight, Powell said expectations play an important role and were a critical reason why inflation was so persistent in the 1970s and ’80s.
https://www.cnbc.com/2022/09/08/fed-cha ... -done.html
"Fed Chair Powell vows to raise rates to fight inflation ‘until the job is done’"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED THU, SEP 8 2022
KEY POINTS
* Federal Reserve Chair Jerome Powell said Thursday he is “strongly committed” to fighting inflation.
* The Fed has raised benchmark interest rates four times this year, with the fed funds rate now set in a range between 2.25%-2.50%.
* This was the Fed chief’s last publicly scheduled appearance before the central bank’s Sept. 20-21 meeting.
Federal Reserve Chair Jerome Powell in an appearance Thursday emphasized the importance of getting inflation down now before the public gets too used to higher prices and comes to expect them as the norm.
In his latest comments underlining his commitment to the inflation fight, Powell said expectations play an important role and were a critical reason why inflation was so persistent in the 1970s and ’80s.
https://www.cnbc.com/2022/09/08/fed-cha ... -done.html
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Powell hopeful inflation can be tamed without pain of Volcker era"
By Howard Schneider and Ann Saphir
September 8, 2022
WASHINGTON, Sept 8 (Reuters) - The Federal Reserve is "strongly committed" to fighting inflation, but there remains hope it can be done without the "very high social costs" involved in prior campaigns to control surging prices, Fed Chair Jerome Powell said on Thursday.
Powell, in a 40-minute webcast interview with Cato Institute President Peter Goettler, was not asked about the U.S. central bank's policy meeting later this month, when it is expected to raise its target interest rate by either half or three-quarters of a percentage point, and the Fed chief did not volunteer any information on his preference.
Investors in contracts tied to the Fed's policy rate currently anticipate the larger 75-basis-point increase, an expectation that rose through the day after the European Central Bank hiked its policy rate by three-quarters of a percentage point, and a decline in U.S. weekly jobless claims pointed to continuing strength in the labor market.
But Powell did restate what has now become the Fed's message of the moment: Policymakers won't back down on planned rate increases.
"We need to act now, forthrightly, strongly as we have been doing, and we need to keep at it until the job is done," Powell said.
"The Fed has and accepts responsibility for price stability."
"My colleagues and I are strongly committed to this project and we will keep at it until the job is done."
The Fed will hold its next policy meeting on Sept. 20-21, when it will issue updated economic projections and almost certainly announce the fifth consecutive increase in the target federal funds rate.
The release of a monthly U.S. consumer price inflation report next week will be the final major piece of data for policymakers to evaluate in making that decision.
Information since the Fed's July 26-27 meeting has given some small sense that the pace of inflation, which has been running at 40-year highs, may be slowing, but not enough for policymakers to feel confident it has peaked.
The job market, meanwhile, remains strong, with an Atlanta Fed wage tracker showing earnings through August continued growing at a 5.7% annual pace, a rate some policymakers feel is inconsistent with the Fed's 2% inflation target.
In addition to market-based expectations, more economists are also now anticipating a 75-basis-point increase this month.
Economists at Jefferies and Nomuraon Thursday changed their previous view that the Fed would downshift to a half-percentage-point hike after larger increases in June and July, following on the heels of Goldman Sachs economists on Wednesday.
"The U.S. is in a luxurious position of a continued strong labor market ... there’s a very good chance the Fed can bring down inflation without causing a significant recession," said Oliver Pursche, senior vice president at Wealthspire Advisors in New York.
"The economy and the labor market can absorb a 75-basis-point hike."
VOLCKER'S SHADOW
The issue confronting the Fed now is just how high and how fast it will need to push borrowing costs to control the worst outbreak of inflation since the 1980s, and whether the monetary tightening can be done without triggering a recession and steep rise in unemployment - a so-called "soft landing."
New research suggests, however, that the hopeful scenario is out of reach, with a jobless rate that may have to double from the current 3.7% to dependably lower inflation.
The updated Fed projections due to be issued at the end of this month's policy meeting will show if officials now see a risk of rising joblessness as well.
Powell said he continues to hold out hope it can be avoided.
Referring to former Fed Chair Paul Volcker's fight against inflation in the early 1980s, when Fed policy triggered a recession and the unemployment rate topped 10%, Powell noted that Volcker was trying to uproot years of rising inflation expectations that were feeding higher prices and wages.
Volcker, who was widely credited with winning that battle, "followed several failed attempts" by earlier heads of the Fed to lower inflation, Powell said.
Powell said that because inflation expectations this time remain largely anchored around the central bank's 2% target, the outcome could be better.
"We think we can avoid the kind of very high social costs that Paul Volcker and the Fed had to bring into play" in the 1980s, Powell said.
But he added, as his colleagues have in recent remarks, that even if unemployment starts to rise more than expected, the Fed's focus will remain on price control.
"History cautions against prematurely loosening policy," he said.
Reporting by Howard Schneider; Additional reporting by Ann Saphir, Lindsay Dunsmuir and Stephen Culp; Editing by Chizu Nomiyama and Paul Simao
https://www.reuters.com/markets/us/feds ... 022-09-08/
"Fed's Powell hopeful inflation can be tamed without pain of Volcker era"
By Howard Schneider and Ann Saphir
September 8, 2022
WASHINGTON, Sept 8 (Reuters) - The Federal Reserve is "strongly committed" to fighting inflation, but there remains hope it can be done without the "very high social costs" involved in prior campaigns to control surging prices, Fed Chair Jerome Powell said on Thursday.
Powell, in a 40-minute webcast interview with Cato Institute President Peter Goettler, was not asked about the U.S. central bank's policy meeting later this month, when it is expected to raise its target interest rate by either half or three-quarters of a percentage point, and the Fed chief did not volunteer any information on his preference.
Investors in contracts tied to the Fed's policy rate currently anticipate the larger 75-basis-point increase, an expectation that rose through the day after the European Central Bank hiked its policy rate by three-quarters of a percentage point, and a decline in U.S. weekly jobless claims pointed to continuing strength in the labor market.
But Powell did restate what has now become the Fed's message of the moment: Policymakers won't back down on planned rate increases.
"We need to act now, forthrightly, strongly as we have been doing, and we need to keep at it until the job is done," Powell said.
"The Fed has and accepts responsibility for price stability."
"My colleagues and I are strongly committed to this project and we will keep at it until the job is done."
The Fed will hold its next policy meeting on Sept. 20-21, when it will issue updated economic projections and almost certainly announce the fifth consecutive increase in the target federal funds rate.
The release of a monthly U.S. consumer price inflation report next week will be the final major piece of data for policymakers to evaluate in making that decision.
Information since the Fed's July 26-27 meeting has given some small sense that the pace of inflation, which has been running at 40-year highs, may be slowing, but not enough for policymakers to feel confident it has peaked.
The job market, meanwhile, remains strong, with an Atlanta Fed wage tracker showing earnings through August continued growing at a 5.7% annual pace, a rate some policymakers feel is inconsistent with the Fed's 2% inflation target.
In addition to market-based expectations, more economists are also now anticipating a 75-basis-point increase this month.
Economists at Jefferies and Nomuraon Thursday changed their previous view that the Fed would downshift to a half-percentage-point hike after larger increases in June and July, following on the heels of Goldman Sachs economists on Wednesday.
"The U.S. is in a luxurious position of a continued strong labor market ... there’s a very good chance the Fed can bring down inflation without causing a significant recession," said Oliver Pursche, senior vice president at Wealthspire Advisors in New York.
"The economy and the labor market can absorb a 75-basis-point hike."
VOLCKER'S SHADOW
The issue confronting the Fed now is just how high and how fast it will need to push borrowing costs to control the worst outbreak of inflation since the 1980s, and whether the monetary tightening can be done without triggering a recession and steep rise in unemployment - a so-called "soft landing."
New research suggests, however, that the hopeful scenario is out of reach, with a jobless rate that may have to double from the current 3.7% to dependably lower inflation.
The updated Fed projections due to be issued at the end of this month's policy meeting will show if officials now see a risk of rising joblessness as well.
Powell said he continues to hold out hope it can be avoided.
Referring to former Fed Chair Paul Volcker's fight against inflation in the early 1980s, when Fed policy triggered a recession and the unemployment rate topped 10%, Powell noted that Volcker was trying to uproot years of rising inflation expectations that were feeding higher prices and wages.
Volcker, who was widely credited with winning that battle, "followed several failed attempts" by earlier heads of the Fed to lower inflation, Powell said.
Powell said that because inflation expectations this time remain largely anchored around the central bank's 2% target, the outcome could be better.
"We think we can avoid the kind of very high social costs that Paul Volcker and the Fed had to bring into play" in the 1980s, Powell said.
But he added, as his colleagues have in recent remarks, that even if unemployment starts to rise more than expected, the Fed's focus will remain on price control.
"History cautions against prematurely loosening policy," he said.
Reporting by Howard Schneider; Additional reporting by Ann Saphir, Lindsay Dunsmuir and Stephen Culp; Editing by Chizu Nomiyama and Paul Simao
https://www.reuters.com/markets/us/feds ... 022-09-08/
Re: THE FEDERAL RESERVE
REUTERS
"Fed 'could very well' hike rates by 75 basis points this month, Evans says"
Reuters
September 8, 2022
Sept 8 (Reuters) - Chicago Federal Reserve President Charles Evans on Thursday joined his fellow U.S. central bank policymakers in saying that getting high inflation down is "job one," and to do so the Fed "could very well" raise interest rates by another 75 basis points this month.
There is a "decent chance" the result won't be a recession, Evans said at an economic forum held at the College of Dupage in Glen Ellyn, Illinois.
"We don't want to unnecessarily restrict the economy," he said.
"But we do need to be concerned about the high inflation environment," where inflation, currently at 6.3% by the Fed's preferred measure, has been running above the central bank's 2% goal since last spring.
Saying that he had not yet made up his mind on the right move at the Sept. 20-21 policy meeting, Evans made clear the point is that the Fed's policy rate - now in the 2.25%-2.50% range - must rise to what he feels should be a 3.25%-3.50% range this year and to about 4.00% next year.
The U.S. unemployment rate, now at 3.7%, will also climb, but only as high as about 4.5%, much less than could be expected if the inflation battle were down to the Fed's rate hikes alone, Evans said.
He added that he expects inflation to fall to below 3% next year, due not just to the Fed's rate hikes but also as pandemic-tangled supply chains, a key driver of inflation globally, become unstuck.
As for U.S. growth, he said, "I think we'll muddle through" with GDP growing about a half a percent this year and not contracting.
Reporting by Ann Saphir; Editing by Paul Simao
https://www.reuters.com/markets/europe/ ... 022-09-08/
"Fed 'could very well' hike rates by 75 basis points this month, Evans says"
Reuters
September 8, 2022
Sept 8 (Reuters) - Chicago Federal Reserve President Charles Evans on Thursday joined his fellow U.S. central bank policymakers in saying that getting high inflation down is "job one," and to do so the Fed "could very well" raise interest rates by another 75 basis points this month.
There is a "decent chance" the result won't be a recession, Evans said at an economic forum held at the College of Dupage in Glen Ellyn, Illinois.
"We don't want to unnecessarily restrict the economy," he said.
"But we do need to be concerned about the high inflation environment," where inflation, currently at 6.3% by the Fed's preferred measure, has been running above the central bank's 2% goal since last spring.
Saying that he had not yet made up his mind on the right move at the Sept. 20-21 policy meeting, Evans made clear the point is that the Fed's policy rate - now in the 2.25%-2.50% range - must rise to what he feels should be a 3.25%-3.50% range this year and to about 4.00% next year.
The U.S. unemployment rate, now at 3.7%, will also climb, but only as high as about 4.5%, much less than could be expected if the inflation battle were down to the Fed's rate hikes alone, Evans said.
He added that he expects inflation to fall to below 3% next year, due not just to the Fed's rate hikes but also as pandemic-tangled supply chains, a key driver of inflation globally, become unstuck.
As for U.S. growth, he said, "I think we'll muddle through" with GDP growing about a half a percent this year and not contracting.
Reporting by Ann Saphir; Editing by Paul Simao
https://www.reuters.com/markets/europe/ ... 022-09-08/
Re: THE FEDERAL RESERVE
REUTERS
"RPT-On Fed rate hikes, George calls for steadiness over speed"
By Reuters Staff
SEPTEMBER 9, 2022
Sept 9 (Reuters) - Kansas City Federal Reserve Bank President Esther George on Friday made the case for a “sustained policy response” to high inflation, in what will be her final remarks before the Fed’s next rate-setting meeting in two weeks.
“We will have to determine the course of our policy through observation rather than reference to theoretical models or pre-pandemic trends,” George said in remarks prepared for delivery at the Peterson Institute for International Economics, noting that it would be “likely just speculation” to weigh in on how high the Fed’s policy rate will ultimately need to do.
“Given the likely lags in the passthrough of tighter monetary policy to real economic conditions, this argues for steadiness and purposefulness over speed,” she said.
As the Fed has raised rates at its fastest pace since the 1980s to fight the worst bout of inflation since then, George has been a constant voice cautioning against sharp rate hikes that could add to volatility.
The Fed in two weeks time is expected to choose between delivering a third straight 75 basis point rate hike that would lift the target range for the policy rate to 3%-3.25%, and a smaller half-point hike.
Markets broadly expect the former, and so do many economists, with some noting that Fed Chair Jerome Powell speaking earlier this week did not push back against those market expectations.
George’s remarks signal her support for a slower but perhaps more sustained response to pandemic-driven price pressures.
In her remarks George also called for the Fed to signal clear “resolve” to reduce its balance sheet.
“There may be benefits to announcing the desired reserve levels as the balance sheet shrinks, giving banks time to prepare to operate with significantly fewer reserves,” she said.
(Reporting by Ann Saphir; Editing by Chizu Nomiyama)
https://www.reuters.com/article/usa-fed ... SL1N30G1DS
"RPT-On Fed rate hikes, George calls for steadiness over speed"
By Reuters Staff
SEPTEMBER 9, 2022
Sept 9 (Reuters) - Kansas City Federal Reserve Bank President Esther George on Friday made the case for a “sustained policy response” to high inflation, in what will be her final remarks before the Fed’s next rate-setting meeting in two weeks.
“We will have to determine the course of our policy through observation rather than reference to theoretical models or pre-pandemic trends,” George said in remarks prepared for delivery at the Peterson Institute for International Economics, noting that it would be “likely just speculation” to weigh in on how high the Fed’s policy rate will ultimately need to do.
“Given the likely lags in the passthrough of tighter monetary policy to real economic conditions, this argues for steadiness and purposefulness over speed,” she said.
As the Fed has raised rates at its fastest pace since the 1980s to fight the worst bout of inflation since then, George has been a constant voice cautioning against sharp rate hikes that could add to volatility.
The Fed in two weeks time is expected to choose between delivering a third straight 75 basis point rate hike that would lift the target range for the policy rate to 3%-3.25%, and a smaller half-point hike.
Markets broadly expect the former, and so do many economists, with some noting that Fed Chair Jerome Powell speaking earlier this week did not push back against those market expectations.
George’s remarks signal her support for a slower but perhaps more sustained response to pandemic-driven price pressures.
In her remarks George also called for the Fed to signal clear “resolve” to reduce its balance sheet.
“There may be benefits to announcing the desired reserve levels as the balance sheet shrinks, giving banks time to prepare to operate with significantly fewer reserves,” she said.
(Reporting by Ann Saphir; Editing by Chizu Nomiyama)
https://www.reuters.com/article/usa-fed ... SL1N30G1DS
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Waller: need aggressive rate hikes now while economy can take it"
Reuters
September 9, 2022
Sept 9 (Reuters) - If the Federal Reserve is able to keep the unemployment rate below 5%, it can be aggressive on bringing down inflation but after that tradeoffs will appear, Fed Governor Christopher Waller said on Friday.
"If the unemployment were to stay under 5%, I think we could be really aggressive on inflation."
"Once it gets over 5 there are going to be obvious pressures to start making tradeoffs."
"If we don't get inflation down, we're in trouble," Waller said in remarks following a speech to the Institute for Advanced Studies in Austria.
The Fed should be aggressive with rate hikes while the economy "can take a punch," he said.
Reporting by Lindsay Dunsmuir and Ann Saphir; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/feds ... 022-09-09/
"Fed's Waller: need aggressive rate hikes now while economy can take it"
Reuters
September 9, 2022
Sept 9 (Reuters) - If the Federal Reserve is able to keep the unemployment rate below 5%, it can be aggressive on bringing down inflation but after that tradeoffs will appear, Fed Governor Christopher Waller said on Friday.
"If the unemployment were to stay under 5%, I think we could be really aggressive on inflation."
"Once it gets over 5 there are going to be obvious pressures to start making tradeoffs."
"If we don't get inflation down, we're in trouble," Waller said in remarks following a speech to the Institute for Advanced Studies in Austria.
The Fed should be aggressive with rate hikes while the economy "can take a punch," he said.
Reporting by Lindsay Dunsmuir and Ann Saphir; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/feds ... 022-09-09/
Re: THE FEDERAL RESERVE
REUTERS
"U.S. consumers' inflation expectations fall again, NY Fed says"
Reuters
September 12, 2022
Sept 12 (Reuters) - U.S. consumers' inflation expectations slid further in August as gasoline prices extended their steep decline from June's record high, a development likely to be welcomed by Federal Reserve policymakers weighing how big an interest rate hike to deliver next week.
Consumers in August saw inflation at 5.75% over the next 12 months, down from 6.2% in July and the lowest rate since October 2021, the New York Fed's monthly consumer expectations survey showed on Monday.
They also foresaw price increases averaging 2.8% over the next three years - the lowest pace since late 2020 - after pegging inflation over that horizon at 3.2% in July.
Moreover, consumers last month saw price increases running at 2% over the next five years, matching the Fed's own targeted inflation level.
That was down from 2.35% in July and 3% at the start of the year when the New York Fed first started asking about inflation expectations over that time frame.
Those outcomes may bring some relief to U.S. central bank officials who have been fretting that the highest inflation in 40 years might alter consumers' perceptions of how sticky the current price shocks may be, which would make policymakers' job of containing inflation all the more difficult.
The Federal Open Market Committee - the Fed's policy-setting arm - is expected at its Sept. 20-21 meeting to raise the central bank's benchmark overnight lending rate again from the current range of 2.25%-2.50%.
Futures contracts tied to the Fed policy rate this month barely budged after the release of the New York Fed survey, as traders continued to overwhelmingly price in a third consecutive 75-basis-point hike from the central bank next week.
A week before the Fed's June 14-15 policy meeting, elevated readings of consumer inflation expectations in the New York Fed's survey results contributed to a last-minute decision to ramp up the size of the rate hike. Up to that point, most forecasters had expected only a 50-basis-point increase.
The New York Fed's survey for August was released a day before the U.S. Labor Department was due to issue consumer price index data for that month.
Economists polled by Reuters forecast the CPI would rise 8.1% in the 12 months through August.
The CPI jumped 8.5% in the 12 months through July.
LABOR MARKET
The New York Fed's survey also brought some optimistic news for the labor market, which Fed officials are expecting to weaken somewhat as they raise interest rates to lower overall activity and demand.
Consumers responding to the New York Fed questionnaire in August saw a lower likelihood that they would lose their job in the next year than in July and a higher probability of finding a new job should they lose their current employment.
That signals consumers may be buying into the Fed's so-called "soft landing" aspiration for the economy, in which its policy tightening delivers a relatively modest setback to employment but does not trigger the sharp rise in unemployment usually associated with a recession.
Moreover, the percentage of those seeing it likely that they would quit their current job dropped to the lowest since March 2021.
That's important because Fed officials believe the high rate of churn in labor turnover is exacerbating an already-tight labor market that features two open jobs for every available unemployed person seeking work.
Consumers were also more optimistic about the outlook for their personal financial well-being, according to the survey.
Reporting by Dan Burns; Editing by Paul Simao
https://www.reuters.com/markets/us/us-c ... 022-09-12/
"U.S. consumers' inflation expectations fall again, NY Fed says"
Reuters
September 12, 2022
Sept 12 (Reuters) - U.S. consumers' inflation expectations slid further in August as gasoline prices extended their steep decline from June's record high, a development likely to be welcomed by Federal Reserve policymakers weighing how big an interest rate hike to deliver next week.
Consumers in August saw inflation at 5.75% over the next 12 months, down from 6.2% in July and the lowest rate since October 2021, the New York Fed's monthly consumer expectations survey showed on Monday.
They also foresaw price increases averaging 2.8% over the next three years - the lowest pace since late 2020 - after pegging inflation over that horizon at 3.2% in July.
Moreover, consumers last month saw price increases running at 2% over the next five years, matching the Fed's own targeted inflation level.
That was down from 2.35% in July and 3% at the start of the year when the New York Fed first started asking about inflation expectations over that time frame.
Those outcomes may bring some relief to U.S. central bank officials who have been fretting that the highest inflation in 40 years might alter consumers' perceptions of how sticky the current price shocks may be, which would make policymakers' job of containing inflation all the more difficult.
The Federal Open Market Committee - the Fed's policy-setting arm - is expected at its Sept. 20-21 meeting to raise the central bank's benchmark overnight lending rate again from the current range of 2.25%-2.50%.
Futures contracts tied to the Fed policy rate this month barely budged after the release of the New York Fed survey, as traders continued to overwhelmingly price in a third consecutive 75-basis-point hike from the central bank next week.
A week before the Fed's June 14-15 policy meeting, elevated readings of consumer inflation expectations in the New York Fed's survey results contributed to a last-minute decision to ramp up the size of the rate hike. Up to that point, most forecasters had expected only a 50-basis-point increase.
The New York Fed's survey for August was released a day before the U.S. Labor Department was due to issue consumer price index data for that month.
Economists polled by Reuters forecast the CPI would rise 8.1% in the 12 months through August.
The CPI jumped 8.5% in the 12 months through July.
LABOR MARKET
The New York Fed's survey also brought some optimistic news for the labor market, which Fed officials are expecting to weaken somewhat as they raise interest rates to lower overall activity and demand.
Consumers responding to the New York Fed questionnaire in August saw a lower likelihood that they would lose their job in the next year than in July and a higher probability of finding a new job should they lose their current employment.
That signals consumers may be buying into the Fed's so-called "soft landing" aspiration for the economy, in which its policy tightening delivers a relatively modest setback to employment but does not trigger the sharp rise in unemployment usually associated with a recession.
Moreover, the percentage of those seeing it likely that they would quit their current job dropped to the lowest since March 2021.
That's important because Fed officials believe the high rate of churn in labor turnover is exacerbating an already-tight labor market that features two open jobs for every available unemployed person seeking work.
Consumers were also more optimistic about the outlook for their personal financial well-being, according to the survey.
Reporting by Dan Burns; Editing by Paul Simao
https://www.reuters.com/markets/us/us-c ... 022-09-12/
Re: THE FEDERAL RESERVE
CNBC
"Fed raises rates by another three-quarters of a percentage point, pledges more hikes to fight inflation"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, SEP 21 2022
KEY POINTS
* The Federal Reserve raised benchmark interest rates by another three-quarters of a percentage point and indicated it will keep hiking well above the current level.
* The central bank has been looking to bring down inflation, which is running near its highest levels since the early 1980s.
* Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point, of 4.6% in 2023. That implies a quarter-point rate rise next year but no decreases.
The Federal Reserve on Wednesday raised benchmark interest rates by another three-quarters of a percentage point and indicated it will keep hiking well above the current level.
In its quest to bring down inflation running near its highest levels since the early 1980s, the central bank took its federal funds rate up to a range of 3%-3.25%, the highest it has been since early 2008, following the third consecutive 0.75 percentage point move.
Stocks seesawed following the announcement, with the Dow Jones Industrial Average most recently down slightly.
The market swung as Fed Chairman Jerome Powell discussed the outlook for interest rates and the economy.
Traders have been concerned that the Fed is remaining more hawkish for longer than some had anticipated.
Projections from the meeting indicated that the Fed expects to raise rates by at least 1.25 percentage points in its two remaining meetings this year.
‘Main message has not changed’
“My main message has not changed since Jackson Hole,” Powell said in his post-meeting news conference, referring to his policy speech at the Fed’s annual symposium in August in Wyoming.
“The FOMC is strongly resolved to bring inflation down to 2%, and we will keep at it until the job is done.”
The increases that started in March — and from a point of near-zero — mark the most aggressive Fed tightening since it started using the overnight funds rate as its principal policy tool in 1990.
The only comparison was in 1994, when the Fed hiked a total of 2.25 percentage points; it would begin cutting rates by July of the following year.
Along with the massive rate increases, Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point, of 4.6% in 2023.
That implies a quarter-point rate hike next year but no decreases.
The “dot plot” of individual members’ expectations doesn’t point to rate cuts until 2024.
Powell and his colleagues have emphasized in recent weeks that it is unlikely rate cuts will happen next year, as the market had been pricing.
Federal Open Market Committee members indicate they expect the rate hikes to have consequences.
The funds rate on its face addresses the rates that banks charge each other for overnight lending, but it bleeds through to many consumer adjustable-rate debt instruments, such as home equity loans, credit cards and auto financing.
In their quarterly updates of estimates for rates and economic data, officials coalesced around expectations for the unemployment rate to rise to 4.4% by next year from its current 3.7%.
Increases of that magnitude often are accompanied by recessions.
Along with that, they see GDP growth slowing to 0.2% for 2022, rising slightly in the following years to a longer-term rate of just 1.8%.
The revised forecast is a sharp cut from the 1.7% estimate in June and comes following two consecutive quarters of negative growth, a commonly accepted definition of recession.
Powell conceded a recession is possible, particularly if the Fed has to keep tightening aggressively.
“No one knows whether this process will lead to a recession or, if so, how significant that recession will be,” he said.
The hikes also come with the hopes that headline inflation will drift down to 5.4% this year, as measured by the Fed’s preferred personal consumption expenditures price index, which showed inflation at 6.3% in July.
The summary of economic projections then sees inflation falling back to the Fed’s 2% goal by 2025.
Core inflation excluding food and energy is expected to decline to 4.5% this year, little changed from the current 4.6% level, before ultimately falling to 2.1% by 2025.
(The PCE reading has been running well below the consumer price index.)
The reduction in economic growth came even though the FOMC’s statement massaged language that in July had described spending and production as having “softened.”
This meeting’s statement noted: “Recent indicators point to modest growth in spending and production.”
Those were the only changes in a statement that received unanimous approval.
Otherwise, the statement continued to describe job gains as “robust” and noted that “inflation remains elevated.”
It also repeated that “ongoing increases in the target rate will be appropriate.”
’75 is the new 25′
The dot plot showed virtually all members on board with the higher rates in the near term, though there were some variations in subsequent years.
Six of the 19 “dots” were in favor of taking rates to a 4.75%-5% range next year, but the central tendency was to 4.6%, which would put rates in the 4.5%-4.75% area.
The Fed targets its fund rate in quarter-point ranges.
The chart indicated as many as three rate cuts in 2024 and four more in 2025, to take the longer-run funds rate down to a median outlook of 2.9%.
Markets have been bracing for a more aggressive Fed.
“I believe 75 is the new 25 until something breaks, and nothing has broken yet,” said Bill Zox, portfolio manager at Brandywine Global, in reference to the size of the rate hikes.
“The Fed is not anywhere close to a pause or a pivot."
"They are laser-focused on breaking inflation."
"A key question is what else might they break.“
Traders had fully priced in the 0.75 percentage point move and even had assigned an 18% chance of a full percentage point hike, according to CME Group data.
Futures contracts just before Wednesday’s meeting implied a 4.545% funds rate by April 2023.
The moves come amid stubbornly high inflation that Powell and his colleagues spent much of last year dismissing as “transitory.”
Officials relented in March of this year, with a quarter-point rise that was the first increase since taking rates to zero in the early days of the Covid pandemic.
Along with the rate increases, the Fed has been reducing the amount of bond holdings it has accumulated over the years.
September marked the beginning of full-speed “quantitative tightening,” as it is known in markets, with up to $95 billion a month in proceeds from maturing bonds being allowed to roll off the Fed’s $8.9 trillion balance sheet.
Data also provided by Reuters
https://www.cnbc.com/2022/09/21/fed-rat ... 2022-.html
"Fed raises rates by another three-quarters of a percentage point, pledges more hikes to fight inflation"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, SEP 21 2022
KEY POINTS
* The Federal Reserve raised benchmark interest rates by another three-quarters of a percentage point and indicated it will keep hiking well above the current level.
* The central bank has been looking to bring down inflation, which is running near its highest levels since the early 1980s.
* Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point, of 4.6% in 2023. That implies a quarter-point rate rise next year but no decreases.
The Federal Reserve on Wednesday raised benchmark interest rates by another three-quarters of a percentage point and indicated it will keep hiking well above the current level.
In its quest to bring down inflation running near its highest levels since the early 1980s, the central bank took its federal funds rate up to a range of 3%-3.25%, the highest it has been since early 2008, following the third consecutive 0.75 percentage point move.
Stocks seesawed following the announcement, with the Dow Jones Industrial Average most recently down slightly.
The market swung as Fed Chairman Jerome Powell discussed the outlook for interest rates and the economy.
Traders have been concerned that the Fed is remaining more hawkish for longer than some had anticipated.
Projections from the meeting indicated that the Fed expects to raise rates by at least 1.25 percentage points in its two remaining meetings this year.
‘Main message has not changed’
“My main message has not changed since Jackson Hole,” Powell said in his post-meeting news conference, referring to his policy speech at the Fed’s annual symposium in August in Wyoming.
“The FOMC is strongly resolved to bring inflation down to 2%, and we will keep at it until the job is done.”
The increases that started in March — and from a point of near-zero — mark the most aggressive Fed tightening since it started using the overnight funds rate as its principal policy tool in 1990.
The only comparison was in 1994, when the Fed hiked a total of 2.25 percentage points; it would begin cutting rates by July of the following year.
Along with the massive rate increases, Fed officials signaled the intention of continuing to hike until the funds level hits a “terminal rate,” or end point, of 4.6% in 2023.
That implies a quarter-point rate hike next year but no decreases.
The “dot plot” of individual members’ expectations doesn’t point to rate cuts until 2024.
Powell and his colleagues have emphasized in recent weeks that it is unlikely rate cuts will happen next year, as the market had been pricing.
Federal Open Market Committee members indicate they expect the rate hikes to have consequences.
The funds rate on its face addresses the rates that banks charge each other for overnight lending, but it bleeds through to many consumer adjustable-rate debt instruments, such as home equity loans, credit cards and auto financing.
In their quarterly updates of estimates for rates and economic data, officials coalesced around expectations for the unemployment rate to rise to 4.4% by next year from its current 3.7%.
Increases of that magnitude often are accompanied by recessions.
Along with that, they see GDP growth slowing to 0.2% for 2022, rising slightly in the following years to a longer-term rate of just 1.8%.
The revised forecast is a sharp cut from the 1.7% estimate in June and comes following two consecutive quarters of negative growth, a commonly accepted definition of recession.
Powell conceded a recession is possible, particularly if the Fed has to keep tightening aggressively.
“No one knows whether this process will lead to a recession or, if so, how significant that recession will be,” he said.
The hikes also come with the hopes that headline inflation will drift down to 5.4% this year, as measured by the Fed’s preferred personal consumption expenditures price index, which showed inflation at 6.3% in July.
The summary of economic projections then sees inflation falling back to the Fed’s 2% goal by 2025.
Core inflation excluding food and energy is expected to decline to 4.5% this year, little changed from the current 4.6% level, before ultimately falling to 2.1% by 2025.
(The PCE reading has been running well below the consumer price index.)
The reduction in economic growth came even though the FOMC’s statement massaged language that in July had described spending and production as having “softened.”
This meeting’s statement noted: “Recent indicators point to modest growth in spending and production.”
Those were the only changes in a statement that received unanimous approval.
Otherwise, the statement continued to describe job gains as “robust” and noted that “inflation remains elevated.”
It also repeated that “ongoing increases in the target rate will be appropriate.”
’75 is the new 25′
The dot plot showed virtually all members on board with the higher rates in the near term, though there were some variations in subsequent years.
Six of the 19 “dots” were in favor of taking rates to a 4.75%-5% range next year, but the central tendency was to 4.6%, which would put rates in the 4.5%-4.75% area.
The Fed targets its fund rate in quarter-point ranges.
The chart indicated as many as three rate cuts in 2024 and four more in 2025, to take the longer-run funds rate down to a median outlook of 2.9%.
Markets have been bracing for a more aggressive Fed.
“I believe 75 is the new 25 until something breaks, and nothing has broken yet,” said Bill Zox, portfolio manager at Brandywine Global, in reference to the size of the rate hikes.
“The Fed is not anywhere close to a pause or a pivot."
"They are laser-focused on breaking inflation."
"A key question is what else might they break.“
Traders had fully priced in the 0.75 percentage point move and even had assigned an 18% chance of a full percentage point hike, according to CME Group data.
Futures contracts just before Wednesday’s meeting implied a 4.545% funds rate by April 2023.
The moves come amid stubbornly high inflation that Powell and his colleagues spent much of last year dismissing as “transitory.”
Officials relented in March of this year, with a quarter-point rise that was the first increase since taking rates to zero in the early days of the Covid pandemic.
Along with the rate increases, the Fed has been reducing the amount of bond holdings it has accumulated over the years.
September marked the beginning of full-speed “quantitative tightening,” as it is known in markets, with up to $95 billion a month in proceeds from maturing bonds being allowed to roll off the Fed’s $8.9 trillion balance sheet.
Data also provided by Reuters
https://www.cnbc.com/2022/09/21/fed-rat ... 2022-.html
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Powell: U.S. housing market headed for 'correction'"
By Reuters Staff
SEPTEMBER 21, 2022
(Reuters) - Federal Reserve Chair Jerome Powell on Wednesday said the U.S. housing market will probably go through a “correction” after a period of “red hot” price increases that have put home ownership out of reach for many Americans.
“There was a big imbalance ... housing prices were going up at an unsustainably fast level,” Powell said at a news conference following the Fed’s decision to raise its policy rate by another 75 basis points.
“For the longer term what we need is supply and demand to get better aligned so housing prices go up at a reasonable level, at a reasonable pace and people can afford houses again."
"We probably in the housing market have to go through a correction to get back to that place.”
The Fed’s rate hikes this year have had their biggest impact on the housing sector, slowing sales and bringing prices a bit lower.
Shelter inflation will remain high for some time, Powell said.
Reporting by Ann Saphir and Lindsay Dunsmuir; Editing by Leslie Adler and Andrea Ricci
https://www.reuters.com/article/usa-fed ... SL1N30S2EY
"Fed's Powell: U.S. housing market headed for 'correction'"
By Reuters Staff
SEPTEMBER 21, 2022
(Reuters) - Federal Reserve Chair Jerome Powell on Wednesday said the U.S. housing market will probably go through a “correction” after a period of “red hot” price increases that have put home ownership out of reach for many Americans.
“There was a big imbalance ... housing prices were going up at an unsustainably fast level,” Powell said at a news conference following the Fed’s decision to raise its policy rate by another 75 basis points.
“For the longer term what we need is supply and demand to get better aligned so housing prices go up at a reasonable level, at a reasonable pace and people can afford houses again."
"We probably in the housing market have to go through a correction to get back to that place.”
The Fed’s rate hikes this year have had their biggest impact on the housing sector, slowing sales and bringing prices a bit lower.
Shelter inflation will remain high for some time, Powell said.
Reporting by Ann Saphir and Lindsay Dunsmuir; Editing by Leslie Adler and Andrea Ricci
https://www.reuters.com/article/usa-fed ... SL1N30S2EY