Upcoming Events
Jan 31 Employment Cost Index Release
Jan 31 FOMC Meeting
Feb 01 FOMC Meeting and Press Conference
Feb 01 JOLTS Release
Feb 01 GDPNow Update
Feb 03 Jobs Report Release
Recent News
Predicting a rate hike… The FOMC looks likely to raise its federal funds rate target by 25 basis points when it meets this week, which would put the target range at 4.50 to 4.75 percent. At market close on Friday, the CME Group put the odds of a 25 basis point hike at 99.9 percent.
Mum’s the word… Fed officials were quiet last week. Here’s what they were saying before entering the blackout period:
Inflation is high, and it will take time and resolve to get it back down to 2 per cent.
We are determined to stay the course.
The shorter the trend, the larger the grain of salt when swallowing a story about the future. Back in 2021, we saw three consecutive months of relatively low readings of core inflation before it jumped back up. We do not want to be head-faked. I will be looking for the recent improvement in headline and core inflation to continue.
With inflation still high and indications of continued supply-demand imbalances, it is clear that monetary policy still has more work to do to bring inflation down to our 2 per cent goal on a sustained basis.
- New York Fed President John Williams
You’d probably have to get over 5 percent to say with a straight face that we’ve got the right level of the policy rate that will continue to push inflation down during 2023. We want to guarantee, to the extent we can, that inflation will come down and get back on a steady path toward the 2-percent target. And we don’t want to waiver in that because one of the problems in the 1970s was that inflation kept coming back just when you thought you killed it. So I think the policy has to stay on the tighter side during 2023, as we’re watching this disinflationary process unfold.
- St. Louis Fed President James Bullard
Even after we have enough evidence to pause rate increases, we’ll need to remain flexible and raise rates further if changes in the economic outlook or financial conditions call for it.
- Dallas Fed President Lorie Logan
Inflation is stubborn at its core… The Personal Consumption Expenditures Price Index grew at an annualized rate of just 1.1 percent over the last two months. However, core inflation remains elevated: after excluding food and energy, prices grew at an annualized rate of 4.3 percent in December 2022, compared with 3.3 percent in October and 2.2 percent in November.
Parting Words and Deeds… Retiring Kansas City Fed President Esther George says the Fed should get out of the mortgage-backed securities market. The Fed currently holds around $2.6 trillion MBS of the $12.2 trillion MBS outstanding.
White House eyes Brainard… The Biden Administration is considering Vice Chair Brainard for the top spot at the National Economic Council, several outlets (WaPo, WSJ, FT) reported. The NEC director is the President’s primary economic advisor. Brian Deese has held the job since 2021.