REUTERS
"Fed sees three 2024 rate cuts and shallower path as Powell backs go-slow approach"
By Howard Schneider and Ann Saphir
March 20, 2024
Summary
* Policy rate stays in 5.25%-5.50% range
* U.S. central bank says inflation remains 'elevated'
* Fed upgrades economic outlook in slightly hawkish shift
WASHINGTON, March 20 (Reuters) - Federal Reserve Chair Jerome Powell said on Wednesday recent high inflation readings had not changed the underlying "story" of slowly easing price pressures in the U.S., but added that recent data also had not bolstered the central bank's confidence that the inflation battle has been won.
Powell, speaking after a policy meeting at which officials left rates unchanged and held onto their outlook for three cuts in borrowing costs this year, said the timing of those reductions still depended on officials becoming more secure that inflation can continue to decline towards the Fed's 2% target in an economy that continues to outperform expectations.
Inflation reports at the beginning of the year showed price pressures remained "elevated," in the Fed's view, but "haven't really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road to 2%," Powell told reporters.
"I also don't think that those readings added to anyone's confidence" of a continued decline in inflation.
The decision on when to cut rates will depend on more data, Powell said, to determine if the disappointing readings that started the year continue.
"We want to be careful," the Fed chief said, reiterating a go-slow approach to rate cuts that has been buttressed by the economy's ongoing strength, leaving officials in no rush to ease monetary policy while the economy and the job market continue to grow.
While officials affirmed their view for three rate cuts this year, they also upgraded their outlook for economic growth and projected slightly slower progress on inflation over the course of the year.
The Fed's benchmark overnight interest rate, as expected, was held steady on Wednesday in the 5.25%-5.50% range where it has been since July.
The updated quarterly economic projections showed the personal consumption expenditures price index excluding food and energy rising at a 2.6% rate by the end of the year, compared to 2.4% in the projections issued in December.
Nevertheless, 10 of the Fed's 19 officials still see the policy rate falling by at least three-quarters of a percentage point by the end of this year, a median view first set in December and maintained despite recent stronger-than-expected inflation.
U.S. stocks extended their gains following the release of the Federal Open Market Committee's policy statement while the U.S. dollar slipped against a basket of currencies.
U.S. Treasury yields fell.
Investors strengthened bets of a first rate cut in June.
"The May meeting is not live for a cut, barring a financial accident, as the Committee continue to seek further confidence that inflation is returning to target before firing the starting gun on the easing cycle," said Michael Brown, a market analyst at Pepperstone.
Back in December, eleven officials had seen three quarter-percentage-point cuts on tap for the year, and the new policy view came alongside an upgraded outlook for the economy.
Growth is now seen at 2.1% for the year compared to just the 1.4% projected in December, while the unemployment rate is seen ending the year at 4%, lower than the 4.1% anticipated in December and barely changed from the 3.9% jobless rate recorded in February.
LONGER-RUN RATE HIGHER
One key measure, the longer-run policy rate, was moved higher by a tenth of a percentage point, from 2.5% to 2.6%, reflecting the views of some Fed officials that the economy can support higher interest rates overall in the future.
The Fed kicked off an aggressive monetary policy tightening cycle two years ago in response to a surge in inflation that would eventually hit a 40-year peak, but it has kept its policy rate in the current range since last July.
The latest projections show the median policymaker expects the Fed's benchmark overnight interest rate to fall three-quarters of a percentage point in 2025, less than the 1 percentage point projected in December as part of a slightly slowed rate cut path, and by three-quarters of a point in 2026 as well, the same as anticipated previously.
"Economic activity has been expanding at a solid pace."
"Job gains have remained strong and the unemployment rate has remained low," the Fed said in its unanimously approved statement after the end of a two-day meeting.
The statement also repeated that officials are still seeking "greater confidence" in a continued decline of inflation before they begin cutting interest rates, language adopted at the Fed's Jan. 30-31 meeting that is likely to stay in place until just before the first rate reduction.
Investors ahead of the meeting had settled firmly on an anticipated June start to rate cuts.
That view was largely reinforced by the outcome of the meeting, but it also leaves the median rate outlook near a tipping point, a fact that could give outsized influence to upcoming inflation reports.
Reporting by Howard Schneider; Additional reporting by Saqib Ahmed and Lindsay Dunsmuir; Editing by Paul Simao
https://www.reuters.com/markets/rates-b ... 024-03-20/
THE FEDERAL RESERVE
Re: THE FEDERAL RESERVE
REUTERS
"Amid forecast shift, Fed's Powell flags uncertainty over longer-run outlook"
By Michael S. Derby
March 20, 2024
WASHINGTON, March 20 (Reuters) - Federal Reserve officials on Wednesday nudged up the level estimated for their target interest rate over the longer term, but central bank Chair Jerome Powell said that does not necessarily herald an era of consistently higher interest rates.
Alongside maintaining the current target rate at 5.25%-5.50% and still penciling in three-quarters-of-a-percentage point of rate cuts this year, officials also raised their longer-run estimate of the fed funds rate to 2.6% from 2.5% in December's forecasts.
That breaks above an estimate that had been in place for most of the last five years.
Policymakers' longer-run estimate had fallen persistently over the years prior to the pandemic in what proved to be an extended stretch of very low interest rates and persistently weak inflation.
But gradually, at least over the last year, views have been shifting.
Seven policymakers now figure the long-run neutral rate is at least 2.9%, new projections released on Wednesday showed, versus just three a year ago.
Powell, at a press conference after the rate meeting, said that while he does not anticipate a return to very low rates he was not yet sure that a new higher-rate regime was in the offing.
“My instinct would be that rates will not go back down to the very low levels” that prevailed before the onset of the coronavirus pandemic in the spring of 2020, Powell said.
But there’s “tremendous uncertainty” about where the longer-term rate will ultimately stand.
Over recent months, in the Fed and among private sector economists, there’s been an active debate over whether the pre-pandemic era of very low rates has run its course.
Some believe that period's stretch of very affordable borrowing costs will not return again amid changes in the economy and government finance that point to persistently more expensive credit.
The shift to a higher longer-run forecast was not unexpected.
Joe Brusuelas, chief economist of research firm RSM US LLP, said Fed forecasts point to an inflation-adjusted neutral rate of 0.4%, which he said was in-line with the December forecast outlook.
But for Tani Fukui, director for global economic and market strategy at MetLife Investment Management, the change in the forecast was quite important.
"One of the implications is they are not as tight as they think they are," she said, which might explain why the economy has not slowed as much as expected in the face of aggressive rate rises.
She added the shift in forecast also means “they don't have to cut as much to get to an easing position.”
Meanwhile, ING Chief International Economist James Knightley said in a note he sees that forecast climbing eventually to 3% due in large part to loose fiscal policy.
Reporting by Michael S. Derby and Ann Saphir; Editing by Dan Burns and Andrea Ricci
https://www.reuters.com/markets/us/amid ... 024-03-20/
"Amid forecast shift, Fed's Powell flags uncertainty over longer-run outlook"
By Michael S. Derby
March 20, 2024
WASHINGTON, March 20 (Reuters) - Federal Reserve officials on Wednesday nudged up the level estimated for their target interest rate over the longer term, but central bank Chair Jerome Powell said that does not necessarily herald an era of consistently higher interest rates.
Alongside maintaining the current target rate at 5.25%-5.50% and still penciling in three-quarters-of-a-percentage point of rate cuts this year, officials also raised their longer-run estimate of the fed funds rate to 2.6% from 2.5% in December's forecasts.
That breaks above an estimate that had been in place for most of the last five years.
Policymakers' longer-run estimate had fallen persistently over the years prior to the pandemic in what proved to be an extended stretch of very low interest rates and persistently weak inflation.
But gradually, at least over the last year, views have been shifting.
Seven policymakers now figure the long-run neutral rate is at least 2.9%, new projections released on Wednesday showed, versus just three a year ago.
Powell, at a press conference after the rate meeting, said that while he does not anticipate a return to very low rates he was not yet sure that a new higher-rate regime was in the offing.
“My instinct would be that rates will not go back down to the very low levels” that prevailed before the onset of the coronavirus pandemic in the spring of 2020, Powell said.
But there’s “tremendous uncertainty” about where the longer-term rate will ultimately stand.
Over recent months, in the Fed and among private sector economists, there’s been an active debate over whether the pre-pandemic era of very low rates has run its course.
Some believe that period's stretch of very affordable borrowing costs will not return again amid changes in the economy and government finance that point to persistently more expensive credit.
The shift to a higher longer-run forecast was not unexpected.
Joe Brusuelas, chief economist of research firm RSM US LLP, said Fed forecasts point to an inflation-adjusted neutral rate of 0.4%, which he said was in-line with the December forecast outlook.
But for Tani Fukui, director for global economic and market strategy at MetLife Investment Management, the change in the forecast was quite important.
"One of the implications is they are not as tight as they think they are," she said, which might explain why the economy has not slowed as much as expected in the face of aggressive rate rises.
She added the shift in forecast also means “they don't have to cut as much to get to an easing position.”
Meanwhile, ING Chief International Economist James Knightley said in a note he sees that forecast climbing eventually to 3% due in large part to loose fiscal policy.
Reporting by Michael S. Derby and Ann Saphir; Editing by Dan Burns and Andrea Ricci
https://www.reuters.com/markets/us/amid ... 024-03-20/
Re: THE FEDERAL RESERVE
REUTERS
"Fed gets an earful about 'stranglehold' from high rates"
By Ann Saphir
March 22, 2024
March 22 (Reuters) - Federal Reserve Chair Jerome Powell and fellow Fed governors on Friday heard firsthand from business and community leaders how the Fed's interest rate hikes, along with ongoing price and labor market pressures, are affecting Americans.
Higher interest rates together with instability in commodity prices "has a stranglehold on the American agriculturalist right now, which leads to a stranglehold on all of rural America," said Whitney Ferris-Hansen, who owns and operates J/W Farms and Ranch in Burlington, Colorado.
"An increase in rates is always expected and planned for, but the speed at which these increases happened could not be risk-managed; we could not forward contract grain fast enough to hedge these interest rates."
Starting in March 2022 the Fed raised interest rates rapidly to fight decades-high inflation, bringing its short-term benchmark rate to the 5.25%-5.5% range where it has kept it since last July.
The "Fed Listens" event where Ferris-Hansen and five others spoke and answered policymakers' questions was the latest in a series begun before the pandemic and designed to give U.S. central bankers a close look at the real-world effects of their rate-setting decisions.
It took place at the same table where earlier this week policymakers decided to keep the benchmark short-term policy rate steady.
After that meeting Powell said policymakers expect to cut interest rates later this year, but only once they have greater confidence that inflation is under control.
Friday's panel made clear that for some Americans, that time cannot come soon enough.
Rising borrowing costs coupled with higher energy and transportation prices as well as rising wages are squeezing profits for small and medium-sized manufacturers, said Cara Walton, director at Southfield, Michigan-based Harbour Results, a consulting firm for small manufacturers.
Some have stopped investing in new equipment because they cannot afford the more expensive financing coupled with slowing demand, she said.
"The total cost to invest is very high, and the return on that investment is very long and getting longer," she said.
Small manufacturing companies with young leaders "have never run a business with interest rates like this... it's uncharted territory for us."
Other panelists gave accounts of the impact of continuing pressures from higher prices, even as the rate of increase - inflation - has slowed under pressure of the Fed's interest-rate hikes.
"We're basically in the midst of a perfect storm," said Derrick Chubbs, president and CEO of Second Harvest Food Bank of Central Florida in Orlando, Florida, noting increased costs of healthcare, childcare, transportation and insurance, along with groceries and housing.
His network of nonprofits currently distributes 300,000 meals daily, as much as at the height of the pandemic recession.
One reason for hope: Rents in Orlando are down for the first time since 2020, he said, attributing the decline to the Fed's rate hikes.
Policymakers seemed particularly keen to hear from Svenja Gudell, chief economist at job website Indeed, who noted signs of a cooling labor market compared with the "frenzied" 2021-2022 period, especially in higher-paid sectors like technology where job postings have fallen the most.
Food service and other lower-wage jobs offering benefits like health insurance and time off rose sharply in 2021 and early 2022, she said, but growth has since slowed.
"Send us your slides," Powell said.
Reporting by Ann Saphir; Editing by Andrea Ricci
https://www.reuters.com/markets/us/fed- ... 024-03-22/
"Fed gets an earful about 'stranglehold' from high rates"
By Ann Saphir
March 22, 2024
March 22 (Reuters) - Federal Reserve Chair Jerome Powell and fellow Fed governors on Friday heard firsthand from business and community leaders how the Fed's interest rate hikes, along with ongoing price and labor market pressures, are affecting Americans.
Higher interest rates together with instability in commodity prices "has a stranglehold on the American agriculturalist right now, which leads to a stranglehold on all of rural America," said Whitney Ferris-Hansen, who owns and operates J/W Farms and Ranch in Burlington, Colorado.
"An increase in rates is always expected and planned for, but the speed at which these increases happened could not be risk-managed; we could not forward contract grain fast enough to hedge these interest rates."
Starting in March 2022 the Fed raised interest rates rapidly to fight decades-high inflation, bringing its short-term benchmark rate to the 5.25%-5.5% range where it has kept it since last July.
The "Fed Listens" event where Ferris-Hansen and five others spoke and answered policymakers' questions was the latest in a series begun before the pandemic and designed to give U.S. central bankers a close look at the real-world effects of their rate-setting decisions.
It took place at the same table where earlier this week policymakers decided to keep the benchmark short-term policy rate steady.
After that meeting Powell said policymakers expect to cut interest rates later this year, but only once they have greater confidence that inflation is under control.
Friday's panel made clear that for some Americans, that time cannot come soon enough.
Rising borrowing costs coupled with higher energy and transportation prices as well as rising wages are squeezing profits for small and medium-sized manufacturers, said Cara Walton, director at Southfield, Michigan-based Harbour Results, a consulting firm for small manufacturers.
Some have stopped investing in new equipment because they cannot afford the more expensive financing coupled with slowing demand, she said.
"The total cost to invest is very high, and the return on that investment is very long and getting longer," she said.
Small manufacturing companies with young leaders "have never run a business with interest rates like this... it's uncharted territory for us."
Other panelists gave accounts of the impact of continuing pressures from higher prices, even as the rate of increase - inflation - has slowed under pressure of the Fed's interest-rate hikes.
"We're basically in the midst of a perfect storm," said Derrick Chubbs, president and CEO of Second Harvest Food Bank of Central Florida in Orlando, Florida, noting increased costs of healthcare, childcare, transportation and insurance, along with groceries and housing.
His network of nonprofits currently distributes 300,000 meals daily, as much as at the height of the pandemic recession.
One reason for hope: Rents in Orlando are down for the first time since 2020, he said, attributing the decline to the Fed's rate hikes.
Policymakers seemed particularly keen to hear from Svenja Gudell, chief economist at job website Indeed, who noted signs of a cooling labor market compared with the "frenzied" 2021-2022 period, especially in higher-paid sectors like technology where job postings have fallen the most.
Food service and other lower-wage jobs offering benefits like health insurance and time off rose sharply in 2021 and early 2022, she said, but growth has since slowed.
"Send us your slides," Powell said.
Reporting by Ann Saphir; Editing by Andrea Ricci
https://www.reuters.com/markets/us/fed- ... 024-03-22/
Re: THE FEDERAL RESERVE
Benzinga
"Atlanta Fed President Sees 'Some Troubling Things,' Now Calls For Just 1 Rate Cut In 2024"
Story by Nabaparna Bhattacharya
23 MARCH 2024
Federal Reserve Bank of Atlanta President Raphael Bostic has reportedly revised his forecast, anticipating only one interest-rate cut this year, likely occurring later than initially anticipated.
The Atlanta Fed chief previously advocated for two rate cuts in 2024, suggesting the first cut might occur in the summer, Bloomberg reported.
Bostic informed reporters in Atlanta on Friday that it was a “close call.”
“We will have to see how the data come in over the next several weeks,” he added.
Fed officials, maintaining interest rates for a fifth consecutive meeting Wednesday, narrowly upheld their outlook for three interest-rate cuts this year.
Chair Jerome Powell stated that central bankers anticipate gaining confidence in inflation reaching the 2% goal, with the first reduction likely to occur “at some point this year.”
Former U.S. Treasury Secretary Larry Summers has openly criticized the Federal Reserve’s hints of impending interest rate cuts recently, questioning the necessity of such actions amid a strong economy and ongoing inflation worries.
During an appearance on Bloomberg Television’s Wall Street Week, Summers expressed perplexity over the Fed’s current stance, especially considering the healthy state of the economy and financial markets.
“My sense is still that the Fed has itchy fingers to start cutting rates, and I don’t fully get it,” Summers said.
Meanwhile, Bostic expressed diminished confidence in the inflation trajectory compared to December, citing “some troubling things” beneath headline figures.
He specifically highlighted the wide range of items in the consumer basket experiencing elevated price increases.
A crucial measure of underlying inflation exceeded expectations for the second consecutive month in February, while the Fed’s preferred gauge, to be released next week, is expected to reveal continued high price pressures, Bloomberg reported.
While policymakers project the federal funds rate to reach 4.6% by the end of 2024, individual expectations vary.
The Fed’s “dot plot” revealed that 10 officials anticipate three or more quarter-point cuts this year, while nine expect two or fewer.
“The economy continues to deliver surprises and it continues to be more resilient and more energized than I had forecast or projected,” Bostic said.
https://www.msn.com/en-us/money/markets ... 5b49&ei=26
"Atlanta Fed President Sees 'Some Troubling Things,' Now Calls For Just 1 Rate Cut In 2024"
Story by Nabaparna Bhattacharya
23 MARCH 2024
Federal Reserve Bank of Atlanta President Raphael Bostic has reportedly revised his forecast, anticipating only one interest-rate cut this year, likely occurring later than initially anticipated.
The Atlanta Fed chief previously advocated for two rate cuts in 2024, suggesting the first cut might occur in the summer, Bloomberg reported.
Bostic informed reporters in Atlanta on Friday that it was a “close call.”
“We will have to see how the data come in over the next several weeks,” he added.
Fed officials, maintaining interest rates for a fifth consecutive meeting Wednesday, narrowly upheld their outlook for three interest-rate cuts this year.
Chair Jerome Powell stated that central bankers anticipate gaining confidence in inflation reaching the 2% goal, with the first reduction likely to occur “at some point this year.”
Former U.S. Treasury Secretary Larry Summers has openly criticized the Federal Reserve’s hints of impending interest rate cuts recently, questioning the necessity of such actions amid a strong economy and ongoing inflation worries.
During an appearance on Bloomberg Television’s Wall Street Week, Summers expressed perplexity over the Fed’s current stance, especially considering the healthy state of the economy and financial markets.
“My sense is still that the Fed has itchy fingers to start cutting rates, and I don’t fully get it,” Summers said.
Meanwhile, Bostic expressed diminished confidence in the inflation trajectory compared to December, citing “some troubling things” beneath headline figures.
He specifically highlighted the wide range of items in the consumer basket experiencing elevated price increases.
A crucial measure of underlying inflation exceeded expectations for the second consecutive month in February, while the Fed’s preferred gauge, to be released next week, is expected to reveal continued high price pressures, Bloomberg reported.
While policymakers project the federal funds rate to reach 4.6% by the end of 2024, individual expectations vary.
The Fed’s “dot plot” revealed that 10 officials anticipate three or more quarter-point cuts this year, while nine expect two or fewer.
“The economy continues to deliver surprises and it continues to be more resilient and more energized than I had forecast or projected,” Bostic said.
https://www.msn.com/en-us/money/markets ... 5b49&ei=26
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Goolsbee says he sees three rate cuts this year"
Reuters
March 25, 2024
March 25 (Reuters) - Chicago Federal Reserve Bank President Austan Goolsbee said on Monday that at the Federal Reserve's policy meeting last week he penciled in three rate cuts for this year.
At that meeting, the U.S. central bank kept its benchmark overnight lending rate in a target range of 5.25%-5.5%, while the median estimate for interest rate reductions that policymakers projected for the year was three.
"I was at the median for this one," Goolsbee said in an interview with Yahoo Finance, while declining to say when he thought an easing in borrowing costs might begin.
Goolsbee added that price increase readings for January and February were higher than expected with the "main puzzle" still being housing inflation.
"So we're in an uncertain state but it doesn't feel to me like we've changed fundamentally the story that we're getting back to target," Goolsbee said.
Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/feds ... 024-03-25/
"Fed's Goolsbee says he sees three rate cuts this year"
Reuters
March 25, 2024
March 25 (Reuters) - Chicago Federal Reserve Bank President Austan Goolsbee said on Monday that at the Federal Reserve's policy meeting last week he penciled in three rate cuts for this year.
At that meeting, the U.S. central bank kept its benchmark overnight lending rate in a target range of 5.25%-5.5%, while the median estimate for interest rate reductions that policymakers projected for the year was three.
"I was at the median for this one," Goolsbee said in an interview with Yahoo Finance, while declining to say when he thought an easing in borrowing costs might begin.
Goolsbee added that price increase readings for January and February were higher than expected with the "main puzzle" still being housing inflation.
"So we're in an uncertain state but it doesn't feel to me like we've changed fundamentally the story that we're getting back to target," Goolsbee said.
Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama
https://www.reuters.com/markets/us/feds ... 024-03-25/
Re: THE FEDERAL RESERVE
REUTERS
"Fed posts record loss of $114.3 billion in 2023"
By Michael S. Derby
March 26, 2024
March 26 (Reuters) - The Federal Reserve said on Tuesday that it officially saw a net negative income of $114.3 billion in 2023, a record loss tied to expenses related to managing the U.S. central bank's short-term interest rate target.
The loss last year follows $58.8 billion in net income in 2022, the Fed said.
The numbers released were an audited tally following preliminary numbers reported earlier this year.
The Fed has stressed repeatedly that net negative income does not impede its ability to operate or conduct monetary policy.
By law, the Fed hands over any profits after covering operational expenses to the Treasury.
The Fed earns income from services it provides the financial system and from interest income on securities it owns.
It has earned significant profits over recent years amid very low rates and large levels of bond holdings.
The Fed's move to aggressively boost the federal funds rate starting in the spring of 2022 has upended central bank finances.
To cool inflation pressures, the Fed lifted the target from near zero levels to its current 5.25% to 5.5% range.
The Fed maintains that target by paying banks, money funds and other financial firms to park cash at the central bank, and that is meant paying out substantially more in interest.
The Fed's audited interest expenses for banks' reserve balances hit $176.8 billion last year, up $116.4 billion from 2022's level, while interest payouts from its reverse repo facility was $104.3 billion last year, from $41.9 billion the prior year.
Meanwhile, the income the Fed earned from bonds it owns was at $163.8 billion last year, little changed from 2022.
The Fed can create money to fund its operations when dealing with operating losses which means it faces no obstacles to operate.
It captures its loss in an accounting device called a deferred asset.
The official level of the deferred asset stood at $133.3 billion at the close of 2023.
As of March 20, it had risen to $157.8 billion and it is unclear how much larger it will get.
When the Fed returns to profitability it will use excess earnings to reduce the deferred asset and when it is extinguished the Fed will start returning excess profits to the Treasury again.
Fed officials have noted they've handed back substantial sums to the Treasury over recent years.
A St. Louis Fed report last year said it could take years before the Fed is able to once again return profits to the government.
Reporting by Michael S. Derby; Editing by Marguerita Choy
https://www.reuters.com/markets/us/fed- ... 024-03-26/
"Fed posts record loss of $114.3 billion in 2023"
By Michael S. Derby
March 26, 2024
March 26 (Reuters) - The Federal Reserve said on Tuesday that it officially saw a net negative income of $114.3 billion in 2023, a record loss tied to expenses related to managing the U.S. central bank's short-term interest rate target.
The loss last year follows $58.8 billion in net income in 2022, the Fed said.
The numbers released were an audited tally following preliminary numbers reported earlier this year.
The Fed has stressed repeatedly that net negative income does not impede its ability to operate or conduct monetary policy.
By law, the Fed hands over any profits after covering operational expenses to the Treasury.
The Fed earns income from services it provides the financial system and from interest income on securities it owns.
It has earned significant profits over recent years amid very low rates and large levels of bond holdings.
The Fed's move to aggressively boost the federal funds rate starting in the spring of 2022 has upended central bank finances.
To cool inflation pressures, the Fed lifted the target from near zero levels to its current 5.25% to 5.5% range.
The Fed maintains that target by paying banks, money funds and other financial firms to park cash at the central bank, and that is meant paying out substantially more in interest.
The Fed's audited interest expenses for banks' reserve balances hit $176.8 billion last year, up $116.4 billion from 2022's level, while interest payouts from its reverse repo facility was $104.3 billion last year, from $41.9 billion the prior year.
Meanwhile, the income the Fed earned from bonds it owns was at $163.8 billion last year, little changed from 2022.
The Fed can create money to fund its operations when dealing with operating losses which means it faces no obstacles to operate.
It captures its loss in an accounting device called a deferred asset.
The official level of the deferred asset stood at $133.3 billion at the close of 2023.
As of March 20, it had risen to $157.8 billion and it is unclear how much larger it will get.
When the Fed returns to profitability it will use excess earnings to reduce the deferred asset and when it is extinguished the Fed will start returning excess profits to the Treasury again.
Fed officials have noted they've handed back substantial sums to the Treasury over recent years.
A St. Louis Fed report last year said it could take years before the Fed is able to once again return profits to the government.
Reporting by Michael S. Derby; Editing by Marguerita Choy
https://www.reuters.com/markets/us/fed- ... 024-03-26/
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Waller still sees 'no rush' to cut rates amid sticky inflation data"
By Michael S. Derby
March 27, 2024
NEW YORK, March 27 (Reuters) - Recent disappointing inflation data affirms the case for the U.S. Federal Reserve to hold off on cutting its short-term interest rate target, Fed Governor Christopher Waller said on Wednesday, but he did not rule out trimming rates later in the year.
"There is no rush to cut the policy rate" right now, Waller said in a speech at an Economic Club of New York gathering.
Recent data "tells me that it is prudent to hold this rate at its current restrictive stance perhaps for longer than previously thought to help keep inflation on a sustainable trajectory toward 2%."
Rate cuts are not off the table, however, Waller said, noting that further progress expected on lowering inflation "will make it appropriate" for the Fed "to begin reducing the target range for the federal funds rate this year."
It could take a few months of easing inflation data to gain that confidence, but until then, a strong economy gives the Fed space to take stock of how the economy is performing, Waller said.
Pushing back the start of rate cuts will likely affect how much easing happens this year, he said.
"It is appropriate to reduce the overall number of rate cuts or push them further into the future in response to the recent data."
Waller's comments were his first since last week's Fed policy meeting where officials, as expected, maintained the overnight policy rate at 5.25% to 5.5%.
Policy makers also affirmed forecasts from year-end 2023 for three rate cuts this year, based on the expectation that inflation will fall back toward 2% as the year moves forward.
However, unexpectedly strong inflation this year has called into question whether the Fed can deliver on its forecast.
Fed officials are waiting to see if recent data reflects a temporary setback in the effort to reduce price pressures, and if so, this could mean dialing back rate cut expectations for the year.
At the press conference following last week's policy meeting, Fed Chairman Jerome Powell said current policy risks are "two sided."
"We're in a situation where if we ease too much or too soon, we could see inflation come back, and if we ease too late, we could do unnecessary harm to employment and people's working lives," he said.
"We want to be careful" and the strength of the economy gives the Fed space to watch the data before deciding what to do with interest rate policy, he added.
At the end of February, Waller signaled he was among the officials with some skepticism about any near-term rate cuts, given that the economy is showing strong growth amid a very strong labor market.
In comments after his formal remarks on Wednesday, Waller said there is an extremely high bar to the central bank raising rates.
“Something would really have to dramatically change on the inflation front to think about" pushing rates higher, he said.
Instead, he said, the question before the Fed is when to ease rates and "it’s just a question of when you start."
Reporting by Michael S. Derby; Editing by Richard Chang and Leslie Adler
https://www.reuters.com/markets/us/feds ... 024-03-27/
"Fed's Waller still sees 'no rush' to cut rates amid sticky inflation data"
By Michael S. Derby
March 27, 2024
NEW YORK, March 27 (Reuters) - Recent disappointing inflation data affirms the case for the U.S. Federal Reserve to hold off on cutting its short-term interest rate target, Fed Governor Christopher Waller said on Wednesday, but he did not rule out trimming rates later in the year.
"There is no rush to cut the policy rate" right now, Waller said in a speech at an Economic Club of New York gathering.
Recent data "tells me that it is prudent to hold this rate at its current restrictive stance perhaps for longer than previously thought to help keep inflation on a sustainable trajectory toward 2%."
Rate cuts are not off the table, however, Waller said, noting that further progress expected on lowering inflation "will make it appropriate" for the Fed "to begin reducing the target range for the federal funds rate this year."
It could take a few months of easing inflation data to gain that confidence, but until then, a strong economy gives the Fed space to take stock of how the economy is performing, Waller said.
Pushing back the start of rate cuts will likely affect how much easing happens this year, he said.
"It is appropriate to reduce the overall number of rate cuts or push them further into the future in response to the recent data."
Waller's comments were his first since last week's Fed policy meeting where officials, as expected, maintained the overnight policy rate at 5.25% to 5.5%.
Policy makers also affirmed forecasts from year-end 2023 for three rate cuts this year, based on the expectation that inflation will fall back toward 2% as the year moves forward.
However, unexpectedly strong inflation this year has called into question whether the Fed can deliver on its forecast.
Fed officials are waiting to see if recent data reflects a temporary setback in the effort to reduce price pressures, and if so, this could mean dialing back rate cut expectations for the year.
At the press conference following last week's policy meeting, Fed Chairman Jerome Powell said current policy risks are "two sided."
"We're in a situation where if we ease too much or too soon, we could see inflation come back, and if we ease too late, we could do unnecessary harm to employment and people's working lives," he said.
"We want to be careful" and the strength of the economy gives the Fed space to watch the data before deciding what to do with interest rate policy, he added.
At the end of February, Waller signaled he was among the officials with some skepticism about any near-term rate cuts, given that the economy is showing strong growth amid a very strong labor market.
In comments after his formal remarks on Wednesday, Waller said there is an extremely high bar to the central bank raising rates.
“Something would really have to dramatically change on the inflation front to think about" pushing rates higher, he said.
Instead, he said, the question before the Fed is when to ease rates and "it’s just a question of when you start."
Reporting by Michael S. Derby; Editing by Richard Chang and Leslie Adler
https://www.reuters.com/markets/us/feds ... 024-03-27/
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Mester says it's possible data may support June rate cut"
By Michael S. Derby
April 2, 2024
NEW YORK, April 2 (Reuters) - Federal Reserve Bank of Cleveland President Loretta Mester said on Tuesday she continues to expect the central bank will be able to cut rates this year and noted the June policy meeting might be when the easing kicks off if the data allows it.
“If the economy evolves as expected, then in my view it will be appropriate for the [Federal Open Market Committee] to begin reducing the fed funds rate later this year, as inflation continues on its downward path toward 2%, and labor markets and economic growth remain solid,” Mester said in a speech given before a gathering held by the National Association for Business Economics, Cleveland Association for Business Economics, and Team NEO.
As for the pace of that action, it could occur "gradually" if the economy meets the forecast, she said.
Mester cautioned that to pave the way for an easing in the stance of monetary policy she needs to see upcoming inflation data meet her forecast of further declines.
Because that could take some time, “I do not expect I will have enough information by the time of the FOMC’s next meeting to make that determination" of an easing in rates.
The next Fed policy meeting is scheduled for April 30 and May 1
But that could change by the time the FOMC meets on June 11-12.
“We have to be data dependent so I don’t want to rule that out,” she told reporters after her speech, in regards to an early summer rate cut.
Officials at the last FOMC meeting in March maintained their overnight target rate range at between 5.25% and 5.5% and continued to pencil in three rate cuts this year.
Strength in inflation data at the start of the year has called into question when the Fed will kick off rate cuts and how far it will be able to go.
Mester, who will retire at the end of June, is currently a voting member of the FOMC.
She told reporters that three rate cuts for this year remain a "reasonable" forecast while deeming it a "close call."
In her speech Mester said monetary policy is in a good place right now because a strong economy gives the central bank room to take in data before making a change in rates.
She expects continued declines in inflation albeit at a slower pace than last year.
She also cautioned against premature rate cuts.
“Moving rates down too soon or too quickly without sufficient evidence to give us confidence that inflation is on a sustainable and timely path back to 2% would risk undoing the progress we have made on inflation,” Mester said, adding “at this point, I think the bigger risk would be to begin reducing the funds rate too early.”
Mester also said in her remarks that she’d revised up her expectation for growth this year to just above 2%, and she said the job market will likely see higher unemployment rates.
Mester said she also revised at the FOMC meeting her view of the longer-run federal funds rate to 3% from her prior estimate of 2.5%.
"I don’t think the equilibrium interest rate will be as low as it was” in the future, Mester said following her formal remarks.
The current situation plus the outlook suggests that, “although we’ve raised interest rates quite a bit, and they’re at a high level, maybe we don’t have as much restraint on the monetary policy side as we were thinking."
Reporting by Michael S. Derby; Editing by Andrea Ricci
https://www.reuters.com/markets/us/feds ... 024-04-02/
"Fed's Mester says it's possible data may support June rate cut"
By Michael S. Derby
April 2, 2024
NEW YORK, April 2 (Reuters) - Federal Reserve Bank of Cleveland President Loretta Mester said on Tuesday she continues to expect the central bank will be able to cut rates this year and noted the June policy meeting might be when the easing kicks off if the data allows it.
“If the economy evolves as expected, then in my view it will be appropriate for the [Federal Open Market Committee] to begin reducing the fed funds rate later this year, as inflation continues on its downward path toward 2%, and labor markets and economic growth remain solid,” Mester said in a speech given before a gathering held by the National Association for Business Economics, Cleveland Association for Business Economics, and Team NEO.
As for the pace of that action, it could occur "gradually" if the economy meets the forecast, she said.
Mester cautioned that to pave the way for an easing in the stance of monetary policy she needs to see upcoming inflation data meet her forecast of further declines.
Because that could take some time, “I do not expect I will have enough information by the time of the FOMC’s next meeting to make that determination" of an easing in rates.
The next Fed policy meeting is scheduled for April 30 and May 1
But that could change by the time the FOMC meets on June 11-12.
“We have to be data dependent so I don’t want to rule that out,” she told reporters after her speech, in regards to an early summer rate cut.
Officials at the last FOMC meeting in March maintained their overnight target rate range at between 5.25% and 5.5% and continued to pencil in three rate cuts this year.
Strength in inflation data at the start of the year has called into question when the Fed will kick off rate cuts and how far it will be able to go.
Mester, who will retire at the end of June, is currently a voting member of the FOMC.
She told reporters that three rate cuts for this year remain a "reasonable" forecast while deeming it a "close call."
In her speech Mester said monetary policy is in a good place right now because a strong economy gives the central bank room to take in data before making a change in rates.
She expects continued declines in inflation albeit at a slower pace than last year.
She also cautioned against premature rate cuts.
“Moving rates down too soon or too quickly without sufficient evidence to give us confidence that inflation is on a sustainable and timely path back to 2% would risk undoing the progress we have made on inflation,” Mester said, adding “at this point, I think the bigger risk would be to begin reducing the funds rate too early.”
Mester also said in her remarks that she’d revised up her expectation for growth this year to just above 2%, and she said the job market will likely see higher unemployment rates.
Mester said she also revised at the FOMC meeting her view of the longer-run federal funds rate to 3% from her prior estimate of 2.5%.
"I don’t think the equilibrium interest rate will be as low as it was” in the future, Mester said following her formal remarks.
The current situation plus the outlook suggests that, “although we’ve raised interest rates quite a bit, and they’re at a high level, maybe we don’t have as much restraint on the monetary policy side as we were thinking."
Reporting by Michael S. Derby; Editing by Andrea Ricci
https://www.reuters.com/markets/us/feds ... 024-04-02/
Re: THE FEDERAL RESERVE
CNBC
"Atlanta Fed President Bostic sees only one rate cut this year, occurring in the fourth quarter"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, APR 3 2024
Atlanta Federal Reserve President Raphael Bostic expressed concern Wednesday about the pace of inflation and indicated he doesn’t think interest rate cuts should come until much later in the year.
In a CNBC interview, the central bank official said strong productivity, a rebound in the supply chain and a resilient labor market are indicating that inflation is going to decline “much slower than what many have expected.”
“If the economy evolves as I expect, and that’s going to be seeing continued robustness in GDP, unemployment and a slow decline of inflation through the course of the year, I think it would be appropriate for us to do start moving down at the end of this year, the fourth quarter,” he said on “Squawk Box.”
“We’ll just have to see where the data come in.”
Bostic’s comments come as other Fed officials also are indicating a desire to move cautiously on rate cuts.
They have indicated that a strong economy as well as moderating inflation give them time to see more evidence that inflation is moving back to the central bank’s 2% target.
However, the balance of the Federal Open Market Committee, of which Bostic is a voting member, indicated last month that they see three cuts coming this year, assuming quarter percentage point increments.
That makes Bostic one of the more hawkish members of the rate-setting body.
Markets anticipate the Fed will start cutting in June or July.
The likelihood shifted Wednesday morning, with the market-implied probability of a June cut sliced to 54%, down about 10 percentage points from the previous day, according to the CME Group’s FedWatch gauge.
During Wednesday’s interview, Bostic indicated that his views on inflation and rates have swung back and forth as he’s watched the data evolve from positive progress on inflation in the latter part of 2023 to less certain footing this year.
“The road is going to be bumpy, and I think if you’ve looked over the last several months, inflation hasn’t moved very much relative to where we were at the end of 2023,” he said.
“There are some secondary measures in the inflation numbers that have gotten me a bit concerned that things may move even slower.”
There are some goods components in inflation metrics the Fed uses that show a high proportion moving above 3% and some even above 5%, he said.
“Those are much higher now than they were before and they’re starting to trend back to what we saw in the high inflation period,” Bostic added.
“They’re moving away from what we’d like to see."
"So I’ve got to make sure that those aren’t hiding some extra upward pressure and pricing pressure before I’m going to want to move our policy rate.”
Most metrics the Atlanta Fed tracks show inflation running above 3%.
Its own measure of “sticky” inflation showed the 12-month rate at 4.4% in February.
In fact, the only measures in the Atlanta Fed’s “Underlying Inflation Dashboard” running under 3% are the personal consumption expenditures price indexes that the central bank uses as its primary gauge.
https://www.cnbc.com/2024/04/03/atlanta ... arter.html
"Atlanta Fed President Bostic sees only one rate cut this year, occurring in the fourth quarter"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, APR 3 2024
Atlanta Federal Reserve President Raphael Bostic expressed concern Wednesday about the pace of inflation and indicated he doesn’t think interest rate cuts should come until much later in the year.
In a CNBC interview, the central bank official said strong productivity, a rebound in the supply chain and a resilient labor market are indicating that inflation is going to decline “much slower than what many have expected.”
“If the economy evolves as I expect, and that’s going to be seeing continued robustness in GDP, unemployment and a slow decline of inflation through the course of the year, I think it would be appropriate for us to do start moving down at the end of this year, the fourth quarter,” he said on “Squawk Box.”
“We’ll just have to see where the data come in.”
Bostic’s comments come as other Fed officials also are indicating a desire to move cautiously on rate cuts.
They have indicated that a strong economy as well as moderating inflation give them time to see more evidence that inflation is moving back to the central bank’s 2% target.
However, the balance of the Federal Open Market Committee, of which Bostic is a voting member, indicated last month that they see three cuts coming this year, assuming quarter percentage point increments.
That makes Bostic one of the more hawkish members of the rate-setting body.
Markets anticipate the Fed will start cutting in June or July.
The likelihood shifted Wednesday morning, with the market-implied probability of a June cut sliced to 54%, down about 10 percentage points from the previous day, according to the CME Group’s FedWatch gauge.
During Wednesday’s interview, Bostic indicated that his views on inflation and rates have swung back and forth as he’s watched the data evolve from positive progress on inflation in the latter part of 2023 to less certain footing this year.
“The road is going to be bumpy, and I think if you’ve looked over the last several months, inflation hasn’t moved very much relative to where we were at the end of 2023,” he said.
“There are some secondary measures in the inflation numbers that have gotten me a bit concerned that things may move even slower.”
There are some goods components in inflation metrics the Fed uses that show a high proportion moving above 3% and some even above 5%, he said.
“Those are much higher now than they were before and they’re starting to trend back to what we saw in the high inflation period,” Bostic added.
“They’re moving away from what we’d like to see."
"So I’ve got to make sure that those aren’t hiding some extra upward pressure and pricing pressure before I’m going to want to move our policy rate.”
Most metrics the Atlanta Fed tracks show inflation running above 3%.
Its own measure of “sticky” inflation showed the 12-month rate at 4.4% in February.
In fact, the only measures in the Atlanta Fed’s “Underlying Inflation Dashboard” running under 3% are the personal consumption expenditures price indexes that the central bank uses as its primary gauge.
https://www.cnbc.com/2024/04/03/atlanta ... arter.html
Re: THE FEDERAL RESERVE
CNBC
"Fed’s Powell emphasizes need for more evidence that inflation is easing before cutting rates"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, APR 3 2024
Federal Reserve Chairman Jerome Powell said Wednesday it will take a while for policymakers to evaluate the current state of inflation, keeping the timing of potential interest rate cuts uncertain.
Speaking specifically about stronger-than-expected price pressures to start the year, the central bank leader said he and his fellow officials are in no rush to ease monetary policy.
“On inflation, it is too soon to say whether the recent readings represent more than just a bump,” Powell said in remarks ahead of a question-and-answer session at Stanford University.
“We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent,” he added.
“Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.”
The remarks come two weeks after the rate-setting Federal Open Market Committee again voted to hold benchmark short-term borrowing rates steady.
In addition, the committee’s post-meeting statement on March 20 included the “greater confidence” qualifier needed before cutting.
‘Bumpy path’
Markets widely expect the FOMC to start easing policy this year, though they have had to recalibrate their outlook for the timing and extent of cuts as inflation has held stubbornly higher.
Other economic variables, particularly in the labor market and consumer spending, have held up as well, giving the Fed time to assess the current state of affairs before moving.
The Fed’s preferred inflation measure, the personal consumption expenditures price index, showed a 12-month rate of 2.5% for February, or 2.8% for the pivotal core measure that excludes food and energy.
Virtually all other inflation gauges show rates in excess of 3%.
“Recent readings on both job gains and inflation have come in higher than expected,” Powell said.
“The recent data do not, however, materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2 percent on a sometimes bumpy path.”
Other Fed officials speaking this week have made remarks consistent with the Fed’s patient approach.
Atlanta Fed President Raphael Bostic told CNBC on Wednesday that he thinks just one cut might be in the offing as prices of some important items have turned higher.
San Francisco Fed President Mary Daly said three cuts is a “reasonable baseline” but noted there are no guarantees, while Cleveland’s Loretta Mester also said cuts are likely later this year while adding that rates over the longer term may be higher than anticipated.
All three are FOMC voters.
Powell reiterated that decisions are being made “meeting by meeting” and noted only that cuts are “likely to be appropriate ... at some point this year.”
The uncertainty about rates has caused some consternation in markets, with stocks falling sharply earlier this week as Treasury yields moved higher.
The market stabilized Wednesday, but traders in the fed funds futures market again repriced their rate expectations, casting some doubt on a June cut as the market-implied probability moved to about 54% at one point, according to CME Group data.
Election ahead
Along with his comments on rates, Powell spent some time discussing Fed independence.
With the presidential election campaign heating up, Powell noted the importance of steering clear of political issues.
“Our analysis is free from any personal or political bias, in service to the public,” he said.
“We will not always get it right — no one does."
"But our decisions will always reflect our painstaking assessment of what is best for our economy in the medium and longer term — and nothing else.”
He also talked about “mission creep,” specifically as it relates to some demand for the Fed to get involved in climate change issues and the preparations financial institutions take for related events.
“We are not, nor do we seek to be, climate policymakers,” he said.
https://www.cnbc.com/2024/04/03/feds-po ... rates.html
"Fed’s Powell emphasizes need for more evidence that inflation is easing before cutting rates"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, APR 3 2024
Federal Reserve Chairman Jerome Powell said Wednesday it will take a while for policymakers to evaluate the current state of inflation, keeping the timing of potential interest rate cuts uncertain.
Speaking specifically about stronger-than-expected price pressures to start the year, the central bank leader said he and his fellow officials are in no rush to ease monetary policy.
“On inflation, it is too soon to say whether the recent readings represent more than just a bump,” Powell said in remarks ahead of a question-and-answer session at Stanford University.
“We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent,” he added.
“Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.”
The remarks come two weeks after the rate-setting Federal Open Market Committee again voted to hold benchmark short-term borrowing rates steady.
In addition, the committee’s post-meeting statement on March 20 included the “greater confidence” qualifier needed before cutting.
‘Bumpy path’
Markets widely expect the FOMC to start easing policy this year, though they have had to recalibrate their outlook for the timing and extent of cuts as inflation has held stubbornly higher.
Other economic variables, particularly in the labor market and consumer spending, have held up as well, giving the Fed time to assess the current state of affairs before moving.
The Fed’s preferred inflation measure, the personal consumption expenditures price index, showed a 12-month rate of 2.5% for February, or 2.8% for the pivotal core measure that excludes food and energy.
Virtually all other inflation gauges show rates in excess of 3%.
“Recent readings on both job gains and inflation have come in higher than expected,” Powell said.
“The recent data do not, however, materially change the overall picture, which continues to be one of solid growth, a strong but rebalancing labor market, and inflation moving down toward 2 percent on a sometimes bumpy path.”
Other Fed officials speaking this week have made remarks consistent with the Fed’s patient approach.
Atlanta Fed President Raphael Bostic told CNBC on Wednesday that he thinks just one cut might be in the offing as prices of some important items have turned higher.
San Francisco Fed President Mary Daly said three cuts is a “reasonable baseline” but noted there are no guarantees, while Cleveland’s Loretta Mester also said cuts are likely later this year while adding that rates over the longer term may be higher than anticipated.
All three are FOMC voters.
Powell reiterated that decisions are being made “meeting by meeting” and noted only that cuts are “likely to be appropriate ... at some point this year.”
The uncertainty about rates has caused some consternation in markets, with stocks falling sharply earlier this week as Treasury yields moved higher.
The market stabilized Wednesday, but traders in the fed funds futures market again repriced their rate expectations, casting some doubt on a June cut as the market-implied probability moved to about 54% at one point, according to CME Group data.
Election ahead
Along with his comments on rates, Powell spent some time discussing Fed independence.
With the presidential election campaign heating up, Powell noted the importance of steering clear of political issues.
“Our analysis is free from any personal or political bias, in service to the public,” he said.
“We will not always get it right — no one does."
"But our decisions will always reflect our painstaking assessment of what is best for our economy in the medium and longer term — and nothing else.”
He also talked about “mission creep,” specifically as it relates to some demand for the Fed to get involved in climate change issues and the preparations financial institutions take for related events.
“We are not, nor do we seek to be, climate policymakers,” he said.
https://www.cnbc.com/2024/04/03/feds-po ... rates.html