REUTERS
"Fed's Kashkari says he is not ready to pause on rate hikes"
Reuters
October 18, 2022
Oct 18 (Reuters) - Minneapolis Federal Reserve Bank President Neel Kashkari on Tuesday said he needs to see "some compelling evidence" that underlying inflation has peaked before he would be comfortable stopping the U.S. central bank's interest-rate hikes.
"I'm not ready to pause," Kashkari said at a panel at the Women Corporate Directors, Minnesota Chapter, in Minneapolis.
"We have to get inflation down."
Reporting by Ann Saphir; Editing by Mark Porter
https://www.reuters.com/markets/us/feds ... 022-10-18/
THE FEDERAL RESERVE
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Bostic: U.S. needs to work through labor market 'shuffle and churn'"
Reuters
October 18, 2022
WASHINGTON, Oct 18 (Reuters) - The U.S. labor market is still in the middle of adjusting to new wage and occupation trends that grew out of the pandemic as large firms raise wages and draw workers away from jobs that pay less, Atlanta Fed president Raphael Bostic said on Tuesday.
Sketching out a problem that could linger as the Fed tries to battle high inflation, Bostic told an Urban Institute conference "there's a lot of shuffle and churn that's going on."
"That's creating a lot of tension and disequilibrium in the market place, and we've got to work through all that."
The economic reopening from the pandemic has included both high levels of job quitting by workers, high vacancy rates among employers, and strong wage growth.
Reporting by Howard Schneider
https://www.reuters.com/markets/us/feds ... 022-10-18/
"Fed's Bostic: U.S. needs to work through labor market 'shuffle and churn'"
Reuters
October 18, 2022
WASHINGTON, Oct 18 (Reuters) - The U.S. labor market is still in the middle of adjusting to new wage and occupation trends that grew out of the pandemic as large firms raise wages and draw workers away from jobs that pay less, Atlanta Fed president Raphael Bostic said on Tuesday.
Sketching out a problem that could linger as the Fed tries to battle high inflation, Bostic told an Urban Institute conference "there's a lot of shuffle and churn that's going on."
"That's creating a lot of tension and disequilibrium in the market place, and we've got to work through all that."
The economic reopening from the pandemic has included both high levels of job quitting by workers, high vacancy rates among employers, and strong wage growth.
Reporting by Howard Schneider
https://www.reuters.com/markets/us/feds ... 022-10-18/
Re: THE FEDERAL RESERVE
REUTERS
"Fed says firms gloomier on outlook, but inflation pressures easing"
Reuters
October 19, 2022
Oct 19 (Reuters) - U.S. economic activity expanded modestly in recent weeks, although it was flat in some regions and declined in a couple of others, the Federal Reserve said on Wednesday in a report that showed firms growing more pessimistic about the outlook.
Moreover, the U.S. central bank's latest collection of anecdotes from contacts across its 12 districts, known as the "Beige Book," noted inflation pressures had eased somewhat and were expected to continue doing so, a key "soft data" indication that the Fed's aggressive interest rate hikes may have started to turn the tide against the highest inflation in 40 years.
"Some contacts noted solid pricing power over the past six weeks, while others said cost pass-through was becoming more difficult as customers push back," said the report, which was compiled by the Dallas Fed from contributions received through Oct. 7.
"Looking ahead, expectations were for price increases to generally moderate."
That was a notable contrast with the previous report from late summer that had concluded most Fed contacts then had "expected price pressures to persist at least through the end of the year."
The view that inflation was moderating was accompanied by concerns over the economic cost of the Fed's rate hikes aimed at bringing those price pressures to heel: Demand was generally seen as softening.
"Outlooks grew more pessimistic amidst growing concerns about weakening demand," the Fed said.
The central bank's latest summary of observations from its business, community and labor contacts was released in the run-up to its Nov. 1-2 policy meeting.
IMPACT OF RATE HIKES
With the latest data showing inflation by the Fed's preferred measure continuing to run at more than three times the central bank's 2% target, despite what has already been the most aggressive round of Fed policy tightening in 40 years, the report may do little to temper expectations for a fourth straight 75-basis-point rate hike in three weeks.
Policymakers have signaled they will keep raising rates until they see inflation cooling, even as they acknowledge that higher borrowing costs will likely translate to slower growth, softer labor markets and a likely increase in unemployment.
U.S. job growth has been strong, and the unemployment rate in September fell to 3.5%.
While underlying price pressures for goods have eased as supply chains heal, those of services, which tend to be stickier, continue to rise rapidly.
But as Fed policymakers lift their benchmark overnight lending rate, currently in the 3.00%-3.25% range, nearer to the 4.50%-5.00% range that most of them think will be needed to drive down inflation, they and outside analysts are looking for evidence that the policy tightening is starting to do its work.
Such signs could usher in a slower pace of rate hikes that Fed Chair Jerome Powell has said will come "at some point."
So far, they have been hard to see in much of the broad economic data beyond that tracking housing, where a sharp deceleration is underway.
Reports into the Cleveland Fed, for one, said higher prices and interest rates were constraining demand, not only for housing but increasingly for motor vehicles as well.
"Auto dealers reported flat or decreasing sales, noting that consumers had become wary of higher payments because of increased interest rates and higher vehicle prices," the Cleveland Fed reported.
Overall, higher interest rates as a factor affecting demand, especially in both the residential and commercial property and construction sectors, earned more than two dozen mentions in the latest Beige Book.
The report showed the job market remained tight on balance, though perhaps not as stringent as before.
There were also early indications of employers preparing for a downturn in activity with spot reports of hiring freezes and some layoffs.
The Philadelphia Fed said: "Contacts described a heightened expectation of a recession, and businesses intensified preparations for a downturn: Multiple firms instituted a hiring freeze, others initiated planning for layoffs if business conditions did not improve, and one firm noted broad-based layoffs were already under way."
Reporting by Dan Burns; Editing by Paul Simao
https://www.reuters.com/markets/us/us-f ... 022-10-19/
"Fed says firms gloomier on outlook, but inflation pressures easing"
Reuters
October 19, 2022
Oct 19 (Reuters) - U.S. economic activity expanded modestly in recent weeks, although it was flat in some regions and declined in a couple of others, the Federal Reserve said on Wednesday in a report that showed firms growing more pessimistic about the outlook.
Moreover, the U.S. central bank's latest collection of anecdotes from contacts across its 12 districts, known as the "Beige Book," noted inflation pressures had eased somewhat and were expected to continue doing so, a key "soft data" indication that the Fed's aggressive interest rate hikes may have started to turn the tide against the highest inflation in 40 years.
"Some contacts noted solid pricing power over the past six weeks, while others said cost pass-through was becoming more difficult as customers push back," said the report, which was compiled by the Dallas Fed from contributions received through Oct. 7.
"Looking ahead, expectations were for price increases to generally moderate."
That was a notable contrast with the previous report from late summer that had concluded most Fed contacts then had "expected price pressures to persist at least through the end of the year."
The view that inflation was moderating was accompanied by concerns over the economic cost of the Fed's rate hikes aimed at bringing those price pressures to heel: Demand was generally seen as softening.
"Outlooks grew more pessimistic amidst growing concerns about weakening demand," the Fed said.
The central bank's latest summary of observations from its business, community and labor contacts was released in the run-up to its Nov. 1-2 policy meeting.
IMPACT OF RATE HIKES
With the latest data showing inflation by the Fed's preferred measure continuing to run at more than three times the central bank's 2% target, despite what has already been the most aggressive round of Fed policy tightening in 40 years, the report may do little to temper expectations for a fourth straight 75-basis-point rate hike in three weeks.
Policymakers have signaled they will keep raising rates until they see inflation cooling, even as they acknowledge that higher borrowing costs will likely translate to slower growth, softer labor markets and a likely increase in unemployment.
U.S. job growth has been strong, and the unemployment rate in September fell to 3.5%.
While underlying price pressures for goods have eased as supply chains heal, those of services, which tend to be stickier, continue to rise rapidly.
But as Fed policymakers lift their benchmark overnight lending rate, currently in the 3.00%-3.25% range, nearer to the 4.50%-5.00% range that most of them think will be needed to drive down inflation, they and outside analysts are looking for evidence that the policy tightening is starting to do its work.
Such signs could usher in a slower pace of rate hikes that Fed Chair Jerome Powell has said will come "at some point."
So far, they have been hard to see in much of the broad economic data beyond that tracking housing, where a sharp deceleration is underway.
Reports into the Cleveland Fed, for one, said higher prices and interest rates were constraining demand, not only for housing but increasingly for motor vehicles as well.
"Auto dealers reported flat or decreasing sales, noting that consumers had become wary of higher payments because of increased interest rates and higher vehicle prices," the Cleveland Fed reported.
Overall, higher interest rates as a factor affecting demand, especially in both the residential and commercial property and construction sectors, earned more than two dozen mentions in the latest Beige Book.
The report showed the job market remained tight on balance, though perhaps not as stringent as before.
There were also early indications of employers preparing for a downturn in activity with spot reports of hiring freezes and some layoffs.
The Philadelphia Fed said: "Contacts described a heightened expectation of a recession, and businesses intensified preparations for a downturn: Multiple firms instituted a hiring freeze, others initiated planning for layoffs if business conditions did not improve, and one firm noted broad-based layoffs were already under way."
Reporting by Dan Burns; Editing by Paul Simao
https://www.reuters.com/markets/us/us-f ... 022-10-19/
Re: THE FEDERAL RESERVE
CNBC
"Fed’s Harker sees ‘lack of progress’ on inflation, expects aggressive rate hikes ahead"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED THU, OCT 20 2022
Philadelphia Federal Reserve President Patrick Harker on Thursday said higher interest rates have done little to keep inflation in check, so more increases will be needed.
“We are going to keep raising rates for a while,” the central bank official said in remarks for a speech in New Jersey.
“Given our frankly disappointing lack of progress on curtailing inflation, I expect we will be well above 4% by the end of the year.”
The latter comment was in reference to the fed funds rate, which currently is targeted in a range between 3%-3.25%.
Markets widely expect the Fed to approve a fourth consecutive 0.75 percentage point interest rate hike in early November, followed by another in December.
The expectation is that the Federal Open Market Committee, of which Harker is a nonvoting member this year, will then take rates a bit higher in 2023 before settling in a range around 4.5%-4.75%.
Harker indicated that those higher rates are likely to stay in place for an extended period.
“Sometime next year, we are going to stop hiking rates."
"At that point, I think we should hold at a restrictive rate for a while to let monetary policy do its work,” he said.
“It will take a while for the higher cost of capital to work its way through the economy."
"After that, if we have to, we can tighten further, based on the data.”
Inflation is currently running around its highest level in more than 40 years.
According to the Fed’s preferred gauge, headline personal consumption expenditures inflation is running at a 6.2% annual rate, while the core, excluding food and energy prices, is at 4.9%, both well above the central bank’s 2% target.
“Inflation will come down, but it will take some time to get to our target,” Harker said.
https://www.cnbc.com/2022/10/20/feds-ha ... ahead.html
"Fed’s Harker sees ‘lack of progress’ on inflation, expects aggressive rate hikes ahead"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED THU, OCT 20 2022
Philadelphia Federal Reserve President Patrick Harker on Thursday said higher interest rates have done little to keep inflation in check, so more increases will be needed.
“We are going to keep raising rates for a while,” the central bank official said in remarks for a speech in New Jersey.
“Given our frankly disappointing lack of progress on curtailing inflation, I expect we will be well above 4% by the end of the year.”
The latter comment was in reference to the fed funds rate, which currently is targeted in a range between 3%-3.25%.
Markets widely expect the Fed to approve a fourth consecutive 0.75 percentage point interest rate hike in early November, followed by another in December.
The expectation is that the Federal Open Market Committee, of which Harker is a nonvoting member this year, will then take rates a bit higher in 2023 before settling in a range around 4.5%-4.75%.
Harker indicated that those higher rates are likely to stay in place for an extended period.
“Sometime next year, we are going to stop hiking rates."
"At that point, I think we should hold at a restrictive rate for a while to let monetary policy do its work,” he said.
“It will take a while for the higher cost of capital to work its way through the economy."
"After that, if we have to, we can tighten further, based on the data.”
Inflation is currently running around its highest level in more than 40 years.
According to the Fed’s preferred gauge, headline personal consumption expenditures inflation is running at a 6.2% annual rate, while the core, excluding food and energy prices, is at 4.9%, both well above the central bank’s 2% target.
“Inflation will come down, but it will take some time to get to our target,” Harker said.
https://www.cnbc.com/2022/10/20/feds-ha ... ahead.html
Re: THE FEDERAL RESERVE
REUTERS
"St. Louis Fed says will 'think differently' about private events"
By Howard Schneider
October 20, 2022
WASHINGTON, Oct 20 (Reuters) - The St. Louis Federal Reserve said it would "think differently" about appearances by its president James Bullard at non-public events after news reports of his attendance at a private policy forum last week sponsored by Citigroup.
The New York Times first reported Bullard's appearance at the event, which it noted was unpaid but might conflict with Fed communications rules that discourage Fed involvement in events that offer a "prestige advantage" to profit-making enterprises.
"Jim Bullard works hard to maintain the spirit of transparency and active communications to make his views widely known," the St. Louis Fed said in a statement.
It noted Bullard had conducted press interviews with Reuters and appeared at one other public event last week on the sidelines of the International Monetary Fund annual meeting, at which he discussed his policy views in detail.
Still, the St. Louis Fed posted a transcript of his remarks to the Citi Macro Forum on its web site and added that "we are listening to the commentary around this and will think differently about this in the future."
A review of the transcript showed the Bullard's comments were in line with his public remarks.
Bullard is among the most active of Fed officials in speaking at public events and conducting media interviews, a perch he uses to both explain his policy views and delve into research topics around economics and monetary policy.
The Fed has had a trying year on ethics issues, including the resignation of two regional bank presidents for securities trading during the pandemic year, and the recent disclosure by Atlanta Fed president Raphael Bostic that his outside financial manager had made transactions apparently at odds with Fed rules.
Reporting by Howard Schneider; editing by Diane Craft and Richard Pullin
https://www.reuters.com/markets/us/st-l ... 022-10-20/
"St. Louis Fed says will 'think differently' about private events"
By Howard Schneider
October 20, 2022
WASHINGTON, Oct 20 (Reuters) - The St. Louis Federal Reserve said it would "think differently" about appearances by its president James Bullard at non-public events after news reports of his attendance at a private policy forum last week sponsored by Citigroup.
The New York Times first reported Bullard's appearance at the event, which it noted was unpaid but might conflict with Fed communications rules that discourage Fed involvement in events that offer a "prestige advantage" to profit-making enterprises.
"Jim Bullard works hard to maintain the spirit of transparency and active communications to make his views widely known," the St. Louis Fed said in a statement.
It noted Bullard had conducted press interviews with Reuters and appeared at one other public event last week on the sidelines of the International Monetary Fund annual meeting, at which he discussed his policy views in detail.
Still, the St. Louis Fed posted a transcript of his remarks to the Citi Macro Forum on its web site and added that "we are listening to the commentary around this and will think differently about this in the future."
A review of the transcript showed the Bullard's comments were in line with his public remarks.
Bullard is among the most active of Fed officials in speaking at public events and conducting media interviews, a perch he uses to both explain his policy views and delve into research topics around economics and monetary policy.
The Fed has had a trying year on ethics issues, including the resignation of two regional bank presidents for securities trading during the pandemic year, and the recent disclosure by Atlanta Fed president Raphael Bostic that his outside financial manager had made transactions apparently at odds with Fed rules.
Reporting by Howard Schneider; editing by Diane Craft and Richard Pullin
https://www.reuters.com/markets/us/st-l ... 022-10-20/
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Powell, on eve of next rate hike, urged to protect jobs"
Reuters
October 25, 2022
Oct 25 (Reuters) - U.S. Senate Banking Committee Chair Sherrod Brown on Tuesday urged Federal Reserve Chair Jerome Powell to be careful about tightening monetary policy so much that millions of Americans already suffering from high inflation also lose their jobs.
"It is your job to combat inflation, but at the same time, you must not lose sight of your responsibility to ensure that we have full employment," Brown said in the letter, also addressed to the Fed's Board of Governors and released publicly by Brown's office.
"We must avoid having our short-term advances and strong labor market overwhelmed by the consequences of aggressive monetary actions to decrease inflation, especially when the Fed’s actions do not address its main drivers."
Fed policymakers are widely expected to deliver a fourth straight supersized interest-rate hike when they meet next week, bringing the policy rate to 3.75%-4% as part of what has been the sharpest set of rate increases in about 40 years.
Brown's letter did not explicitly ask Powell or the Fed to slow or stop rate hikes, though it did urge "continued caution" in light of the synchronized monetary policy tightening by central banks around the world and Russia's war in Ukraine among other factors posing the "real possibility of worsening the global economic situation."
Powell for his part has nodded to those risks and to the likelihood that raising borrowing costs will lead to a rise in unemployment, now at a historically low 3.5%.
But he has also argued that beating inflation - running at more than three times the Fed's 2% target - is the only way to ensure long-term labor market strength.
Brown's letter to Powell comes as his fellow Democrats across the country battle to maintain their razor-thin majority in the Senate, with a particularly closely watched race in Ohio, Brown's home state. The elections take place a week after the Fed's meeting.
Republicans blame Democrats' pandemic aid and other policies for high inflation and say they will do a better job with the economy; Democrats have blamed rising prices on greedy corporations and supply chains.
Fed policymakers say the research shows inflation is being driven both by sky-high demand and supply constraints, and that regardless of the cause, they are committed to doing what they can to bring it down.
Brown's letter is unlikely to sway them from that view, though they are expected to at least begin talking about slowing rate hikes when they gather Nov. 1-2.
Still, Brown's missive underscores the political backdrop against which the Fed operates, much as policymakers try to stay out of politics and say their very effectiveness depends on political independence.
"I ask that you don’t forget your responsibility to promote maximum employment and that the decisions you make at the next FOMC meeting reflect your commitment to the dual mandate," Brown wrote.
Reporting by Ann Saphir; Editing by Aurora Ellis
https://www.reuters.com/markets/us/feds ... 022-10-25/
"Fed's Powell, on eve of next rate hike, urged to protect jobs"
Reuters
October 25, 2022
Oct 25 (Reuters) - U.S. Senate Banking Committee Chair Sherrod Brown on Tuesday urged Federal Reserve Chair Jerome Powell to be careful about tightening monetary policy so much that millions of Americans already suffering from high inflation also lose their jobs.
"It is your job to combat inflation, but at the same time, you must not lose sight of your responsibility to ensure that we have full employment," Brown said in the letter, also addressed to the Fed's Board of Governors and released publicly by Brown's office.
"We must avoid having our short-term advances and strong labor market overwhelmed by the consequences of aggressive monetary actions to decrease inflation, especially when the Fed’s actions do not address its main drivers."
Fed policymakers are widely expected to deliver a fourth straight supersized interest-rate hike when they meet next week, bringing the policy rate to 3.75%-4% as part of what has been the sharpest set of rate increases in about 40 years.
Brown's letter did not explicitly ask Powell or the Fed to slow or stop rate hikes, though it did urge "continued caution" in light of the synchronized monetary policy tightening by central banks around the world and Russia's war in Ukraine among other factors posing the "real possibility of worsening the global economic situation."
Powell for his part has nodded to those risks and to the likelihood that raising borrowing costs will lead to a rise in unemployment, now at a historically low 3.5%.
But he has also argued that beating inflation - running at more than three times the Fed's 2% target - is the only way to ensure long-term labor market strength.
Brown's letter to Powell comes as his fellow Democrats across the country battle to maintain their razor-thin majority in the Senate, with a particularly closely watched race in Ohio, Brown's home state. The elections take place a week after the Fed's meeting.
Republicans blame Democrats' pandemic aid and other policies for high inflation and say they will do a better job with the economy; Democrats have blamed rising prices on greedy corporations and supply chains.
Fed policymakers say the research shows inflation is being driven both by sky-high demand and supply constraints, and that regardless of the cause, they are committed to doing what they can to bring it down.
Brown's letter is unlikely to sway them from that view, though they are expected to at least begin talking about slowing rate hikes when they gather Nov. 1-2.
Still, Brown's missive underscores the political backdrop against which the Fed operates, much as policymakers try to stay out of politics and say their very effectiveness depends on political independence.
"I ask that you don’t forget your responsibility to promote maximum employment and that the decisions you make at the next FOMC meeting reflect your commitment to the dual mandate," Brown wrote.
Reporting by Ann Saphir; Editing by Aurora Ellis
https://www.reuters.com/markets/us/feds ... 022-10-25/
Re: THE FEDERAL RESERVE
CNBC
"Powell again is facing political pressure as worries mount over the economy"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, OCT 26 2022
KEY POINTS
* Sen. Sherrod Brown this week sent a letter to Fed Chair Jerome Powell, expressing concern about the impact interest rate hikes could have on employment.
* “Potential job losses brought about by monetary over-tightening will only worsen these matters for the working class,” the Ohio Democrat said.
* The last time the Fed raised interest rates, from 2016 to December 2018, Powell withstood withering criticism from former President Donald Trump.
* Powell has in the past been generally dismissive when asked if political pressure can factor into decision making.
Political questioning of Federal Reserve Chair Jerome Powell about the central bank’s policy moves is intensifying, this time from the other side of the aisle.
No stranger to political pressure, the Fed chief this week found himself the focus of concern in a letter from Sen. Sherrod Brown.
The Ohio Democrat warned in the letter about potential job losses from the Fed’s rate hikes that it is using to combat inflation.
“It is your job to combat inflation, but at the same time you must not lose sight of your responsibility to ensure that we have full employment,” Brown wrote.
He added that “potential job losses brought about by monetary over-tightening will only worsen these matters for the working class.”
The letter comes with the Fed less than a week away from its two-day policy meeting that is widely expected to conclude Nov. 2 with a fourth consecutive 0.75 percentage point interest rate increase.
That would take the central bank’s benchmark funds rate to a range of 3.75% to 4%, its highest level since early 2008 and represents the fastest pace of policy tightening since the early 1980s.
Without recommending a specific course of action, Brown asked Powell to remember the Fed has a two-pronged mandate — low inflation as well as full employment — and requested that “the decisions you make at the next FOMC meeting reflect your commitment to the dual mandate.”
The last time the Fed raised interest rates, from 2016 to December 2018, Powell faced withering criticism from former President Donald Trump, who on one occasion called the central bankers “boneheads” and seemed to compare Powell unfavorably with Chinese President Xi Jinping when he asked in a tweet, “Who is our bigger enemy?”
Democrats, including then-presidential hopeful Joe Biden, criticized Trump for his Fed comments, insisting the central bank be free of political pressure when formulating monetary policy.
Standing firm
Brown’s stance was considerably more nuanced than Trump’s — though equally unlikely to move the dial on monetary policy.
“Chair Powell has made it pretty clear that the necessary conditions for the Fed to achieve its full employment objective is low and stable inflation."
"Without low and stable inflation, there’s no way to achieve full employment,” said Mark Zandi, chief economist for Moody’s Analytics.
“He’ll stick to his guns on this."
"I don’t see this as having any material impact on decision making at the Fed.”
To be sure, while it’s most likely a reaction to a changing tone from some Fed officials and a slight shift in the economic data, market expectations for monetary policy have altered a bit.
Traders have made peace with the three-quarter point hike next week.
But they now see just a 36% chance for another such move at December’s Federal Open Market Committee meeting, after earlier rating it a near 80% probability, according to CME Group data.
That change in sentiment has come following cautionary remarks about overly aggressive policies from several Fed officials, including Vice Chairman Lael Brainard and San Francisco regional President Mary Daly.
In remarks late last week, Daly said she’s looking for a “step-down” point where the Fed can slow the pace of its rate moves.
“The democratization of the Fed is the issue for the market, how much power the other members have versus the chairman."
"It’s difficult to know,” said Quincy Krosby, chief equity strategist at LPL Financial.
Regarding Brown’s letter, Krosby said, “I don’t think it’s going to affect him."
"… It’s not the pressure coming from the politicians, which is to be expected.”
A Fed spokesman acknowledged that Powell received the Brown letter and said normal policy is to respond to such communication directly.
In the past, Powell has been generally dismissive when asked if political pressure can factor into decision making.
Employment data will be key
Along with the nudging from Brown, Powell also has faced criticism from others on Capitol Hill.
Sen. Elizabeth Warren, the ultra-progressive Massachusetts Democrat and former presidential contender, has called Powell dangerous and recently also warned about the impact rate hikes could have on employment.
Also, Sen. Joe Manchin, D-W. Va., last year criticized Powell for what was seen as the Fed’s flat-footed response to the early rise of inflation.
“I don’t necessarily think that Powell will buckle to the political pressure, but I’m wondering whether some of his colleagues start to, some of the doves who have become hawkish,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
“Employment’s fine now, but as months go on and growth continues to slow and layoffs begin to increase at a more notable pace, I have to believe that the level of pressure is going to grow.”
Payroll gains have been strong all years, but a number of companies have said they are either putting a freeze on hiring or cutting back as economic conditions soften.
A slowing economy and stubbornly high inflation is making the backdrop difficult for the November elections, where Democrats are expected to lose control of the House and possibly the Senate.
With the high stakes in mind, both markets and lawmakers will be listening closely to Powell’s post-meeting news conference next Wednesday, which will come six days before the election.
“He knows the pressure."
"He knows that the politicians are increasingly nervous about losing their seats,” Krosby said.
“There’s very little he could do at this point, by the way, to help either party.”
https://www.cnbc.com/2022/10/26/powell- ... onomy.html
"Powell again is facing political pressure as worries mount over the economy"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, OCT 26 2022
KEY POINTS
* Sen. Sherrod Brown this week sent a letter to Fed Chair Jerome Powell, expressing concern about the impact interest rate hikes could have on employment.
* “Potential job losses brought about by monetary over-tightening will only worsen these matters for the working class,” the Ohio Democrat said.
* The last time the Fed raised interest rates, from 2016 to December 2018, Powell withstood withering criticism from former President Donald Trump.
* Powell has in the past been generally dismissive when asked if political pressure can factor into decision making.
Political questioning of Federal Reserve Chair Jerome Powell about the central bank’s policy moves is intensifying, this time from the other side of the aisle.
No stranger to political pressure, the Fed chief this week found himself the focus of concern in a letter from Sen. Sherrod Brown.
The Ohio Democrat warned in the letter about potential job losses from the Fed’s rate hikes that it is using to combat inflation.
“It is your job to combat inflation, but at the same time you must not lose sight of your responsibility to ensure that we have full employment,” Brown wrote.
He added that “potential job losses brought about by monetary over-tightening will only worsen these matters for the working class.”
The letter comes with the Fed less than a week away from its two-day policy meeting that is widely expected to conclude Nov. 2 with a fourth consecutive 0.75 percentage point interest rate increase.
That would take the central bank’s benchmark funds rate to a range of 3.75% to 4%, its highest level since early 2008 and represents the fastest pace of policy tightening since the early 1980s.
Without recommending a specific course of action, Brown asked Powell to remember the Fed has a two-pronged mandate — low inflation as well as full employment — and requested that “the decisions you make at the next FOMC meeting reflect your commitment to the dual mandate.”
The last time the Fed raised interest rates, from 2016 to December 2018, Powell faced withering criticism from former President Donald Trump, who on one occasion called the central bankers “boneheads” and seemed to compare Powell unfavorably with Chinese President Xi Jinping when he asked in a tweet, “Who is our bigger enemy?”
Democrats, including then-presidential hopeful Joe Biden, criticized Trump for his Fed comments, insisting the central bank be free of political pressure when formulating monetary policy.
Standing firm
Brown’s stance was considerably more nuanced than Trump’s — though equally unlikely to move the dial on monetary policy.
“Chair Powell has made it pretty clear that the necessary conditions for the Fed to achieve its full employment objective is low and stable inflation."
"Without low and stable inflation, there’s no way to achieve full employment,” said Mark Zandi, chief economist for Moody’s Analytics.
“He’ll stick to his guns on this."
"I don’t see this as having any material impact on decision making at the Fed.”
To be sure, while it’s most likely a reaction to a changing tone from some Fed officials and a slight shift in the economic data, market expectations for monetary policy have altered a bit.
Traders have made peace with the three-quarter point hike next week.
But they now see just a 36% chance for another such move at December’s Federal Open Market Committee meeting, after earlier rating it a near 80% probability, according to CME Group data.
That change in sentiment has come following cautionary remarks about overly aggressive policies from several Fed officials, including Vice Chairman Lael Brainard and San Francisco regional President Mary Daly.
In remarks late last week, Daly said she’s looking for a “step-down” point where the Fed can slow the pace of its rate moves.
“The democratization of the Fed is the issue for the market, how much power the other members have versus the chairman."
"It’s difficult to know,” said Quincy Krosby, chief equity strategist at LPL Financial.
Regarding Brown’s letter, Krosby said, “I don’t think it’s going to affect him."
"… It’s not the pressure coming from the politicians, which is to be expected.”
A Fed spokesman acknowledged that Powell received the Brown letter and said normal policy is to respond to such communication directly.
In the past, Powell has been generally dismissive when asked if political pressure can factor into decision making.
Employment data will be key
Along with the nudging from Brown, Powell also has faced criticism from others on Capitol Hill.
Sen. Elizabeth Warren, the ultra-progressive Massachusetts Democrat and former presidential contender, has called Powell dangerous and recently also warned about the impact rate hikes could have on employment.
Also, Sen. Joe Manchin, D-W. Va., last year criticized Powell for what was seen as the Fed’s flat-footed response to the early rise of inflation.
“I don’t necessarily think that Powell will buckle to the political pressure, but I’m wondering whether some of his colleagues start to, some of the doves who have become hawkish,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.
“Employment’s fine now, but as months go on and growth continues to slow and layoffs begin to increase at a more notable pace, I have to believe that the level of pressure is going to grow.”
Payroll gains have been strong all years, but a number of companies have said they are either putting a freeze on hiring or cutting back as economic conditions soften.
A slowing economy and stubbornly high inflation is making the backdrop difficult for the November elections, where Democrats are expected to lose control of the House and possibly the Senate.
With the high stakes in mind, both markets and lawmakers will be listening closely to Powell’s post-meeting news conference next Wednesday, which will come six days before the election.
“He knows the pressure."
"He knows that the politicians are increasingly nervous about losing their seats,” Krosby said.
“There’s very little he could do at this point, by the way, to help either party.”
https://www.cnbc.com/2022/10/26/powell- ... onomy.html
Re: THE FEDERAL RESERVE
REUTERS
"U.S. data brings some encouraging signs for inflation-weary Fed"
By Lindsay Dunsmuir
October 28, 2022
Oct 28 (Reuters) - Some hints that U.S. price pressures are beginning to ease even as overall inflation remains high could encourage Federal Reserve policymakers to opt for smaller interest rate increases after they deliver a fourth straight supersized hike next week.
While the Commerce Department reported on Friday that underlying inflation pressures remained stubbornly high last month, the Labor Department's Employment Cost Index showed a considerable slowdown in private-sector wage growth in the third quarter - it rose 1.2% compared to 1.6% in the second quarter - suggesting the likelihood of a scenario of ever-rising wages pushing prices higher may be receding.
Fed policymakers are keenly attentive to the ECI as one of the better measures of labor market slack and a predictor of core inflation.
"Although another 75bp (basis point) rate hike lies in store next week, we suspect that slowdown (in wage growth) will help convince the Fed to slow the pace of tightening in December," said Andrew Hunter, senior U.S. economist at Capital Economics.
With the U.S. central bank almost certain to lift its benchmark overnight interest rate by 75 basis points to the 3.75%-4.00% range at its Nov. 1-2 policy meeting, investors are now focused on what's coming in December and early 2023.
Projections released last month showed policymakers' median forecast for the federal funds rate by the end of 2023 at 4.6%.
Fed officials have said they expect to hit that level by early next year and several then want to pause, arguing that the economy will need time to absorb the fastest pace of tightening in 40 years and that an easing in inflation is likely to lag the rate hikes.
Several policymakers in the last month have also appeared to be leaning toward a smaller rate hike at the Dec. 13-14 meeting.
Futures contracts tied to the Fed's benchmark overnight interest rate were little changed after the release of Friday's data, still pricing in a half-percentage-point hike next month and another 50 basis points over the first two meetings of next year.
INFLATION STILL HIGH
Whether the Fed will be able to stick to its preferred path of a pause around 4.6% remains to be seen.
Certainly, the latest Personal Consumption Expenditures (PCE) price index data did little to bolster central bank hopes that price pressures have decisively turned a corner.
The PCE price index, which is the Fed's preferred measure as it tracks progress in reducing inflation to its 2% target, increased 0.3% on a month-to-month basis and 6.2% on a year-to-year basis in September, matching the advances in August.
Excluding the volatile food and energy components, the PCE price index was up 0.5% in September, matching the gain in the prior month, and 5.1% in the 12 months through September, compared to a 4.9% year-on-year rise in August.
That was enough for one analyst to argue the market is undershooting the amount of Fed tightening that remains.
"Inflation is still running way too hot, the month-on-month numbers are holding steady ... the numbers also show that the Fed is going to have to continue to raise rates and tighten probably longer than the market is pricing in currently," said Oliver Pursche, senior vice president at Wealthspire Advisors.
Reporting by Lindsay Dunsmuir; Additional reporting by Ann Saphir and Stephen Culp; Editing by Paul Simao
https://www.reuters.com/markets/europe/ ... 022-10-28/
"U.S. data brings some encouraging signs for inflation-weary Fed"
By Lindsay Dunsmuir
October 28, 2022
Oct 28 (Reuters) - Some hints that U.S. price pressures are beginning to ease even as overall inflation remains high could encourage Federal Reserve policymakers to opt for smaller interest rate increases after they deliver a fourth straight supersized hike next week.
While the Commerce Department reported on Friday that underlying inflation pressures remained stubbornly high last month, the Labor Department's Employment Cost Index showed a considerable slowdown in private-sector wage growth in the third quarter - it rose 1.2% compared to 1.6% in the second quarter - suggesting the likelihood of a scenario of ever-rising wages pushing prices higher may be receding.
Fed policymakers are keenly attentive to the ECI as one of the better measures of labor market slack and a predictor of core inflation.
"Although another 75bp (basis point) rate hike lies in store next week, we suspect that slowdown (in wage growth) will help convince the Fed to slow the pace of tightening in December," said Andrew Hunter, senior U.S. economist at Capital Economics.
With the U.S. central bank almost certain to lift its benchmark overnight interest rate by 75 basis points to the 3.75%-4.00% range at its Nov. 1-2 policy meeting, investors are now focused on what's coming in December and early 2023.
Projections released last month showed policymakers' median forecast for the federal funds rate by the end of 2023 at 4.6%.
Fed officials have said they expect to hit that level by early next year and several then want to pause, arguing that the economy will need time to absorb the fastest pace of tightening in 40 years and that an easing in inflation is likely to lag the rate hikes.
Several policymakers in the last month have also appeared to be leaning toward a smaller rate hike at the Dec. 13-14 meeting.
Futures contracts tied to the Fed's benchmark overnight interest rate were little changed after the release of Friday's data, still pricing in a half-percentage-point hike next month and another 50 basis points over the first two meetings of next year.
INFLATION STILL HIGH
Whether the Fed will be able to stick to its preferred path of a pause around 4.6% remains to be seen.
Certainly, the latest Personal Consumption Expenditures (PCE) price index data did little to bolster central bank hopes that price pressures have decisively turned a corner.
The PCE price index, which is the Fed's preferred measure as it tracks progress in reducing inflation to its 2% target, increased 0.3% on a month-to-month basis and 6.2% on a year-to-year basis in September, matching the advances in August.
Excluding the volatile food and energy components, the PCE price index was up 0.5% in September, matching the gain in the prior month, and 5.1% in the 12 months through September, compared to a 4.9% year-on-year rise in August.
That was enough for one analyst to argue the market is undershooting the amount of Fed tightening that remains.
"Inflation is still running way too hot, the month-on-month numbers are holding steady ... the numbers also show that the Fed is going to have to continue to raise rates and tighten probably longer than the market is pricing in currently," said Oliver Pursche, senior vice president at Wealthspire Advisors.
Reporting by Lindsay Dunsmuir; Additional reporting by Ann Saphir and Stephen Culp; Editing by Paul Simao
https://www.reuters.com/markets/europe/ ... 022-10-28/
Re: THE FEDERAL RESERVE
CNBC
"Fed approves 0.75-point hike to take rates to highest since 2008 and hints at change in policy ahead"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, NOV 2 2022
KEY POINTS
* The Federal Reserve, in a well-telegraphed move, raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75%-4%, the highest level since January 2008.
* The central bank’s new statement hinted at a potential change in how it will approach monetary policy to bring down inflation.
* However, stocks fell as Fed Chair Jerome Powell dismissed the idea that the Fed may be pausing soon though he said he expects a discussion at the next meeting or two about slowing the pace of tightening.
* Still, Powell reiterated that there may come a time to slow the pace of rate increases.
The Federal Reserve on Wednesday approved a fourth consecutive three-quarter point interest rate increase and signaled a potential change in how it will approach monetary policy to bring down inflation.
In a well-telegraphed move that markets had been expecting for weeks, the central bank raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75%-4%, the highest level since January 2008.
The move continued the most aggressive pace of monetary policy tightening since the early 1980s, the last time inflation ran this high.
Along with anticipating the rate hike, markets also had been looking for language indicating that this could be the last 0.75-point, or 75 basis point, move.
The new statement hinted at that policy change, saying when determining future hikes, the Fed “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
Economists are hoping this is the much talked about “step-down” in policy that could see a rate increase of half a point at the December meeting and then a few smaller hikes in 2023.
Changes in policy path
This week’s statement also expanded on previous language simply declaring that “ongoing increases in the target range will be appropriate.“
The new language read, “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”
Stocks initially rose following the announcement, but turned negative during Chairman Jerome Powell’s news conference as the market tried to gauge whether the Fed thinks it can implement a less restrictive policy that would include a slower pace of rate hikes to achieve its inflation goals.
On balance, Powell dismissed the idea that the Fed may be pausing soon though he said he expects a discussion at the next meeting or two about slowing the pace of tightening.
He also reiterated that it may take resolve and patience to get inflation down.
“We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected,” he said.
Still, Powell repeated the idea that there may come a time to slow the pace of rate increases.
He has said this at recent news conferences
“So that time is coming, and it may come as soon as the next meeting or the one after that."
"No decision has been made,” he said.
Soft-landing path narrows
The chairman also expressed some pessimism about the future.
He noted that he now expects the “terminal rate,” or the point when the Fed stops raising rates, to be higher than it was at the September meeting.
With the higher rates also comes the prospect that the Fed will not be able to achieve the “soft landing” that Powell has spoken of in the past.
“Has it narrowed?"
"Yes,” he said in response to a question about whether the path has narrowed to a place where the economy doesn’t enter a pronounced contraction.
“Is it still possible?"
"Yes.”
However, he said the need for still-higher rates makes the job more difficult.
“Policy needs to be more restrictive, and that narrows the path to a soft landing,” Powell said.
Along with the tweak in the statement, the Federal Open Market Committee again categorized growth in spending and production as “modest” and noted that “job gains have been robust in recent months” while inflation is “elevated.”
The statement also reiterated language that the committee is “highly attentive to inflation risks.”
The rate increase comes as recent inflation readings show prices remain near 40-year highs.
A historically tight jobs market in which there are nearly two openings for every unemployed worker is pushing up wages, a trend the Fed is seeking to head off as it tightens money supply.
Concerns are rising that the Fed, in its efforts to bring down the cost of living, also will pull the economy into recession.
Powell has said he still sees a path to a “soft landing” in which there is not a severe contraction, but the U.S. economy this year has shown virtually no growth even as the full impact from the rate hikes has yet to kick in.
At the same time, the Fed’s preferred inflation measure showed the cost of living rose 6.2% in September from a year ago – 5.1% even excluding food and energy costs.
GDP declined in both the first and second quarters, meeting a common definition of recession, though it rebounded to 2.6% in the third quarter largely because of an unusual rise in exports.
At the same time, housing demand has plunged as 30-year mortgage rates have soared past 7% in recent days.
On Wall Street, markets have been rallying in anticipation that the Fed soon might start to ease back as worries grow over the longer-term impact of higher rates.
The Dow Jones Industrial Average has gained more than 13% over the past month, in part because of an earnings season that wasn’t as bad as feared but also due to growing hopes for a recalibration of Fed policy.
Treasury yields also have come off their highest levels since the early days of the financial crisis, though they remain elevated.
The benchmark 10-year note most recently was around 4.09%.
There is little if any expectation that the rate hikes will halt anytime soon, so the anticipation is just for a slower pace.
Futures traders are pricing a near coin-flip chance of a half-point increase in December, against another three-quarter point move.
Current market pricing also indicates the fed funds rate will top out near 5% before the rate hikes cease.
The fed funds rate sets the level that banks charge each other for overnight loans, but spills over into multiple other consumer debt instruments such as adjustable-rate mortgages, auto loans and credit cards.
https://www.cnbc.com/2022/11/02/fed-hik ... -2008.html
"Fed approves 0.75-point hike to take rates to highest since 2008 and hints at change in policy ahead"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, NOV 2 2022
KEY POINTS
* The Federal Reserve, in a well-telegraphed move, raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75%-4%, the highest level since January 2008.
* The central bank’s new statement hinted at a potential change in how it will approach monetary policy to bring down inflation.
* However, stocks fell as Fed Chair Jerome Powell dismissed the idea that the Fed may be pausing soon though he said he expects a discussion at the next meeting or two about slowing the pace of tightening.
* Still, Powell reiterated that there may come a time to slow the pace of rate increases.
The Federal Reserve on Wednesday approved a fourth consecutive three-quarter point interest rate increase and signaled a potential change in how it will approach monetary policy to bring down inflation.
In a well-telegraphed move that markets had been expecting for weeks, the central bank raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75%-4%, the highest level since January 2008.
The move continued the most aggressive pace of monetary policy tightening since the early 1980s, the last time inflation ran this high.
Along with anticipating the rate hike, markets also had been looking for language indicating that this could be the last 0.75-point, or 75 basis point, move.
The new statement hinted at that policy change, saying when determining future hikes, the Fed “will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
Economists are hoping this is the much talked about “step-down” in policy that could see a rate increase of half a point at the December meeting and then a few smaller hikes in 2023.
Changes in policy path
This week’s statement also expanded on previous language simply declaring that “ongoing increases in the target range will be appropriate.“
The new language read, “The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”
Stocks initially rose following the announcement, but turned negative during Chairman Jerome Powell’s news conference as the market tried to gauge whether the Fed thinks it can implement a less restrictive policy that would include a slower pace of rate hikes to achieve its inflation goals.
On balance, Powell dismissed the idea that the Fed may be pausing soon though he said he expects a discussion at the next meeting or two about slowing the pace of tightening.
He also reiterated that it may take resolve and patience to get inflation down.
“We still have some ways to go and incoming data since our last meeting suggests that the ultimate level of interest rates will be higher than previously expected,” he said.
Still, Powell repeated the idea that there may come a time to slow the pace of rate increases.
He has said this at recent news conferences
“So that time is coming, and it may come as soon as the next meeting or the one after that."
"No decision has been made,” he said.
Soft-landing path narrows
The chairman also expressed some pessimism about the future.
He noted that he now expects the “terminal rate,” or the point when the Fed stops raising rates, to be higher than it was at the September meeting.
With the higher rates also comes the prospect that the Fed will not be able to achieve the “soft landing” that Powell has spoken of in the past.
“Has it narrowed?"
"Yes,” he said in response to a question about whether the path has narrowed to a place where the economy doesn’t enter a pronounced contraction.
“Is it still possible?"
"Yes.”
However, he said the need for still-higher rates makes the job more difficult.
“Policy needs to be more restrictive, and that narrows the path to a soft landing,” Powell said.
Along with the tweak in the statement, the Federal Open Market Committee again categorized growth in spending and production as “modest” and noted that “job gains have been robust in recent months” while inflation is “elevated.”
The statement also reiterated language that the committee is “highly attentive to inflation risks.”
The rate increase comes as recent inflation readings show prices remain near 40-year highs.
A historically tight jobs market in which there are nearly two openings for every unemployed worker is pushing up wages, a trend the Fed is seeking to head off as it tightens money supply.
Concerns are rising that the Fed, in its efforts to bring down the cost of living, also will pull the economy into recession.
Powell has said he still sees a path to a “soft landing” in which there is not a severe contraction, but the U.S. economy this year has shown virtually no growth even as the full impact from the rate hikes has yet to kick in.
At the same time, the Fed’s preferred inflation measure showed the cost of living rose 6.2% in September from a year ago – 5.1% even excluding food and energy costs.
GDP declined in both the first and second quarters, meeting a common definition of recession, though it rebounded to 2.6% in the third quarter largely because of an unusual rise in exports.
At the same time, housing demand has plunged as 30-year mortgage rates have soared past 7% in recent days.
On Wall Street, markets have been rallying in anticipation that the Fed soon might start to ease back as worries grow over the longer-term impact of higher rates.
The Dow Jones Industrial Average has gained more than 13% over the past month, in part because of an earnings season that wasn’t as bad as feared but also due to growing hopes for a recalibration of Fed policy.
Treasury yields also have come off their highest levels since the early days of the financial crisis, though they remain elevated.
The benchmark 10-year note most recently was around 4.09%.
There is little if any expectation that the rate hikes will halt anytime soon, so the anticipation is just for a slower pace.
Futures traders are pricing a near coin-flip chance of a half-point increase in December, against another three-quarter point move.
Current market pricing also indicates the fed funds rate will top out near 5% before the rate hikes cease.
The fed funds rate sets the level that banks charge each other for overnight loans, but spills over into multiple other consumer debt instruments such as adjustable-rate mortgages, auto loans and credit cards.
https://www.cnbc.com/2022/11/02/fed-hik ... -2008.html
Re: THE FEDERAL RESERVE
REUTERS
"Fed jacks up interest rates again, hints at smaller increases ahead"
By Howard Schneider and Ann Saphir
Summary
* U.S. central bank lifts rates by 75 basis points
* Powell: Time to reassess pace of rate hikes 'is coming'
* U.S. stocks close sharply lower after Powell's remarks
WASHINGTON, Nov 2 (Reuters) - The Federal Reserve raised interest rates by three-quarters of a percentage point again on Wednesday and said its battle against inflation will require borrowing costs to rise further, yet signaled it may be nearing an inflection point in what has become the swiftest tightening of U.S. monetary policy in 40 years.
The double-sided message left open the possibility the U.S. central bank may raise rates in smaller increments in the future, ending its sequence of three-quarters-of-a-percentage-point hikes as soon as December in favor of more tempered increases of perhaps half a percentage point, while also leaving policymakers room to continue pushing rates higher if inflation doesn't start to slow.
Fed Chair Jerome Powell, speaking in a news conference after the end of the central bank's latest policy meeting, said he wanted no confusion on that point: Even if policymakers do scale back future increases, he said, they were still undecided about just how high rates would need to rise to curb inflation, and were determined to "stay the course until the job's done."
Regardless of how fast the Fed moves, "there's some ground to cover" for the target federal funds rate to reach a "sufficiently restrictive" level that will slow inflation, Powell said.
The final destination is "very uncertain ..."
"We're going to find it over time."
"The question of when to moderate the pace of increases is much less important than the question of how high ... and how long to keep monetary policy restrictive," he said, adding that it was "very premature" to discuss when the Fed might pause its increases.
Major U.S. stock indices spiked after the release of the Fed's statement, which promised to take economic risks more clearly into account in deciding the size of any further rate increases, but erased those gains as Powell spoke and ended the day sharply lower.
The S&P 500 index fell 2.5% and the Nasdaq Composite slid more than 3%.
Yields on U.S. Treasury securities, which had dropped sharply after the Fed statement was released, turned higher.
The 2-year note - the bond maturity most sensitive to Fed policy expectations - was up 6 basis points to about 4.61%.
Bill Nelson, a former top Fed staffer who is now chief economist at the Bank Policy Institute, said ahead of Powell's news conference that the Fed's policy statement appeared to set the central bank up for more rate hikes before its tightening cycle is completed, delivered at a possibly slower pace.
The document "implied that (the Fed) may be aiming for a higher medium-term level for the fed funds rate than currently expected," Nelson said.
'NO DECISION HAS BEEN MADE'
Investors were expecting a signal the Fed might ease up on its pace of tightening after a blistering run that raised the policy rate from near zero in March to what is now a range of between 3.75% and 4.00% - the fastest monetary tightening since the early 1980s.
The pace of the rate hikes has triggered global anxiety the Fed was dragging the world economy towards a point of no return, with the dollar's strength against major currencies in effect exporting U.S. inflation and stressing finiancial markets from London to Tokyo.
The Fed's statement broadly acknowledged the need to assess the affect of the policy moves made so far in calibrating any future decisions.
"Ongoing increases in the target range will be appropriate," the central bank's policy-setting Federal Open Market Committee said at the end of its two-day meeting.
But "in determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."
The time to reassess the pace of increases "is coming," Powell said.
"It may come as soon as the next meeting or the one after that ..."
"No decision has been made."
The language in the policy statement acknowledged the broad debate that has emerged around the Fed's policy tightening, and opened a new stage in that discussion.
While the rapid increases this year have been done in the name of moving "expeditiously" to catch up with inflation running at more than three times the Fed's 2% target, the central bank is now entering a more nuanced phase - fine-tuning instead of "front-loading."
At the Fed's Sept. 20-21 meeting, the median estimate among policymakers pegged the peak fed funds rate next year at between 4.50% and 4.75%.
Rate futures markets now imply about even odds of it climbing to 5% or higher next year.
The shift in the FOMC statement "took me a little by surprise," said Derek Tang, an economist with forecasting firm LH Meyer.
The Fed's statement "was a lot more definite about a possible downshift than I thought it would be."
"I thought (Powell) would reserve a lot more judgment until December, but it seems like the Committee did reach a consensus that they could downshift as early as December, depending on how the data go."
Reporting by Howard Schneider; Additional reporting by Michael S. Derby; Editing by Andrea Ricci and Paul Simao
https://www.reuters.com/markets/us/fed- ... 022-11-02/
"Fed jacks up interest rates again, hints at smaller increases ahead"
By Howard Schneider and Ann Saphir
Summary
* U.S. central bank lifts rates by 75 basis points
* Powell: Time to reassess pace of rate hikes 'is coming'
* U.S. stocks close sharply lower after Powell's remarks
WASHINGTON, Nov 2 (Reuters) - The Federal Reserve raised interest rates by three-quarters of a percentage point again on Wednesday and said its battle against inflation will require borrowing costs to rise further, yet signaled it may be nearing an inflection point in what has become the swiftest tightening of U.S. monetary policy in 40 years.
The double-sided message left open the possibility the U.S. central bank may raise rates in smaller increments in the future, ending its sequence of three-quarters-of-a-percentage-point hikes as soon as December in favor of more tempered increases of perhaps half a percentage point, while also leaving policymakers room to continue pushing rates higher if inflation doesn't start to slow.
Fed Chair Jerome Powell, speaking in a news conference after the end of the central bank's latest policy meeting, said he wanted no confusion on that point: Even if policymakers do scale back future increases, he said, they were still undecided about just how high rates would need to rise to curb inflation, and were determined to "stay the course until the job's done."
Regardless of how fast the Fed moves, "there's some ground to cover" for the target federal funds rate to reach a "sufficiently restrictive" level that will slow inflation, Powell said.
The final destination is "very uncertain ..."
"We're going to find it over time."
"The question of when to moderate the pace of increases is much less important than the question of how high ... and how long to keep monetary policy restrictive," he said, adding that it was "very premature" to discuss when the Fed might pause its increases.
Major U.S. stock indices spiked after the release of the Fed's statement, which promised to take economic risks more clearly into account in deciding the size of any further rate increases, but erased those gains as Powell spoke and ended the day sharply lower.
The S&P 500 index fell 2.5% and the Nasdaq Composite slid more than 3%.
Yields on U.S. Treasury securities, which had dropped sharply after the Fed statement was released, turned higher.
The 2-year note - the bond maturity most sensitive to Fed policy expectations - was up 6 basis points to about 4.61%.
Bill Nelson, a former top Fed staffer who is now chief economist at the Bank Policy Institute, said ahead of Powell's news conference that the Fed's policy statement appeared to set the central bank up for more rate hikes before its tightening cycle is completed, delivered at a possibly slower pace.
The document "implied that (the Fed) may be aiming for a higher medium-term level for the fed funds rate than currently expected," Nelson said.
'NO DECISION HAS BEEN MADE'
Investors were expecting a signal the Fed might ease up on its pace of tightening after a blistering run that raised the policy rate from near zero in March to what is now a range of between 3.75% and 4.00% - the fastest monetary tightening since the early 1980s.
The pace of the rate hikes has triggered global anxiety the Fed was dragging the world economy towards a point of no return, with the dollar's strength against major currencies in effect exporting U.S. inflation and stressing finiancial markets from London to Tokyo.
The Fed's statement broadly acknowledged the need to assess the affect of the policy moves made so far in calibrating any future decisions.
"Ongoing increases in the target range will be appropriate," the central bank's policy-setting Federal Open Market Committee said at the end of its two-day meeting.
But "in determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."
The time to reassess the pace of increases "is coming," Powell said.
"It may come as soon as the next meeting or the one after that ..."
"No decision has been made."
The language in the policy statement acknowledged the broad debate that has emerged around the Fed's policy tightening, and opened a new stage in that discussion.
While the rapid increases this year have been done in the name of moving "expeditiously" to catch up with inflation running at more than three times the Fed's 2% target, the central bank is now entering a more nuanced phase - fine-tuning instead of "front-loading."
At the Fed's Sept. 20-21 meeting, the median estimate among policymakers pegged the peak fed funds rate next year at between 4.50% and 4.75%.
Rate futures markets now imply about even odds of it climbing to 5% or higher next year.
The shift in the FOMC statement "took me a little by surprise," said Derek Tang, an economist with forecasting firm LH Meyer.
The Fed's statement "was a lot more definite about a possible downshift than I thought it would be."
"I thought (Powell) would reserve a lot more judgment until December, but it seems like the Committee did reach a consensus that they could downshift as early as December, depending on how the data go."
Reporting by Howard Schneider; Additional reporting by Michael S. Derby; Editing by Andrea Ricci and Paul Simao
https://www.reuters.com/markets/us/fed- ... 022-11-02/