Upcoming Events
Monday, February 12
Survey of Consumer Expectations Release
Bowman Speaks at American Bankers Association Conference for Community Bankers
Tuesday, February 13
CPI Release
Wednesday, February 14
Barr Speaks at National Association for Business Economics (NABE) Economic Policy Conference
Goolsbee Speaks at Council on Foreign Relations
Thursday, February 15
Industrial Production and Capacity Utilization Release
GDPNow Update
Waller Speaks at Global Interdependence Center and University of the Bahamas Conference
Friday, February 16
PPI Release
GDPNow Update
Barr Speaks at Columbia Law School Banking Conference
Recent News
Survey says… Professional forecasters expect real GDP will grow at an annualized rate of 2.1 percent in Q1-2024, according to the latest survey from the Philadelphia Fed. They had previously expected just 0.8 percent growth this quarter. The pros now think real GDP will grow 2.4 percent in 2024, up from 1.7 percent in the previous survey.
Professional forecasters have revised down their expectations for inflation. They think the Personal Consumption Expenditures Price Index (PCEPI) will grow at an annualized rate of 1.9 percent in Q1-2024, down from 2.5 percent in the prior survey. They think core PCEPI, which excludes volatile food and energy prices, will grow 2.1 percent, down from with 2.7 percent in the prior survey. The pros think headline and core PCEPI will grow 2.1 percent in 2024, both down from 2.4 percent in the prior survey.
Fed speak… At the post-meeting press conference in January, Fed Chair Jerome Powell said it's unlikely that the Federal Open Market Committee (FOMC) will reach a level of confidence by the time of the March meeting to cut its federal funds rate target then. When will the FOMC likely begin cutting rates, then? That depends on where FOMC members think the economy is today and how they interpret the incoming data.
Here’s what FOMC members were saying last week:
An open question is how much longer supply-side progress will continue. While we may see some more labor force growth, the prospects for additional labor supply improvements seem somewhat limited. And although there may be some further effects on consumer prices from the past resolution of supply chain bottlenecks, most of that is likely behind us. Also, productivity is always difficult to forecast. Many businesses, especially in the services sector, have learned to operate effectively with fewer workers – but there is likely a limit to how far this process can go.
So, while we may still get some positive supply-side news, a durable return to 2 percent inflation will likely require demand growing at a more moderate pace this year. I expect this slowdown will happen, but the timing is difficult to predict, and the road may well be bumpy.
— Pres. Susan Collins (Boston)
There are reasons to be cautious in assuming that last year’s rapid pace of disinflation will be maintained as inflation gets closer to the 2 percent goal. While restrictive monetary policy has played an important role in moving inflation down, supply-side adjustments were also important. Now that pressures on supply chains are approaching normal and the labor market is coming into better balance, we should not count on as much help from the supply side as we saw last year.
[…]
It would be a mistake to move rates down too soon or too quickly without sufficient evidence that inflation was on a sustainable and timely path back to 2 percent. Doing so would undermine all of the good work that has gone into getting inflation to this point. On the other hand, if year-ahead inflation expectations continue to decline, maintaining the current level of the nominal fed funds rate for too long would effectively be a tightening in our policy stance, which would pose an increasing risk to the maximum employment part of our mandate.
— Pres. Loretta Mester (Cleveland)
I see three factors as likely to contribute to continued disinflation, especially in the category of core services excluding housing: continued moderation of wage growth, normalization of price-setting behavior by firms, and anchored inflation expectations.
[…]
I am pleased with the disinflationary progress thus far and expect it to continue. I must emphasize, however, that the Committee's job is not done yet. Consumer spending was surprisingly strong last year. Gross domestic product (GDP) grew at a nearly 5 percent rate in the third quarter, led by consumption. And even though spending and output growth moderated some in the fourth quarter, consumption contributed nearly 2 percentage points to fourth-quarter GDP growth. So consumers could surprise us again this year, and that could slow progress on inflation. Last week's employment report was also surprisingly strong amidst the broader cooling trend. It is important that supply and demand in both product and labor markets broadly continue moving into better balance.
I am also paying close attention to the upside risks to inflation posed by geopolitical developments. Russia's ongoing war on Ukraine and the widening of the conflict in the Middle East could contribute to higher commodity prices and disrupt global trade, in turn pushing up goods inflation in the U.S.