REUTERS
"Fed's Bullard says unemployment rate can go below 3% this year"
By Reuters Staff
FEBRUARY 1, 2022
NEW YORK, Feb 1 (Reuters) - Despite some near term challenges caused by a surge in COVID-19 infections, the unemployment rate could continue to drop this year as companies scrounge for workers and several factors, including early retirements, limit the size of the labor force, St. Louis Federal Reserve Bank President James Bullard said on Tuesday.
“I think unemployment is going to go down below 3% this year,” Bullard said during a Reuters interview.
“I think the upcoming jobs report will probably be not very good because of Omicron, but don’t be fooled."
"This is quite the strong economy here and a very strong labor market.”
(Reporting by Jonnelle Marte; Editing by Franklin Paul)
https://www.reuters.com/article/usa-fed ... SW1N2SF01A
THE FEDERAL RESERVE
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Bullard sees rate hikes now, then time to assess"
By Ann Saphir
FEBRUARY 1, 2022
Feb 1 (Reuters) - St. Louis Federal Reserve President James Bullard on Tuesday said he favors lifting rates at the U.S. central bank’s meeting in March and likely again in May.
But he pushed back against the idea of kicking off the tightening cycle with a half-percentage point hike, and said that how high the Fed will ultimately need to lift rates is an “open question.”
“The point of this is to get (monetary policy) better positioned right now and in coming months, and then we will be able to assess, at that point, whether we need to do more or not,” Bullard told Reuters in an interview on Twitter Spaces.
As the Fed barrels toward the end of two years of near-zero rates, Bullard signaled there will likely be less guidance for investors ahead of time for the future path of rates.
“We are going to have to be more nimble, faster, better at reacting to inflation data and other developments as we go through this year,” Bullard said.
“It’s going to be a more data-dependent environment.”
Still, Bullard - one of 16 Fed policymakers setting interest rates for the country who for months has been cajoling his colleagues to take a more aggressive stance against soaring inflation - gave somewhat of a roadmap for what he expects on policy and the economy.
On trimming the Fed’s $9 trillion balance sheet, Bullard said he would like to get started in the second quarter and thinks “that the runoff can be faster than it was last time around.”
Raising rates and shrinking the balance sheet are both expected to raise borrowing costs and slow growth, putting downward pressure on what’s now 40-year-high inflation.
“We are cognizant of the inflation issue, we’re moving on the policy rate, but we’re also going to move on the balance sheet so we’re not that far from reaching neutral if you are willing to consider both of those,” Bullard said.
If needed, he added, the Fed could use both levers to eventually put the brakes on the economy.
Meanwhile, he said, the U.S. unemployment rate - now at 3.9% - could plumb near-70-year lows.
“I think unemployment is going to go down below 3% this year,” Bullard said, noting that companies he talks to are doing well and scrounging for workers.
“I think the upcoming jobs report will probably be not very good because of Omicron, but don’t be fooled."
"This is quite the strong economy here and a very strong labor market.”
(Reporting by Howard Schneider and Ann Saphir; Editing by Andrea Ricci)
https://www.reuters.com/article/usa-fed ... SL1N2UC2AP
"Fed's Bullard sees rate hikes now, then time to assess"
By Ann Saphir
FEBRUARY 1, 2022
Feb 1 (Reuters) - St. Louis Federal Reserve President James Bullard on Tuesday said he favors lifting rates at the U.S. central bank’s meeting in March and likely again in May.
But he pushed back against the idea of kicking off the tightening cycle with a half-percentage point hike, and said that how high the Fed will ultimately need to lift rates is an “open question.”
“The point of this is to get (monetary policy) better positioned right now and in coming months, and then we will be able to assess, at that point, whether we need to do more or not,” Bullard told Reuters in an interview on Twitter Spaces.
As the Fed barrels toward the end of two years of near-zero rates, Bullard signaled there will likely be less guidance for investors ahead of time for the future path of rates.
“We are going to have to be more nimble, faster, better at reacting to inflation data and other developments as we go through this year,” Bullard said.
“It’s going to be a more data-dependent environment.”
Still, Bullard - one of 16 Fed policymakers setting interest rates for the country who for months has been cajoling his colleagues to take a more aggressive stance against soaring inflation - gave somewhat of a roadmap for what he expects on policy and the economy.
On trimming the Fed’s $9 trillion balance sheet, Bullard said he would like to get started in the second quarter and thinks “that the runoff can be faster than it was last time around.”
Raising rates and shrinking the balance sheet are both expected to raise borrowing costs and slow growth, putting downward pressure on what’s now 40-year-high inflation.
“We are cognizant of the inflation issue, we’re moving on the policy rate, but we’re also going to move on the balance sheet so we’re not that far from reaching neutral if you are willing to consider both of those,” Bullard said.
If needed, he added, the Fed could use both levers to eventually put the brakes on the economy.
Meanwhile, he said, the U.S. unemployment rate - now at 3.9% - could plumb near-70-year lows.
“I think unemployment is going to go down below 3% this year,” Bullard said, noting that companies he talks to are doing well and scrounging for workers.
“I think the upcoming jobs report will probably be not very good because of Omicron, but don’t be fooled."
"This is quite the strong economy here and a very strong labor market.”
(Reporting by Howard Schneider and Ann Saphir; Editing by Andrea Ricci)
https://www.reuters.com/article/usa-fed ... SL1N2UC2AP
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Bullard says U.S. unemployment rate can go below 3% this year"
By Howard Schneider and Jonnelle Marte
February 1, 2022
NEW YORK, Feb 1 (Reuters) - St. Louis Federal Reserve Bank President James Bullard said he sees the unemployment rate falling below 3% this year, a jobless rate the U.S. economy last saw in the early 1950s.
"I think unemployment is going to go down below 3% this year," Bullard said on Tuesday in a Reuters interview.
He noted that the unemployment rate dropped by 0.7 percentage points over the past two months alone to 3.9%.
The jobless rate could continue to fall as companies scrounge for workers and several factors, including early retirements, limit the share of people who are working or looking for jobs, he said.
Bullard said the labor market is strong, despite the weakness it could experience in the near term because of a surge in COVID-19 infections.
"I think the upcoming jobs report will probably be not very good because of Omicron, but don't be fooled," Bullard said.
"This is quite the strong economy here and a very strong labor market."
The last time the U.S. unemployment rate was below 3% was 1953, when it fell to as low as 2.5% - the lowest since the Labor Department began reporting it regularly in 1948.
Bullard said he supports raising interest rates in March to get monetary policy better positioned, but said future actions will depend on what happens with the economy and inflation.
Reporting by Howard Schneider and Jonnelle Marte; Editing by Franklin Paul, Howard Goller and Andrea Ricci
https://www.reuters.com/business/feds-b ... 022-02-01/
"Fed's Bullard says U.S. unemployment rate can go below 3% this year"
By Howard Schneider and Jonnelle Marte
February 1, 2022
NEW YORK, Feb 1 (Reuters) - St. Louis Federal Reserve Bank President James Bullard said he sees the unemployment rate falling below 3% this year, a jobless rate the U.S. economy last saw in the early 1950s.
"I think unemployment is going to go down below 3% this year," Bullard said on Tuesday in a Reuters interview.
He noted that the unemployment rate dropped by 0.7 percentage points over the past two months alone to 3.9%.
The jobless rate could continue to fall as companies scrounge for workers and several factors, including early retirements, limit the share of people who are working or looking for jobs, he said.
Bullard said the labor market is strong, despite the weakness it could experience in the near term because of a surge in COVID-19 infections.
"I think the upcoming jobs report will probably be not very good because of Omicron, but don't be fooled," Bullard said.
"This is quite the strong economy here and a very strong labor market."
The last time the U.S. unemployment rate was below 3% was 1953, when it fell to as low as 2.5% - the lowest since the Labor Department began reporting it regularly in 1948.
Bullard said he supports raising interest rates in March to get monetary policy better positioned, but said future actions will depend on what happens with the economy and inflation.
Reporting by Howard Schneider and Jonnelle Marte; Editing by Franklin Paul, Howard Goller and Andrea Ricci
https://www.reuters.com/business/feds-b ... 022-02-01/
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Bullard sees three successive hikes to start policy tightening"
By Ann Saphir and Howard Schneider
February 1, 2022
Feb 1 (Reuters) - St. Louis Federal Reserve President James Bullard on Tuesday said he favors starting the turn to tighter U.S. monetary policy with successive rate increases at the Fed's March, May and June meetings, before assessing whether the pace of inflation requires more aggressive steps from there.
But he pushed back against the idea of kicking off the tightening cycle with a half-percentage point hike in March, noting that markets have on their own started to push up borrowing costs already, and said that how high the Fed will ultimately need to lift rates remains an "open question."
"The point of this is to get (monetary policy) better positioned right now and in coming months, and then we will be able to assess, at that point, whether we need to do more or not," during the second half of the year and into 2023, Bullard told Reuters in an interview on Twitter Spaces.
With investors currently anticipating five quarter point increases over the course of the year, Bullard said that "is not too bad a bet..."
"A lot is going to depend on how inflation develops during the year."
He is not optimistic about how much inflation will fall without the Fed's intervention.
Global factors remained tilted towards higher prices, and Bullard said he thinks the U.S. economy is going to continue to grow strongly - so strong in fact he expects the unemployment rate to fall below 3% by year's end.
Though the upcoming jobs report for January may show some weakness because of the rise over the holidays in coronavirus cases, "don't be fooled," Bullard said.
"This is quite the strong economy here and a very strong labor market."
That would be the lowest unemployment rate since the early 1950s, and likely lead to ongoing wage pressures and sustained consumer spending that could keep prices rising.
TWO-YEAR MARK
As the Fed barrels toward the end of two years of near-zero interest rates, Bullard signaled that uncertainty is so high at this pointthe Fed may offer less guidance about the overall path of interest rates as it mulls data meeting by meeting.
"We are going to have to be more nimble, faster, better at reacting to inflation data and other developments as we go through this year," Bullard said.
"It’s going to be a more data-dependent environment."
Still, Bullard - who for months has been cajoling his colleagues to take a more aggressive stance against soaring inflation - gave somewhat of a roadmap for what he expects on policy and the economy.
On trimming the Fed's $9 trillion balance sheet, Bullard said he would like to get started in the second quarter and thinks "that the runoff can be faster than it was last time around."
Raising rates and shrinking the balance sheet are both expected to raise borrowing costs and slow growth, putting downward pressure on what's now 40-year-high inflation.
"We are cognizant of the inflation issue, we’re moving on the policy rate, but we’re also going to move on the balance sheet so we’re not that far from reaching neutral if you are willing to consider both of those," Bullard said, referring to the interest rate that would neither speed nor slow the economy.
In Bullard's estimation that rate is between 1.75% and 2%, a bit below where many of his colleagues see it.
Reporting by Howard Schneider and Ann Saphir; Editing by Andrea Ricci
https://www.reuters.com/business/feds-b ... 022-02-01/
"Fed's Bullard sees three successive hikes to start policy tightening"
By Ann Saphir and Howard Schneider
February 1, 2022
Feb 1 (Reuters) - St. Louis Federal Reserve President James Bullard on Tuesday said he favors starting the turn to tighter U.S. monetary policy with successive rate increases at the Fed's March, May and June meetings, before assessing whether the pace of inflation requires more aggressive steps from there.
But he pushed back against the idea of kicking off the tightening cycle with a half-percentage point hike in March, noting that markets have on their own started to push up borrowing costs already, and said that how high the Fed will ultimately need to lift rates remains an "open question."
"The point of this is to get (monetary policy) better positioned right now and in coming months, and then we will be able to assess, at that point, whether we need to do more or not," during the second half of the year and into 2023, Bullard told Reuters in an interview on Twitter Spaces.
With investors currently anticipating five quarter point increases over the course of the year, Bullard said that "is not too bad a bet..."
"A lot is going to depend on how inflation develops during the year."
He is not optimistic about how much inflation will fall without the Fed's intervention.
Global factors remained tilted towards higher prices, and Bullard said he thinks the U.S. economy is going to continue to grow strongly - so strong in fact he expects the unemployment rate to fall below 3% by year's end.
Though the upcoming jobs report for January may show some weakness because of the rise over the holidays in coronavirus cases, "don't be fooled," Bullard said.
"This is quite the strong economy here and a very strong labor market."
That would be the lowest unemployment rate since the early 1950s, and likely lead to ongoing wage pressures and sustained consumer spending that could keep prices rising.
TWO-YEAR MARK
As the Fed barrels toward the end of two years of near-zero interest rates, Bullard signaled that uncertainty is so high at this pointthe Fed may offer less guidance about the overall path of interest rates as it mulls data meeting by meeting.
"We are going to have to be more nimble, faster, better at reacting to inflation data and other developments as we go through this year," Bullard said.
"It’s going to be a more data-dependent environment."
Still, Bullard - who for months has been cajoling his colleagues to take a more aggressive stance against soaring inflation - gave somewhat of a roadmap for what he expects on policy and the economy.
On trimming the Fed's $9 trillion balance sheet, Bullard said he would like to get started in the second quarter and thinks "that the runoff can be faster than it was last time around."
Raising rates and shrinking the balance sheet are both expected to raise borrowing costs and slow growth, putting downward pressure on what's now 40-year-high inflation.
"We are cognizant of the inflation issue, we’re moving on the policy rate, but we’re also going to move on the balance sheet so we’re not that far from reaching neutral if you are willing to consider both of those," Bullard said, referring to the interest rate that would neither speed nor slow the economy.
In Bullard's estimation that rate is between 1.75% and 2%, a bit below where many of his colleagues see it.
Reporting by Howard Schneider and Ann Saphir; Editing by Andrea Ricci
https://www.reuters.com/business/feds-b ... 022-02-01/
Re: THE FEDERAL RESERVE
REUTERS
"Fed's Harker says four rate hikes are appropriate for this year"
Reuters
February 1, 2022
NEW YORK, Feb 1 (Reuters) - It may be appropriate for the Federal Reserve to raise interest rates four times this year, and to move more aggressively if the factors leading to higher inflation, such as supply chain issues, are not mitigated, Philadelphia Fed President Patrick Harker said on Tuesday.
"Right now, I think four 25-basis-point increases this year is appropriate," Harker said during an interview with Bloomberg TV.
"But there's a lot of risk here," including the risk that inflation is worse than expected, or that it eases faster than Fed officials expect, he said.
Policymakers say they plan to raise interest rates in March, and to start reducing the Fed's balance sheet later this year, as they work to remove the accommodation provided to stabilize markets and the economy during the pandemic.
Asked whether he would support raising interest rates by half a percentage point in March, Harker said he would need to be convinced it was needed.
"If inflation stays where it is right now and continues to start to come down, I don't see a 50-basis-point increase," said Harker, who votes for policy this year as an alternate for the Boston Fed.
"But if we see a spike, then I think we might have to act more aggressively."
He said he would like the Fed to start shrinking its bond holdings once interest rates are close to 1% or 1.25%, from today's near-zero levels.
"That reduction is going to be steeper and faster than the last time we tried it," Harker said.
Fed officials said last week that they would like to shrink those holdings primarily by letting bonds run off the balance sheet as they mature.
Harker said he would not commit to actively selling assets until he saw more analysis.
"This is something we're actively looking at right now," he said.
Reporting by Jonnelle Marte; editing by Jonathan Oatis
https://www.reuters.com/business/feds-h ... 022-02-01/
"Fed's Harker says four rate hikes are appropriate for this year"
Reuters
February 1, 2022
NEW YORK, Feb 1 (Reuters) - It may be appropriate for the Federal Reserve to raise interest rates four times this year, and to move more aggressively if the factors leading to higher inflation, such as supply chain issues, are not mitigated, Philadelphia Fed President Patrick Harker said on Tuesday.
"Right now, I think four 25-basis-point increases this year is appropriate," Harker said during an interview with Bloomberg TV.
"But there's a lot of risk here," including the risk that inflation is worse than expected, or that it eases faster than Fed officials expect, he said.
Policymakers say they plan to raise interest rates in March, and to start reducing the Fed's balance sheet later this year, as they work to remove the accommodation provided to stabilize markets and the economy during the pandemic.
Asked whether he would support raising interest rates by half a percentage point in March, Harker said he would need to be convinced it was needed.
"If inflation stays where it is right now and continues to start to come down, I don't see a 50-basis-point increase," said Harker, who votes for policy this year as an alternate for the Boston Fed.
"But if we see a spike, then I think we might have to act more aggressively."
He said he would like the Fed to start shrinking its bond holdings once interest rates are close to 1% or 1.25%, from today's near-zero levels.
"That reduction is going to be steeper and faster than the last time we tried it," Harker said.
Fed officials said last week that they would like to shrink those holdings primarily by letting bonds run off the balance sheet as they mature.
Harker said he would not commit to actively selling assets until he saw more analysis.
"This is something we're actively looking at right now," he said.
Reporting by Jonnelle Marte; editing by Jonathan Oatis
https://www.reuters.com/business/feds-h ... 022-02-01/
Re: THE FEDERAL RESERVE
REUTERS
"Raskin tells Senate it is not Fed's job to prescribe bank lending"
By Pete Schroeder
FEBRUARY 2, 2022
WASHINGTON (Reuters) - Sarah Bloom Raskin, President Joe Biden’s pick to lead the Federal Reserve’s regulatory work, plans to tell lawmakers she does not believe the role includes telling banks where they should be lending.
In prepared testimony posted by the U.S. Senate Banking Committee on Wednesday ahead of her nomination hearing on Thursday, Raskin said the role of vice chair for supervision requires broad consultation inside and outside of the Fed on how best to ensure banks are managing their risks.
But that job does not include telling banks where they should be lending, a rebuttal to accusations from Republicans and some industry groups that she might discourage banks from investing in fossil fuels in her capacity at the Fed.
“The role does not involve directing banks to make loans only to specific sectors, or to avoid making loans to particular sectors."
"And the role exists within the laws passed by Congress that govern the Federal Reserve and its responsibilities,” her prepared testimony states.
Raskin, a former Fed governor and senior Treasury official under President Barack Obama, is widely expected to press for stricter scrutiny of banks than when Fed bank oversight was run by Randal Quarles, a Republican who left the Fed in December.
In her prepared testimony, Raskin said the 2008 financial crisis shows bank supervisors must be attentive to risks “no matter where they come from,” mentioning everything from cyberattacks to “cataclysmic weather-related events” as meriting scrutiny.
Reporting by Pete Schroeder; Editing by Leslie Adler and Andrea Ricci
https://www.reuters.com/article/usa-fed ... SL1N2UD2XB
"Raskin tells Senate it is not Fed's job to prescribe bank lending"
By Pete Schroeder
FEBRUARY 2, 2022
WASHINGTON (Reuters) - Sarah Bloom Raskin, President Joe Biden’s pick to lead the Federal Reserve’s regulatory work, plans to tell lawmakers she does not believe the role includes telling banks where they should be lending.
In prepared testimony posted by the U.S. Senate Banking Committee on Wednesday ahead of her nomination hearing on Thursday, Raskin said the role of vice chair for supervision requires broad consultation inside and outside of the Fed on how best to ensure banks are managing their risks.
But that job does not include telling banks where they should be lending, a rebuttal to accusations from Republicans and some industry groups that she might discourage banks from investing in fossil fuels in her capacity at the Fed.
“The role does not involve directing banks to make loans only to specific sectors, or to avoid making loans to particular sectors."
"And the role exists within the laws passed by Congress that govern the Federal Reserve and its responsibilities,” her prepared testimony states.
Raskin, a former Fed governor and senior Treasury official under President Barack Obama, is widely expected to press for stricter scrutiny of banks than when Fed bank oversight was run by Randal Quarles, a Republican who left the Fed in December.
In her prepared testimony, Raskin said the 2008 financial crisis shows bank supervisors must be attentive to risks “no matter where they come from,” mentioning everything from cyberattacks to “cataclysmic weather-related events” as meriting scrutiny.
Reporting by Pete Schroeder; Editing by Leslie Adler and Andrea Ricci
https://www.reuters.com/article/usa-fed ... SL1N2UD2XB
Re: THE FEDERAL RESERVE
REUTERS
"Fed nominee Jefferson says high inflation is a major challenge"
By Reuters Staff
FEBRUARY 2, 2022
Feb 2 (Reuters) - Philip Jefferson, one of U.S. President Joe Biden’s nominees to the Federal Reserve Board, said on Wednesday that tackling high inflation and keeping inflation expectations anchored should be a main priority for the central bank.
“Today, the economy is facing two major challenges: the COVID-19 pandemic and inflation,” Jefferson said in prepared remarks released ahead of a confirmation hearing on Thursday at the Senate Banking committee.
“The spike in inflation we are seeing today threatens to heighten expectations of future inflation.”
Jefferson is dean of faculty at Davidson College in North Carolina and if confirmed would be only the fourth Black man to serve on the governing body of the U.S. central bank.
(Reporting by Ann Saphir Editing by Chris Reese)
https://www.reuters.com/article/usa-fed ... SW1N2SF01M
"Fed nominee Jefferson says high inflation is a major challenge"
By Reuters Staff
FEBRUARY 2, 2022
Feb 2 (Reuters) - Philip Jefferson, one of U.S. President Joe Biden’s nominees to the Federal Reserve Board, said on Wednesday that tackling high inflation and keeping inflation expectations anchored should be a main priority for the central bank.
“Today, the economy is facing two major challenges: the COVID-19 pandemic and inflation,” Jefferson said in prepared remarks released ahead of a confirmation hearing on Thursday at the Senate Banking committee.
“The spike in inflation we are seeing today threatens to heighten expectations of future inflation.”
Jefferson is dean of faculty at Davidson College in North Carolina and if confirmed would be only the fourth Black man to serve on the governing body of the U.S. central bank.
(Reporting by Ann Saphir Editing by Chris Reese)
https://www.reuters.com/article/usa-fed ... SW1N2SF01M
Re: THE FEDERAL RESERVE
REUTERS
"As Fed fights inflation, ‘dovish’ may not define Biden’s newest nominees"
By Ann Saphir, Howard Schneider
FEBRUARY 2, 2022
(Reuters) - In the summer of 2005, Philip Jefferson spent several weeks learning from fellow Swarthmore College professor Amy Vollmer how to genetically engineer bacteria to resist antibiotics, an unusual interlude for a tenured economics professor.
He says his brief foray into her field gave him fresh ideas for teaching in his own discipline; years later, Vollmer says, he told her it was one of the best things he had ever done.
Jefferson, now dean of faculty at Davidson College in North Carolina, is poised to again push boundaries after being picked by U.S President Joe Biden to join the Federal Reserve Board, which runs the central bank of the world’s biggest economy.
He and fellow nominees Michigan State University economist Lisa Cook and former Fed governor Sarah Bloom Raskin appear Thursday at the U.S. Senate Banking Committee for a confirmation hearing.
If Cook and Jefferson are confirmed it would be the first time two governors who are Black would serve on the seven-member Fed Board at the same time, with Cook being the first non-white woman ever to hold the job.
Raskin, whose nomination as Fed vice chair of supervision would make her the Fed’s top banking regulator, is almost certain to draw the lion’s share of senators’ questions.
Her views on climate risk and banks’ capital requirements - welcomed by some Democrats as likely signaling more restrictions for Wall Street and panned by Republicans for the same reason - will come under particular scrutiny.
But investors are also keen to know exactly where the three nominees - none of whom responded to requests from Reuters for comment - stand on monetary policy, now at a crossroads as the Fed prepares to battle searing-hot inflation.
DOVES OR HAWKS?
Wall Street analysts expect the Fed to start tightening policy next month, raising interest rates faster than it has in decades and shrinking its balance sheet rapidly as well, as it unwinds the emergency measures it unleashed to limit the economic damage from the COVID-19 pandemic.
Many of those same analysts have also pegged all three Fed nominees as leaning “dovish” - that is, more concerned with supporting the full-employment side of the Fed’s dual mandate than on fighting inflation, which often takes a toll on economic growth and employment.
They point to Raskin’s support for a go-slower approach on policy tightening in 2013, when she was on the Fed Board.
They cite Jefferson’s research focus on poverty and Cook’s on the drag that inequality exerts on economic growth as evidence that they would tolerate higher inflation as the price for a stronger labor market.
That said, it is far from clear how strongly any new Fed policymaker would push for easy policy with inflation running at its highest since 1982, eating into wage gains and making it harder for Americans - lower-income households in particular - to make ends meet.
Indeed, Dartmouth College’s Andy Levin says the eye the nominees have trained on regular Americans suggests the opposite, at least for now.
“It’s bad for ordinary people if inflation stays at 5% or continues to go upward,” he said.
“They are all going to be strong advocates of the dual mandate, but that doesn’t mean being complacent about inflation.”
It is a theme also heard from Michelle Holder, president at Equitable Growth, a think tank largely focused on economic inequality.
“Given the weightiness, the sheer importance that inflation possesses for most American families and individuals, the Fed simply has to make primary controlling inflation,” she told Reuters.
Though that doesn’t mean the Fed can stop worrying about jobs, “controlling inflation probably has to take precedence now.”
And it is one that Democrats, gearing up for what may be a heated hearing Thursday, are eager to emphasize.
On Wednesday, Senate Banking Committee Chair Sherrod Brown’s office put out a memo saying Cook “believes we need to put workers first in our economy by focusing on the Fed’s full employment mandate and lowering prices so paychecks go farther,” and Jefferson would “tackle the economic challenges faced by all the Americans who’ve been left behind in our economy.”
A ‘THICK MIDDLE’ AS ANCHOR
Moreover, with all three nominees joining a Fed that is remarkably united on the need to remove policy accommodation, it’s unlikely even strongly held dovish views would budge that.
“At a very high level the mandate is fairly clear, so that ‘thick middle’ is not going to change and the perspectives are not going to change depending on who is sitting in the chairs,” Atlanta Fed President Raphael Bostic said in a January interview.
Senator Pat Toomey, the top Republican on the Banking committee, has suggested the nominees are partisan, in part because of their attention to issues like racial inequality and climate change.
But on some level, the nominees personify the Fed’s own deepening research into the economic implications of such issues.
Once inflation is better contained, Bostic said, “you will see many of us lean back in to say we started ‘lower for longer,’ we started ‘being patient,’ now that we have inflation under control we are going to return to that kind of approach.”
Still, people who know the nominees say it would be a mistake to make too many assumptions about what their perspectives will be.
Trevon Logan, an economics professor at Ohio State University, pointed to a research project with Cook that began as a “bet” on a new approach she was taking to mine census data.
“I began essentially doubting her, and ended up with egg on my face” when it turned out to work, he said.
“I’ve been continuously struck by her creativity.”
The idea that Jefferson would be a policy dove “is probably not right,” said Swarthmore economics professor Mark Kuperberg, who worked and lunched with Jefferson regularly for two decades.
He said Jefferson as an economist “is quite middle of the road.”
John Caskey, another colleague in the Swarthmore economics department, declined to speculate on Jefferson’s policy learnings, but pointed to the nominee’s stint as a microbiologist those many years ago.
“He has an open mind,” Caskey said.
Reporting by Ann Saphir and Howard Schneider; Editing by Dan Burns and Andrea Ricci
https://www.reuters.com/article/usa-fed ... SL1N2UD1TH
"As Fed fights inflation, ‘dovish’ may not define Biden’s newest nominees"
By Ann Saphir, Howard Schneider
FEBRUARY 2, 2022
(Reuters) - In the summer of 2005, Philip Jefferson spent several weeks learning from fellow Swarthmore College professor Amy Vollmer how to genetically engineer bacteria to resist antibiotics, an unusual interlude for a tenured economics professor.
He says his brief foray into her field gave him fresh ideas for teaching in his own discipline; years later, Vollmer says, he told her it was one of the best things he had ever done.
Jefferson, now dean of faculty at Davidson College in North Carolina, is poised to again push boundaries after being picked by U.S President Joe Biden to join the Federal Reserve Board, which runs the central bank of the world’s biggest economy.
He and fellow nominees Michigan State University economist Lisa Cook and former Fed governor Sarah Bloom Raskin appear Thursday at the U.S. Senate Banking Committee for a confirmation hearing.
If Cook and Jefferson are confirmed it would be the first time two governors who are Black would serve on the seven-member Fed Board at the same time, with Cook being the first non-white woman ever to hold the job.
Raskin, whose nomination as Fed vice chair of supervision would make her the Fed’s top banking regulator, is almost certain to draw the lion’s share of senators’ questions.
Her views on climate risk and banks’ capital requirements - welcomed by some Democrats as likely signaling more restrictions for Wall Street and panned by Republicans for the same reason - will come under particular scrutiny.
But investors are also keen to know exactly where the three nominees - none of whom responded to requests from Reuters for comment - stand on monetary policy, now at a crossroads as the Fed prepares to battle searing-hot inflation.
DOVES OR HAWKS?
Wall Street analysts expect the Fed to start tightening policy next month, raising interest rates faster than it has in decades and shrinking its balance sheet rapidly as well, as it unwinds the emergency measures it unleashed to limit the economic damage from the COVID-19 pandemic.
Many of those same analysts have also pegged all three Fed nominees as leaning “dovish” - that is, more concerned with supporting the full-employment side of the Fed’s dual mandate than on fighting inflation, which often takes a toll on economic growth and employment.
They point to Raskin’s support for a go-slower approach on policy tightening in 2013, when she was on the Fed Board.
They cite Jefferson’s research focus on poverty and Cook’s on the drag that inequality exerts on economic growth as evidence that they would tolerate higher inflation as the price for a stronger labor market.
That said, it is far from clear how strongly any new Fed policymaker would push for easy policy with inflation running at its highest since 1982, eating into wage gains and making it harder for Americans - lower-income households in particular - to make ends meet.
Indeed, Dartmouth College’s Andy Levin says the eye the nominees have trained on regular Americans suggests the opposite, at least for now.
“It’s bad for ordinary people if inflation stays at 5% or continues to go upward,” he said.
“They are all going to be strong advocates of the dual mandate, but that doesn’t mean being complacent about inflation.”
It is a theme also heard from Michelle Holder, president at Equitable Growth, a think tank largely focused on economic inequality.
“Given the weightiness, the sheer importance that inflation possesses for most American families and individuals, the Fed simply has to make primary controlling inflation,” she told Reuters.
Though that doesn’t mean the Fed can stop worrying about jobs, “controlling inflation probably has to take precedence now.”
And it is one that Democrats, gearing up for what may be a heated hearing Thursday, are eager to emphasize.
On Wednesday, Senate Banking Committee Chair Sherrod Brown’s office put out a memo saying Cook “believes we need to put workers first in our economy by focusing on the Fed’s full employment mandate and lowering prices so paychecks go farther,” and Jefferson would “tackle the economic challenges faced by all the Americans who’ve been left behind in our economy.”
A ‘THICK MIDDLE’ AS ANCHOR
Moreover, with all three nominees joining a Fed that is remarkably united on the need to remove policy accommodation, it’s unlikely even strongly held dovish views would budge that.
“At a very high level the mandate is fairly clear, so that ‘thick middle’ is not going to change and the perspectives are not going to change depending on who is sitting in the chairs,” Atlanta Fed President Raphael Bostic said in a January interview.
Senator Pat Toomey, the top Republican on the Banking committee, has suggested the nominees are partisan, in part because of their attention to issues like racial inequality and climate change.
But on some level, the nominees personify the Fed’s own deepening research into the economic implications of such issues.
Once inflation is better contained, Bostic said, “you will see many of us lean back in to say we started ‘lower for longer,’ we started ‘being patient,’ now that we have inflation under control we are going to return to that kind of approach.”
Still, people who know the nominees say it would be a mistake to make too many assumptions about what their perspectives will be.
Trevon Logan, an economics professor at Ohio State University, pointed to a research project with Cook that began as a “bet” on a new approach she was taking to mine census data.
“I began essentially doubting her, and ended up with egg on my face” when it turned out to work, he said.
“I’ve been continuously struck by her creativity.”
The idea that Jefferson would be a policy dove “is probably not right,” said Swarthmore economics professor Mark Kuperberg, who worked and lunched with Jefferson regularly for two decades.
He said Jefferson as an economist “is quite middle of the road.”
John Caskey, another colleague in the Swarthmore economics department, declined to speculate on Jefferson’s policy learnings, but pointed to the nominee’s stint as a microbiologist those many years ago.
“He has an open mind,” Caskey said.
Reporting by Ann Saphir and Howard Schneider; Editing by Dan Burns and Andrea Ricci
https://www.reuters.com/article/usa-fed ... SL1N2UD1TH
Re: THE FEDERAL RESERVE
CNBC
"Payrolls show surprisingly powerful gain of 467,000 in January despite omicron surge"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED FRI, FEB 4 2022
KEY POINTS
* Nonfarm payrolls rose 467,000 in January, well ahead of the 150,000 Wall Street estimate.
* Leisure and hospitality led the gains, while professional and business services and retail also posted big numbers.
* Wages surged, rising 0.7% for the month and 5.7% for the year.
* Massive revisions juiced up the November and December totals by 709,000.
Job growth rose far more than expected in January despite surging omicron cases that seemingly sent millions of workers to the sidelines, the Labor Department reported Friday.
Nonfarm payrolls surged by 467,000 for the month, while the unemployment rate edged higher to 4%, according to the Bureau of Labor Statistics.
The Dow Jones estimate was for payroll growth of 150,000 and a 3.9% unemployment rate.
The stunning gain came a week after the White House warned that the numbers could be low due to the pandemic.
Covid cases, however, have plunged nationally in recent weeks, with the seven-day moving average down more than 50% since peaking in mid-January, according to the CDC.
Most economists had expected January’s number to be tepid due to the virus, though they were looking for stronger gains ahead.
Along with the big upside surprise for January, massive revisions sent previous months considerably higher.
December, which initially was reported as a gain of 199,000, went up to 510,000.
November surged to 647,000 from the previously reported 249,000.
For the two months alone, the initial counts were revised up by 709,000.
The revisions came as part of the annual adjustments from the BLS that saw sizeable changes for many of the months in 2021.
Those changes brought the 2021 total to 6.665 million, easily the biggest single-year gain in U.S. history.
“The benchmark revisions helped the numbers a bit just because it moved out some of the seasonal factors that have been at work."
"But overall the job market is strong, particularly in the face of omicron,” said Kathy Jones, chief fixed income strategist at Charles Schwab.
“It’s hard to find a weak spot in this report.”
For January, the biggest employment gains came in leisure and hospitality, which saw 151,000 hires, 108,000 of which came from bars and restaurants.
Professional and business services contributed 86,000, while retail was up 61,000.
Earnings also rose sharply, accelerating 0.7%, good for a 12-month gain of 5.7% and providing confirmation that inflation continues to gather strength.
That yearly move was the biggest gain since May 2020 when wage numbers were distorted by the pandemic.
The rate of wage gains, however, still lags inflation, which was running around 7% in December as gauged by the consumer price index.
There was more good jobs news: The labor force participation rate rose to 62.2%, a 0.3 percentage point gain.
That took the rate, which is closely watched by Fed officials, to its highest level since March 2020 and within 1.2 percentage points of where it was pre-pandemic.
The labor force participation rate for women rose to 57%.
A more encompassing level of unemployment that counts discouraged workers and those holding part-time jobs for economic reasons dropped to 7.1%, a 0.2 percentage point decline and to just above its pre-pandemic level.
Those working part-time for economic reasons fell by 212,000 in January, with the total level down 37% from a year ago.
“These data make it clear that the labor market ahead of Omicron was much stronger than previously believed, and it’s very tempting to argue that the [January] data mean that all danger of an Omicron hit has passed,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics.
”We’re a bit more cautious than that, not least because the near-real-time data fell through most of [January] and have only just begun to recover.”
The job gains brought employment back to about 1.7 million below where it was in February 2020, a month before the pandemic declaration.
Stocks were mixed on the report and volatile.
Government bond yields spiked, with the benchmark 10-year Treasury note rising to 1.91%.
Markets have been anticipating an inflation-fighting Fed to hike interest rates at least five times in 2022, so the resilient jobs market is likely to do little to dissuade that sentiment.
The probability of the central bank increasing its benchmark short-term rate by half a percentage point, or 50 basis points, rose to 27% after the jobs report, according to the CME’s FedWatch gauge.
The Fed usually hikes in 25 basis point increments.
The chance of six increases this year rose to 51% following the report.
“They definitely will feel more behind the curve,” Jones said.
“I don’t think there’s a 50 basis point hike coming in March, but I think speculation about it will build and that will continue to push up on yields.”
The job gains were broad-based, with transportation and warehousing adding 54,000, local government education rising by 29,000 and health care moving higher by 18,000.
The unemployment rate for Blacks edged lower to 6.9%.
The rate for Asians also declined, falling to 3.6%.
The gain in jobs followed a report earlier in the week from payrolls processing firm ADP, which had indicated a drop of 301,000.
The two counts also differed widely in December, though the BLS revision brought the total closer to the ADP count of a 776,000 gain for that month.
https://www.cnbc.com/2022/02/04/jobs-re ... 2020-.html
"Payrolls show surprisingly powerful gain of 467,000 in January despite omicron surge"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED FRI, FEB 4 2022
KEY POINTS
* Nonfarm payrolls rose 467,000 in January, well ahead of the 150,000 Wall Street estimate.
* Leisure and hospitality led the gains, while professional and business services and retail also posted big numbers.
* Wages surged, rising 0.7% for the month and 5.7% for the year.
* Massive revisions juiced up the November and December totals by 709,000.
Job growth rose far more than expected in January despite surging omicron cases that seemingly sent millions of workers to the sidelines, the Labor Department reported Friday.
Nonfarm payrolls surged by 467,000 for the month, while the unemployment rate edged higher to 4%, according to the Bureau of Labor Statistics.
The Dow Jones estimate was for payroll growth of 150,000 and a 3.9% unemployment rate.
The stunning gain came a week after the White House warned that the numbers could be low due to the pandemic.
Covid cases, however, have plunged nationally in recent weeks, with the seven-day moving average down more than 50% since peaking in mid-January, according to the CDC.
Most economists had expected January’s number to be tepid due to the virus, though they were looking for stronger gains ahead.
Along with the big upside surprise for January, massive revisions sent previous months considerably higher.
December, which initially was reported as a gain of 199,000, went up to 510,000.
November surged to 647,000 from the previously reported 249,000.
For the two months alone, the initial counts were revised up by 709,000.
The revisions came as part of the annual adjustments from the BLS that saw sizeable changes for many of the months in 2021.
Those changes brought the 2021 total to 6.665 million, easily the biggest single-year gain in U.S. history.
“The benchmark revisions helped the numbers a bit just because it moved out some of the seasonal factors that have been at work."
"But overall the job market is strong, particularly in the face of omicron,” said Kathy Jones, chief fixed income strategist at Charles Schwab.
“It’s hard to find a weak spot in this report.”
For January, the biggest employment gains came in leisure and hospitality, which saw 151,000 hires, 108,000 of which came from bars and restaurants.
Professional and business services contributed 86,000, while retail was up 61,000.
Earnings also rose sharply, accelerating 0.7%, good for a 12-month gain of 5.7% and providing confirmation that inflation continues to gather strength.
That yearly move was the biggest gain since May 2020 when wage numbers were distorted by the pandemic.
The rate of wage gains, however, still lags inflation, which was running around 7% in December as gauged by the consumer price index.
There was more good jobs news: The labor force participation rate rose to 62.2%, a 0.3 percentage point gain.
That took the rate, which is closely watched by Fed officials, to its highest level since March 2020 and within 1.2 percentage points of where it was pre-pandemic.
The labor force participation rate for women rose to 57%.
A more encompassing level of unemployment that counts discouraged workers and those holding part-time jobs for economic reasons dropped to 7.1%, a 0.2 percentage point decline and to just above its pre-pandemic level.
Those working part-time for economic reasons fell by 212,000 in January, with the total level down 37% from a year ago.
“These data make it clear that the labor market ahead of Omicron was much stronger than previously believed, and it’s very tempting to argue that the [January] data mean that all danger of an Omicron hit has passed,” wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics.
”We’re a bit more cautious than that, not least because the near-real-time data fell through most of [January] and have only just begun to recover.”
The job gains brought employment back to about 1.7 million below where it was in February 2020, a month before the pandemic declaration.
Stocks were mixed on the report and volatile.
Government bond yields spiked, with the benchmark 10-year Treasury note rising to 1.91%.
Markets have been anticipating an inflation-fighting Fed to hike interest rates at least five times in 2022, so the resilient jobs market is likely to do little to dissuade that sentiment.
The probability of the central bank increasing its benchmark short-term rate by half a percentage point, or 50 basis points, rose to 27% after the jobs report, according to the CME’s FedWatch gauge.
The Fed usually hikes in 25 basis point increments.
The chance of six increases this year rose to 51% following the report.
“They definitely will feel more behind the curve,” Jones said.
“I don’t think there’s a 50 basis point hike coming in March, but I think speculation about it will build and that will continue to push up on yields.”
The job gains were broad-based, with transportation and warehousing adding 54,000, local government education rising by 29,000 and health care moving higher by 18,000.
The unemployment rate for Blacks edged lower to 6.9%.
The rate for Asians also declined, falling to 3.6%.
The gain in jobs followed a report earlier in the week from payrolls processing firm ADP, which had indicated a drop of 301,000.
The two counts also differed widely in December, though the BLS revision brought the total closer to the ADP count of a 776,000 gain for that month.
https://www.cnbc.com/2022/02/04/jobs-re ... 2020-.html
Re: THE FEDERAL RESERVE
CNBC
"Seven hikes? Fast-rising wages could cause the Fed to raise interest rates even higher this year"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED MON, FEB 7 2022
KEY POINTS
* Rapidly rising wages are expected to push Federal Reserve interest rate hikes at an even faster pace.
* Average hourly earnings are running at a 5.7% pace over the past 12 months, near the highest levels in 15 years.
* Bank of America is sticking to its call for seven rate hikes this year as the Fed looks to control the higher cost of living.
Too much of a good thing, in the form of rapidly rising wages, is expected to push Federal Reserve interest rate hikes at an even faster pace.
Average hourly earnings jumped 0.7% in January and are now running at a 5.7% pace over the past 12 months, according to Labor Department data released Friday.
Excepting a two-month period during the early days of the pandemic, that is by a wide margin the fastest-ever move in data going back to March 2007.
While that has come as welcome news to workers, it’s posed a further quandary for the Fed, which increasingly is being seen as falling behind in terms of policy and having to catch up to inflation that is running at its fastest pace in nearly 40 years.
“If I’m the Fed, I’m getting more nervous that it’s not just a few outliers” that are driving wage increases, Ethan Harris, Bank of America’s head of global economics research, said in a media call Monday.
“If I were the Fed chair ... I would have raised rates early in the fall."
"When we get this broad-based increase and it starts making its way to wages, you’re behind the curve and you need to start moving.”
BofA and Harris have issued the most aggressive Fed call on Wall Street for this year.
The bank’s economists see seven quarter-percentage-point rate hikes in 2022, followed by four more next year.
Harris said he’s not backing off the call, even though markets are currently only giving the scenario an 18% chance of happening, according to CME data.
He cites the Fed’s new approach to monetary policy that it approved in September 2020.
Under what it deemed flexible average inflation targeting, the Fed said it would be willing to allow inflation to run hotter than its 2% target in the interest of achieving full employment.
But with inflation running around 7% year-over-year and the labor market getting ever tighter, the Fed now is in the position of playing catch-up.
“The problem with the whole approach, and what’s got us calling for seven hikes, is the economy’s not just hitting the Fed’s goals, it’s blowing through the stop signs,” Harris said.
Harris points out that wages are surging across virtually all income classes.
Leisure and hospitality, the hardest-hit sector from the pandemic, has seen a 13% earnings gain over the past year.
Wages in finance jobs are up 4.8%, while retail trade pay has risen 7.1%.
Goldman Sachs sees the push higher as part of the “Great Resignation,” a term used to describe the fastest pace of people leaving their jobs in data that goes back to 2001.
For all of 2021, workers changed or left jobs 47.4 million times, according to the Labor Department.
“The Great Resignation consists of two quite different but connected trends: millions of workers have left the labor force, and millions more have quit their jobs for better, higher-paying opportunities,” Goldman economists Joseph Briggs and David Mericle said in a note.
“These trends have pushed wage growth to a rate that increasingly raises concern about the inflation outlook.”
Goldman figures that wage growth will slow this year, but only by a little, to something around 5% through the year.
The firm expects four rate increases in 2022.
“Faster growth of labor costs than is compatible with the 2% inflation goal is likely to keep the FOMC on a consecutive hiking path and raise the risk of a more aggressive response,” the economists said.
Markets have been raising the stakes slowly for the Fed, pricing in five hikes this year but leaving open the possibility for more and at a faster rate.
While traders see a quarter-point move coming in March, the possibility of a more aggressive 50 basis point hike has risen to nearly 30%.
A basis point is one one-hundredth of a percentage point.
“This is how out of date and behind Fed policy is,” Mohamed El-Erian, chief economic advisor at Allianz, told CNBC’s “Squawk Box” on Monday.
“So hopefully they can regain the inflation narrative, hopefully they can control the wage narrative."
"My concern is the market is running away with rate hikes in excess of what the economy can absorb.”
BofA’s Harris said going 50 basis points would be “a reasonable thing to do” though he noted it wouldn’t be in keeping with the “humble” approach Chairman Jerome Powell espoused during his post-meeting news conference in January.
Harris said he actually doesn’t think the rate hikes will wreck the economy, so long as the Fed communicates that the moves will be methodical and aimed at controlling inflation, not halting growth.
This cycle could resemble the Fed’s move in the mid-aughts when it instituted a series of 17 hikes aimed at slowing down the runaway housing market, he added.
“I actually think it’s not a radical call,” Harris said of the bank’s expectation for 11 hikes through 2023.
“It’s just the path of least resistance for a central bank that’s starting at zero.”
https://www.cnbc.com/2022/02/07/seven-h ... -year.html
"Seven hikes? Fast-rising wages could cause the Fed to raise interest rates even higher this year"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED MON, FEB 7 2022
KEY POINTS
* Rapidly rising wages are expected to push Federal Reserve interest rate hikes at an even faster pace.
* Average hourly earnings are running at a 5.7% pace over the past 12 months, near the highest levels in 15 years.
* Bank of America is sticking to its call for seven rate hikes this year as the Fed looks to control the higher cost of living.
Too much of a good thing, in the form of rapidly rising wages, is expected to push Federal Reserve interest rate hikes at an even faster pace.
Average hourly earnings jumped 0.7% in January and are now running at a 5.7% pace over the past 12 months, according to Labor Department data released Friday.
Excepting a two-month period during the early days of the pandemic, that is by a wide margin the fastest-ever move in data going back to March 2007.
While that has come as welcome news to workers, it’s posed a further quandary for the Fed, which increasingly is being seen as falling behind in terms of policy and having to catch up to inflation that is running at its fastest pace in nearly 40 years.
“If I’m the Fed, I’m getting more nervous that it’s not just a few outliers” that are driving wage increases, Ethan Harris, Bank of America’s head of global economics research, said in a media call Monday.
“If I were the Fed chair ... I would have raised rates early in the fall."
"When we get this broad-based increase and it starts making its way to wages, you’re behind the curve and you need to start moving.”
BofA and Harris have issued the most aggressive Fed call on Wall Street for this year.
The bank’s economists see seven quarter-percentage-point rate hikes in 2022, followed by four more next year.
Harris said he’s not backing off the call, even though markets are currently only giving the scenario an 18% chance of happening, according to CME data.
He cites the Fed’s new approach to monetary policy that it approved in September 2020.
Under what it deemed flexible average inflation targeting, the Fed said it would be willing to allow inflation to run hotter than its 2% target in the interest of achieving full employment.
But with inflation running around 7% year-over-year and the labor market getting ever tighter, the Fed now is in the position of playing catch-up.
“The problem with the whole approach, and what’s got us calling for seven hikes, is the economy’s not just hitting the Fed’s goals, it’s blowing through the stop signs,” Harris said.
Harris points out that wages are surging across virtually all income classes.
Leisure and hospitality, the hardest-hit sector from the pandemic, has seen a 13% earnings gain over the past year.
Wages in finance jobs are up 4.8%, while retail trade pay has risen 7.1%.
Goldman Sachs sees the push higher as part of the “Great Resignation,” a term used to describe the fastest pace of people leaving their jobs in data that goes back to 2001.
For all of 2021, workers changed or left jobs 47.4 million times, according to the Labor Department.
“The Great Resignation consists of two quite different but connected trends: millions of workers have left the labor force, and millions more have quit their jobs for better, higher-paying opportunities,” Goldman economists Joseph Briggs and David Mericle said in a note.
“These trends have pushed wage growth to a rate that increasingly raises concern about the inflation outlook.”
Goldman figures that wage growth will slow this year, but only by a little, to something around 5% through the year.
The firm expects four rate increases in 2022.
“Faster growth of labor costs than is compatible with the 2% inflation goal is likely to keep the FOMC on a consecutive hiking path and raise the risk of a more aggressive response,” the economists said.
Markets have been raising the stakes slowly for the Fed, pricing in five hikes this year but leaving open the possibility for more and at a faster rate.
While traders see a quarter-point move coming in March, the possibility of a more aggressive 50 basis point hike has risen to nearly 30%.
A basis point is one one-hundredth of a percentage point.
“This is how out of date and behind Fed policy is,” Mohamed El-Erian, chief economic advisor at Allianz, told CNBC’s “Squawk Box” on Monday.
“So hopefully they can regain the inflation narrative, hopefully they can control the wage narrative."
"My concern is the market is running away with rate hikes in excess of what the economy can absorb.”
BofA’s Harris said going 50 basis points would be “a reasonable thing to do” though he noted it wouldn’t be in keeping with the “humble” approach Chairman Jerome Powell espoused during his post-meeting news conference in January.
Harris said he actually doesn’t think the rate hikes will wreck the economy, so long as the Fed communicates that the moves will be methodical and aimed at controlling inflation, not halting growth.
This cycle could resemble the Fed’s move in the mid-aughts when it instituted a series of 17 hikes aimed at slowing down the runaway housing market, he added.
“I actually think it’s not a radical call,” Harris said of the bank’s expectation for 11 hikes through 2023.
“It’s just the path of least resistance for a central bank that’s starting at zero.”
https://www.cnbc.com/2022/02/07/seven-h ... -year.html