THE LIVYJR FILES

REUTERS

"Fed lays out plan to reduce bond purchases, flags inflation worries"

By Ann Saphir and Jonnelle Marte, Lindsay Dunsmuir

October 13, 2021

Summary

* Policymakers discuss plan for 'gradual' cut in bond-buying

* Taper could start in mid-November or mid-December -minutes

* Minutes contain fewer references to 'transitory' inflation

Oct 13 (Reuters) - The Federal Reserve signaled on Wednesday it could start reducing its crisis-era support for the U.S. economy by the middle of next month, with a growing number of its policymakers worried that high inflation could persist longer than previously thought.

Though no decision on a "taper" of the U.S. central bank's $120 billion in monthly asset purchases was reached at its Sept. 21-22 policy meeting, "participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate," according to the minutes of that meeting.

With the economy set to grow this year at its fastest pace in decades, inflation riding well above the Fed's comfort zone and the labor market much healed from the devastation of the coronavirus pandemic, Fed Chair Jerome Powell and his colleagues want to start cutting back on the bond-buying program the central bank put in place to spur the economic recovery from the coronavirus pandemic.

Policymakers discussed cutting the Fed's purchases of Treasuries by $10 billion a month and those of mortgage-backed securities by $5 billion a month, said the minutes, which were released on Wednesday, though "several" participants preferred a faster reduction.

If a decision to begin tapering takes place at the Fed's Nov. 2-3 policy meeting, the minutes said, the process could begin in either the middle of that month or mid-December.

In a change from readouts of Fed meetings over the summer, policymakers were no longer described as "generally" expecting inflation pressures to ease as transitory factors "dissipated."

Instead, the minutes suggested there were intensifying worries within the Fed over inflation, with "most" policymakers now seeing upside risks, and "some" concerned about elevated inflation feeding through to inflation expectations or more broadly into prices.

Still, "several other" policymakers attributed upward price pressures to pandemic-related supply bottlenecks that could be expected to abate.

FOCUS ON RATES

With the wind-down in asset purchases imminent, attention now shifts to the timing of future interest rate hikes.

The Fed has promised to keep its benchmark overnight lending rate at the current near-zero level until the economy reaches full employment, and inflation has not only reached its 2% goal but is on track to stay modestly above that level for some time.

The central bank set those parameters when inflation had been running below 2% for years, and the big challenge was seen as lifting it up rather than tamping it down.

But now, the opposite problem may be emerging, as pent-up consumer demand fuels spending in a reopening economy and businesses, hobbled by supply bottlenecks, struggle to keep up.

In forecasts released alongside last month's policy statement, half of Fed policymakers thought a rate hike would be needed before the end of next year, with all but one forecasting a first increase in borrowing costs before the end of 2023.

Key for investors - and the millions of Americans who still can't find jobs - is the question of whether policymakers will need to begin raising rates earlier to stop inflation from spiraling upward, potentially sacrificing labor market gains in the process.

Powell has played down the possibility of being forced into that uncomfortable position.

But the data may be trending against him.

U.S. consumer prices rose 5.4% in the 12 months through September, the U.S. government reported on Wednesday, and traders of interest rate futures boosted their bets that the Fed would have to start lifting rates by next September.

In the minutes, "various" policymakers thought that economic conditions would likely justify keeping rates near their current level for "the next couple of years."

A "number," however, felt rates would need to rise by the end of next year because they felt it would have reached full employment; "some" also thought inflation would remain elevated with risks to the upside, the minutes showed.

Reporting by Ann Saphir, Lindsay Dunsmuir, Jonnelle Marte; Editing by Dan Burns and Paul Simao

https://www.reuters.com/business/patien ... 021-10-13/

REUTERS

"Higher inflation squeezing U.S. consumers as food prices, rents accelerate"

By Lucia Mutikani

October 13, 2021

Summary

* Consumer price index increases 0.4% in September

* Food, rents account for more than half of the rise

* Core CPI gains 0.2%; increases 4.0% year-on-year

WASHINGTON, Oct 13 (Reuters) - U.S. consumer prices increased solidly in September as Americans paid more for food, rent and a range of other goods, putting pressure on the Biden administration to urgently resolve strained supply chains, which are hampering economic growth.

With prices likely to rise further in the months ahead following a recent surge in the costs of energy products, the report from the Labor Department on Wednesday could test Federal Reserve Chair Jerome Powell's repeated assertion that high inflation is transitory.

Powell and the White House have blamed supply chain bottlenecks for the high inflation.

Supply chains have been gummed up by robust demand as economies emerge from the COVID-19 pandemic, thanks to more than $10 trillion in global economic stimulus, about half of it in the United States.

The coronavirus pandemic has caused a global shortage of workers needed to produce raw materials and move goods from factories to consumers.

President Joe Biden on Wednesday announced that the Port of Los Angeles would start operating around the clock, following the Port of Long Beach's lead, to ease congestion.

Retailers like Walmart Inc as well as shipping companies FedEx Corp and UPS also agreed to move goods 24 hours a day and seven days a week.

"Inflation is no longer 'transitory,'" said Sung Won Sohn, professor of finance and economics at Loyola Marymount University in Los Angeles.

"Supply-chain bottlenecks are getting worse."

"The logjam is unlikely to ease anytime soon despite the latest intervention by the White House."

The consumer price index rose 0.4% last month after climbing 0.3% in August.

Food prices jumped 0.9% after increasing 0.4% in the prior month.

The largest rise in food prices since April 2020 was driven by a surge in the cost of meat.

Owners' equivalent rent of primary residence, which is what a homeowner would receive from renting a home, increased 0.4%.

That was the biggest gain in five years and followed a 0.3% rise in August.

Rent of primary residence shot up 0.5%, the largest advance since May 2001.

Rents are rising as demand for housing in cities rebounds after a pandemic-induced exodus to suburbs and other low-density locations.

Economists expect rents, which account for nearly a third of the CPI, will be a major source of inflation in the months ahead.

"If shelter prices continue to pick up steam, it could mean higher inflation is more baked in than originally thought," said Will Compernolle, senior economist at FHN Financial in New York.

Food and rents accounted for more than half of the increase in the CPI.

Economists polled by Reuters had forecast the overall CPI would rise 0.3%.

In the 12 months through September, the CPI increased 5.4% after advancing 5.3% on a year-on-year basis in August.

Though gasoline prices rose moderately relative to August, prices at the pump have accelerated after the price of Brent crude shot above $80 a barrel.

Natural gas prices have also surged.

Major U.S. stock indexes closed higher.

The dollar fell against a basket of currencies.

Yields on the two-year Treasury note, which is sensitive to changes in interest rates, rose.

NEW CARS MORE EXPENSIVE

Excluding the volatile food and energy components, the CPI climbed 0.2% after edging up 0.1% in August.

In addition to rents, the co-called core CPI was lifted by a 1.3% increase in the cost of new motor vehicles, which marked the fifth straight month of gains above 1%.

A global semiconductor shortage has forced auto manufacturers to cut production.

The average price of a new motor vehicle topped $45,000 for the first time ever in September, according to Kelley Blue Book, a vehicle valuation and automotive research company in California.

There were also increases in the prices of household furnishings and operations, with furniture and bedding posting the biggest gain since March 1988.

Consumers also paid more for motor vehicle insurance.

Though prices for airline fares and used cars and trucks fell, economists expected a rebound, noting that air travel was picking up as infections driven by the Delta variant of the coronavirus subside.

Auction data pointed to rising prices for used motor vehicles.

The so-called core CPI rose 4.0% on a year-on-year basis last month, matching the gain in August.

Accelerating wage growth is also exerting upward pressure on inflation.

The government reported last week that average hourly earnings increased by the most in seven months on a year-on-year basis in September because of worker shortages.

With the number of people voluntarily quitting their jobs hitting a record high in August and at least 10.4 million unfilled positions, wage inflation is set to rise further.

Minutes of the Fed's Sept. 21-22 policy meeting, which were released on Wednesday, showed some U.S. central bank officials "expressed concerns that elevated rates of inflation could feed through into longer-term inflation expectations of households."

Fed officials signaled they could start reducing the central bank's massive bond-buying program in mid-November, the minutes showed.

Strong inflation, if persistent, could force the Fed to increase interest rates.

"Stickier more persistent factors are becoming more prevalent, which the Fed is more likely to respond to," said Michelle Meyer, chief U.S. economist at Bank of America Securities in New York.

The Fed's preferred inflation measure for its flexible 2% target, the core personal consumption expenditures price index, increased 3.6% in the 12 months through August, rising by the same margin for a third straight month.

September's data is due later this month.

The Fed last month upgraded its core PCE inflation projection for this year to 3.7% from the 3.0% it projected in June.

Rising inflation, which is eroding consumers' purchasing power, and supply constraints led economists to anticipate that economic growth braked to below a 3% annualized rate in the third quarter.

The economy grew at a 6.7% pace in the April-June quarter.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao

https://www.reuters.com/world/us/us-con ... 021-10-13/

REUTERS

"Fed, nearing bond-buying 'taper,' remains divided on inflation"

By Ann Saphir

OCTOBER 14, 2021

(Reuters) - Despite a broadly shared view that the U.S. labor market has healed enough to allow the Federal Reserve to start reducing its monthly bond purchases as soon as next month, policymakers remain divided over inflation and what they should do about it.

The U.S. government reported on Thursday that producer prices rose 8.6% in the 12 months through September, the biggest year-on-year advance in nearly 11 years.

Data on Wednesday showed U.S. consumer prices shot up 5.4% over the same period.

But data from both reports also suggested COVID-driven price increases may already have peaked, with month-to-month gains slowing.

Speaking to a virtual gathering of the Euro50 Group on Thursday, St. Louis Fed President James Bullard described the inflation trend as “concerning.”

“While I do think there is some probability that this will naturally dissipate over the next six months, I wouldn’t say that’s such a strong case that we can count on that happening,” Bullard said, adding that he gives it about a 50% chance.

Bullard has been pushing for the Fed to start reducing its $120 billion in monthly purchases of Treasuries and mortgage-backed securities next month, and minutes from the U.S. central bank’s Sept. 21-22 policy meeting show policymakers are generally in support of doing so, with plans to wrap up the process by the middle of 2022.

Bullard, however, wants to end the bond purchases by the first quarter of 2022 to allow the Fed to raise interest rates as soon as the spring if inflation remains uncomfortably high.

The Fed has promised to keep its benchmark overnight lending rate at the current near-zero level until the economy reaches full employment, and inflation has not only reached its 2% goal but is on track to stay modestly above that level for some time.

The central bank set those parameters when inflation had been running below 2% for years, and the challenge was seen as lifting it up rather than tamping it down.

But now, the opposite problem may be emerging, as pent-up consumer demand fuels spending in a reopening economy and businesses, hobbled by supply bottlenecks, struggle to keep up.

In an address late on Wednesday to South Dakota State University, Fed Governor Michelle Bowman sounded the alarm on inflation and her worries that easy monetary policy is helping to feed high prices as well as possible asset bubbles.

Bowman also urged a start to the bond-buying “taper” next month.

But others have a different view of the situation.

San Francisco Fed President Mary Daly, one of the central bank’s most dovish policymakers, told CNN International on Thursday that inflation isn’t tied to monetary policy at this juncture and that tightening policy is unlikely to do much to bring it down.

Daly said rising prices are “going to last as long as COVID is with us” because they are driven by supply-chain bottlenecks caused by pandemic-related disruptions, and that inflation would subside once the pandemic did.

“It is premature to start talking about rate increases,” Daly said, noting, however, that the point had been reached where “we feel like we can dial back the level of support we are adding to the economy.”

Speaking to the Forecasters Club of New York, Richmond Fed President Thomas Barkin made clear that he isn’t yet convinced either that high inflation will surely fade or that it will stay high.

In talking with business leaders, he said, he has found that the focus for 2022 price-setting isn’t about how much further they can raise prices but rather about whether they will be able to maintain the price increases they made this year.

Inflation expectations “have a very real role” in shaping pricing decisions, Barkin said.

So too do current inflation readings.

He’s also not sure, he said, if labor supply constraints, which are pushing up wages and could feed into higher prices, are going to ease as more people return to the workforce, or if many of the 5 million who have left have done so permanently.

“I’m not one of the those people who feels the need to make the declaration” about whether inflation is transitory or not, he said.

But by tapering asset purchases, he said, the Fed buys itself time to figure it out.

Reporting by Ann Saphir; Editing by Paul Simao and Diane Craft

https://www.reuters.com/article/usa-fed ... SL1N2RA1XR

REUTERS

"Fed's Harker says it will soon be time to start tapering asset purchases"

By Reuters Staff

OCTOBER 14, 2021

Oct 14 (Reuters) - It will soon be time to start reducing the Federal Reserve’s asset purchases from the current pace of $120 billion a month, but the central bank is not likely to raise interest rates for at least another year, Philadelphia Federal Reserve Bank President Patrick Harker said on Thursday.

“I am in the camp that believes it will soon be time to begin slowly and methodically — frankly, boringly — taper our $120 billion in monthly purchases of Treasury bills and mortgage-backed securities,” Harker said in remarks prepared for a virtual discussion, repeating a view he shared last month.

Harker said those asset purchases are doing little to address the supply side issues hindering the labor market recovery.

The Fed official lowered his expectations for how much he expects the U.S. economy to grow this year because of the Delta variant, which damaged consumer confidence and dealt a blow to the leisure and hospitality industry.

Harker now expects the economy to grow by about 5.5% this year and by about 3.5% in 2022.

He said he expects inflation to be around 4% for 2021 before coming down to “a bit over” 2% next year and “right at” 2% in 2023.

Several Fed officials have signaled that the central bank is still on track here to begin reducing the pace of its asset purchases as soon as next month, despite lower-than-expected jobs growth in September.

A readout from the Fed's September policy meeting showed a growing number of policymakers are worried that high inflation could persist here longer than previously thought.

Harker said policymakers can evaluate interest rates after the tapering is complete, but said he thinks rates will remain steady in the near future if inflation doesn’t spiral out of control.

“I wouldn’t expect any hikes to interest rates until late next year or early 2023, unless the inflation picture changes dramatically,” he said.

(Reporting by Jonnelle Marte; editing by Diane Craft)

https://www.reuters.com/article/usa-fed ... SL1N2RA31C

REUTERS

"NY Fed's Logan says she expects usage of reverse repo facility to come down over time"

By Reuters Staff

OCTOBER 14, 2021

NEW YORK, Oct 14 (Reuters) - The popularity of a Federal Reserve facility that allows financial firms to park cash with the central bank overnight is not concerning and usage should decline as rates on other investments start to rise, a senior New York Fed official said on Thursday.

“Over time, if rates on other overnight investments start to rise relative to the overnight (reverse repo facility) ... I would expect the overnight RRP usage to come down,” Logan said during a virtual discussion.

Usage of the facility surged to record highs in recent months as firms struggling to invest their excess cash stash more than $1 trillion daily with the Fed.

(Reporting by Jonnelle Marte; Editing by Chris Reese)

https://www.reuters.com/article/usa-fed ... SS0N2O3026

THE CAPE CHARLES MIRROR OCTOBER 14, 2021 AT 9:55 PM

Paul Plante says:

So, yes, people, inflation!

According to the RIGZONE story “Oil Futures Down In Steady Trading On OPEC Demand Concerns” by Julia Fanzeres and Devika Krishna Kumar on October 13, 2021, Americans making less than $400,000 are going to get raped but good by inflation this winter as they try to heat their houses, to wit:

The Energy Information Administration boosted its forecast for annual average WTI and Brent prices in 2022 by $5.87 to $68.24/bbl and $71.91 a barrel, respectively, according to the agency’s monthly Short-Term Energy Outlook on Wednesday.

The agency also warned that spending on energy for those households primarily using heating oil will rise 43% compared with last winter, according to its Winter Fuels Outlook report.

end quotes

Makes me glad I heat with wood or I would be freezing this winter for sure, and many older Americans on a fixed income may well be!

And then we had the CNBC story “10-year Treasury yield falls after inflation data, Fed minutes” by Hannah Miao and Vicky McKeever on October 13, 2021, as follows:

Consumer prices increased slightly more than expected in September with the consumer price index for all items rising 0.4% for the month, compared to the 0.3% Dow Jones estimate, the Labor Department reported Wednesday.

On a year-over-year basis, prices increased 5.4% vs. the estimate for 5.3%.

“The print reflected that while transitory factors continue to roll-off, stickier more persistent factors are becoming more prevalent, which the Fed is more likely to respond to,” Bank of America analysts said in a note.

end quotes

Again, that inflation is a tax on people in the United States of America making less than $400,000.

And then we go to the CNBC article “Fed says it could begin ‘gradual tapering process’ by mid-November” by on 13 October 2021, as follows:

The committee also released the summary of its economic expectations, including projections for GDP growth, inflation and unemployment.

Members scaled back their GDP estimates for this year but upped their outlook for inflation, and indicated they expect unemployment to be lower than earlier estimates.

end quotes

Hey, kids, look at that – the Federal Reserve is talking again about STAGFLATION in our futures!

And CNBC again with the story “Consumer prices rise more than expected as energy costs surge” by Jeff Cox on 13 October 2021, as follows:

On a year-over-year basis, prices increased 5.4% versus the estimate for 5.3% and the highest since January 1991.

Gasoline prices rose another 1.2% for the month, bringing the annual increase to 42.1%.

Fuel oil shot up 3.9%, for a 42.6% year over year surge.

Federal Reserve officials have called the current inflation run “transitory,” and attribute it largely to supply chain and demand issues that they expect to subside in the months ahead.

However, that view has been receiving substantial pushback lately.

“This is one more data point to say, ‘Fed, your trying to convince us that inflation is transitory is just not believable,’” Doll said.

“If you know anybody who doesn’t have to live somewhere, doesn’t eat any food and doesn’t use energy, then inflation is maybe not a particular problem.”

“But come on.”

Also on Tuesday, Atlanta Fed President Raphael Bostic said the factors that have pushed inflation higher “will not be brief.”

end quotes

And of course, that implicates the lack of credibility of Joe Biden himself on the subject of inflation, which takes us the Reuters article “Fed lays out plan to reduce bond purchases, flags inflation worries” by Ann Saphir, Jonnelle Marte and Lindsay Dunsmuir on October 13, 2021, as follows:

In a change from readouts of Fed meetings over the summer, policymakers were no longer described as “generally” expecting inflation pressures to ease as transitory factors “dissipated.”

Instead, the minutes suggested there were intensifying worries within the Fed over inflation, with “most” policymakers now seeing upside risks, and “some” concerned about elevated inflation feeding through to inflation expectations or more broadly into prices.

end quotes

Which takes us to another Reuters article entitled “Higher inflation squeezing U.S. consumers as food prices, rents accelerate” by Lucia Mutikani on October 13, 2021, to wit:

WASHINGTON, Oct 13 (Reuters) – U.S. consumer prices increased solidly in September as Americans paid more for food, rent and a range of other goods, putting pressure on the Biden administration to urgently resolve strained supply chains, which are hampering economic growth.

“Inflation is no longer ‘transitory,'” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University in Los Angeles.

“Supply-chain bottlenecks are getting worse.”

“The logjam is unlikely to ease anytime soon despite the latest intervention by the White House.”

end quotes

WHOA!

Hey, wait a minute!

I thought Joe Biden and Peter Buttigieg had that all worked out and fixed!

Which takes us to a Reuters story entitled “White House asks U.S. oil-and-gas companies to help lower fuel costs -sources” by Jarrett Renshaw on October 13, 2021, as follows:

(Reuters) -The White House has been speaking with U.S. oil and gas producers in recent days about helping to bring down rising fuel costs, according to two sources familiar with the matter.

“We are closely monitoring the cost of oil and the cost of gas Americans are paying at the pump.”

“And we are using every tool at our disposal to address anti-competitive practices in U.S. and global energy markets to ensure reliable and stable energy markets,” a White House official said.

The U.S. Energy Department said on Wednesday that household heating costs are expected to rise dramatically this winter for all fuels, but particularly for heating oil and propane.

Any call by the White House for an increase in U.S. production is likely to fall on deaf ears, according to one oil executive, who did not want to be identified criticizing the approach.

The industry has also been unhappy with some of President Joe Biden’s earlier actions, including a temporary drilling halt on federal lands, that they see as an attack on the industry.

“By pursuing policies that restrict supply and make it harder to produce oil and natural gas here in America, Americans will have to pay more for their energy,” said Anne Bradbury, chief executive officer at the American Exploration and Production Council, which lobbies for independent oil-and-gas producers.

end quotes

And as they say in the media biz, that’s the news, folks!

MORAL OF THE STORY: buy that loaf of bread now while you can still afford it!

http://www.capecharlesmirror.com/news/w ... ent-445667

REUTERS

"Fed's Waller: 'More aggressive' response may be needed if inflation stays high"

By Howard Schneider, Ann Saphir

OCTOBER 19, 2021

WASHINGTON (Reuters) - If inflation keeps rising at its current pace in coming months rather that subsiding as expected, Federal Reserve policymakers may need to adopt “a more aggressive policy response” next year, Fed Governor Christopher Waller said on Tuesday.

For now, Waller said in remarks to the Stanford Institute for Economic Policy Research, he continues to believes the economy has seen the worst of the most recent coronavirus wave, that labor and other supply shortages will ease over time and that “the escalation of inflation will be transitory,” with price increases moving back to the Fed’s 2% goal next year.

That would mean any increase to the Fed’s key policy interest rate from its current near-zero level “is still some time off,” he said, a view in synch with most of his colleagues.

The Fed’s most recent “dot plot” depicting policymakers’ rate-hike expectations show about half seeing the Fed lifting rates by the end of next year, with the other half expecting liftoff by the end of 2023.

A longer wait on raising rates could give the economy more time to achieve full employment, the other leg of the Fed’s dual mandate.

But Waller said he feels the risks are shifting, and he is now “greatly concerned” the current fast rise in prices may continue.

Reporting by Howard Schneider and Ann Saphir; Editing by Andrea Ricci and Peter Cooney

https://www.reuters.com/article/usa-fed ... SKBN2H92BX

REUTERS

"Fed's Bowman says we may see inflation lasting longer than expected"

By Reuters Staff

OCTOBER 19, 2021

NEW YORK, Oct 19 (Reuters) - Supply chain disruptions are leading to higher prices and it will be important to watch how long that inflation lasts and how it affects long-term expectations, Federal Reserve Governor Michelle Bowman said on Tuesday.

“I have to think about this in the context of what the impacts are on longer-term inflation expectations,” Bowman said during a virtual conversation with Richmond Fed President Thomas Barkin.

“We’re looking at a situation where we may see inflation lasting a bit longer than we may have expected just even a few months ago.”

(Reporting by Jonnelle Marte Editing by Chris Reese)

https://www.reuters.com/article/usa-fed ... SS0N2O3028

REUTERS

"Fed report shows wage pressures amid 'modest to moderate' economic growth"

By Ann Saphir, Lindsay Dunsmuir

OCTOBER 20, 2021

(Reuters) -U.S. employers reported significant increases in prices and wages even as economic growth decelerated to a “modest to moderate” pace in September and early October, the Federal Reserve said on Wednesday in its latest compendium of reports about the economy.

“Outlooks for near-term economic activity remained positive, overall, but some Districts noted increased uncertainty and more cautious optimism than in previous months,” according to the summary of information from the Fed’s 12 regional districts, prepared as part of a broad range of briefings ahead of policymakers’ Nov. 2-3 meeting.

Employment increased, though labor growth was dampened by a low supply of workers, despite wage increases designed to attract new hires and keep existing employees, the report said.

Most districts reported “significantly elevated prices,” with some expecting prices to stay high or increase further, and others expecting inflation to moderate.

“Many firms raised selling prices indicating a greater ability to pass along cost increases to customers amid strong demand,” the Fed districts reported.

Policymakers are poised to begin reducing their $120 billion in monthly asset purchases as soon as next month after what most see as substantial improvement in the labor market since the end of last year.

The report isn’t likely to alter that decision, but it does expose the tensions Fed policymakers face as they move beyond the taper and begin contemplating when to raise rates.

Inflation has been running well above the Fed’s 2% target for the last several months.

Fed Governor Randal Quarles on Wednesday said current high inflation may test the Fed’s patience as it leaves rates low to encourage hiring.

His current view, like that of most of his colleagues, is that inflation will subside next year.

But if wages start to push prices into an upward spiral, or inflation expectations begin to get unmoored, he said, the Fed may need to act sooner to raise rates.

Policymakers are keenly focused on the drivers of those price rises and whether they will, as most expect, recede next year.

If current high inflation persists, the Fed may need to start raising rates sooner than widely assumed, several here policymakers have said here recently.

However, Cleveland Fed President Loretta Mester pushed back against those concerns on Wednesday afternoon, saying that although she sees upside risks to inflation, she expects inflation will come back down next year.

“I don’t think that interest rate hikes are coming any time soon,” Mester said during an interview with CNBC.

FIRMS RAISE PRICES

Wednesday’s report showed companies in most districts were feeling price and wage pressures from supply chain bottlenecks as well as from labor constraints.

The Philadelphia Fed reported on one firm that was offering as much as “$90,000 for a second-year CPA position that might have commanded $65,000 before the pandemic.”

The Cleveland Fed said nearly 60% of its contacts reported raising wages recently, but with supply chains slowing production of goods, even that appeared not to be enough.

One auto dealer, the district reported, noted that “supply chain disruptions were causing his labor challenges, adding, ‘nothing to sell makes it hard to keep employees.’”

A furniture retailer told the Boston Fed it had raised prices more than 30% since February 2021 to reflect increased shipping and materials costs.

The San Francisco Fed reported competition for talent and workers’ willingness to switch jobs as driving up wages, with one contact from the banking sector calling it “a wage war.”

Meanwhile, the increase in available workers that many employers expected to see as pandemic unemployment benefits expired and schools came back into session failed to materialize in many districts, the report showed.

Reporting by Ann Saphir and Lindsay Dunsmuir; Additional reporting by Jonnelle Marte; Editing by Andrea Ricci and Diane Craft

https://www.reuters.com/article/usa-fed ... SKBN2HA2AN

REUTERS

"Boston Fed will not release documents on its former president's trades"

By Howard Schneider

OCTOBER 20, 2021

WASHINGTON (Reuters) - The Boston Federal Reserve will not release documents that could show whether its former president vetted a series of personal investments last year with its ethics officer, a spokesman for the regional Fed bank said, a key point in an ongoing ethics controversy at the U.S. central bank.

Eric Rosengren, along with Dallas Fed President Robert Kaplan, stepped down after details of their trading activities in 2020 were reported in the media last month, raising questions about whether Fed rules on policymakers’ financial investments are strict enough given their market-sensitive roles.

Their investing activities and those of other top Fed officials including Chair Jerome Powell, in a year when the central bank delivered an unprecedented response to the economic threat posed by the coronavirus pandemic, have erupted into a full-blown controversy that may weigh on whether Powell is reappointed as Fed chief.

In a statement issued shortly after the initial reports, Rosengren said he would sell the securities in question, including shares in real estate investment trusts, the value of which could be influenced by Fed policy decisions.

Rosengren also said the investments “were permissible under Fed ethics rules for asset types and timeframes for transactions.”

Responding to a Reuters request for any documents from the Boston Fed’s general counsel or ethics officer underlying that comment, a spokesman for the regional bank emailed a statement on Tuesday that deferred to a broad review of Fed ethics rules launched by Powell last month.

“We will not be able to provide internal communications of that nature,” the statement said.

“The Chair has called for reviews of the ethics rules and frameworks."

"We welcome them, and will cooperate fully - and won’t publicly address specifics so as to see those reviews proceed fully, without prejudgment or distraction.”

Reuters has requested similar documents from the Dallas Fed as well as the Fed’s Board of Governors - the panel of officials who oversee the entire U.S. central bank system.

A Dallas Fed spokesman said the request had been forwarded to the regional bank’s general counsel.

There has been no response yet on the request filed to the Fed’s Board of Governors under the federal Freedom of Information Act.

The 12 regional Fed banks are quasi-private entities not governed by the Freedom of Information Act, and can be selective about the documents they make public.

Republican U.S. Senator Steve Daines pointedly questioned Powell about this issue at a recent congressional hearing.

Other prominent lawmakers, including Senate Banking Committee Chair Sherrod Brown, a Democrat, plan to introduce legislation restricting Fed officials’ ownership of shares of individual companies.

Democratic Senator Elizabeth Warren has asked for securities regulators to investigate the transactions and demanded an ethics overhaul at the Fed’s regional banks.

In a Sept. 20 letter to Warren, St. Louis Fed President James Bullard, writing on behalf of all the Fed regional banks, said they would abide by whatever new guidance emerges from Powell’s review.

POWELL’S FUTURE

The ethics controversy has become an issue for Powell as he awaits word on whether President Joe Biden will appoint him to a second four-year term as Fed chief when his current one expires in February.

Reports on some of Powell’s own transactions last year have highlighted the potential reputational damage the central bank now faces as the controversy lingers.

In Powell’s case, that involved between $1 million and $5 million in proceeds from the sale of a stock market index fund a few days before he delivered a policy speech.

Under forms that Fed governors file each year with the U.S. Office of Government Ethics, the values of holdings and transactions are recorded only in broad categories so the exact amount of the sale is not known.

A Fed spokesman said the sale and six smaller ones that year were to cover Powell’s family expenses.

From a personal finance perspective, it was a bad move.

The fund, the Vanguard Total Stock Market Index Fund, which tracks the broader U.S. equity market, has risen more than 30% since Powell sold it.

But, as with Rosengren and Kaplan, the context has become as important as the details.

Their transactions took place in a year of enormous economic uncertainty and hyperactivity by the Fed in response, actions that had tremendous influence on both the economy and financial markets.

In Powell’s case, the apparent liquidation of his stake in the Vanguard fund - his annual disclosure for 2020 shows effectively no holding in it at the end of that year - came with the U.S. unemployment rate at a lofty 7.8%, the initial rounds of federal pandemic-related aid due to expire, and no vaccines against COVID-19 in sight.

Powell has been a clear favorite for renomination, and still may be.

The online political betting market PredictIt.org, where the pace of transactions has surged since the ethics controversy emerged, suggests about a 70% probability he will be renamed to the job.

But that is down from 90% just before the matter arose.

Added to discussion around Powell’s management of monetary policy and bank regulation - the substance of his job - he now faces what Fed historian Peter Conti-Brown called a “legitimacy crisis.”

“There should be a very clear bright line rule, and that is that no central banker, or frankly any Fed employee with access to (Federal Open Market Committee) deliberations, can be an active market participant,” Conti-Brown said on a podcast with David Beckworth, a senior research fellow at George Mason University’s Mercatus Center.[-

“I would prefer to see central bankers buy structured products that rebalance by algorithm."

"So there’s no human discretion involved.”

Reporting by Howard Schneider; Editing by Dan Burns and Paul Simao

https://www.reuters.com/article/usa-fed ... SKBN2HA2AT