Upcoming Events
Feb 22 FOMC Minutes Release
Feb 23 Revised GDP Release
Feb 23 Bostic Speaks at Atlanta Fed’s Banking Outlook Conference
Feb 24 PCEPI Release
Feb 24 GDPNow Update
Feb 24 Revised Surveys of Consumers Release
Feb 24 Jefferson Speaks at Monetary Policy Forum
Recent News
Stubborn inflation… Consumer prices grew at a continuously compounding annual rate of 6.2 percent in January 2023, up from 1.6 percent in December 2022. Core CPI inflation remained more-or-less flat at 4.9 percent, compared with 4.8 percent in the previous month. The latest inflation reading reinforces recent statements from Fed officials, who maintain that they still have a lot of work to do.
Could’ve done more… Cleveland Fed President Loretta Mester and St. Louis Fed President James Bullard both said they would have preferred a 50 basis point hike at the last FOMC meeting. Both presidents ended their terms as voting members of the FOMC in January, but still participate in the policy discussions.
What you’d expect… The New York Fed reported median inflation expectations of 5.0 percent over the one-year horizon in January 2023, which was unchanged from December 2022. Inflation expectations were at 2.7 percent over the three-year horizon, compared with 3.0 percent in the previous month.
We’ve reconsidered… Markets now expect a 25 basis point rate hike at each of the next three FOMC meetings, CME Group reports. That implies a terminal rate range of 5.25 to 5.5 percent. Ahead of the previous meeting, markets were pricing in just two 25 basis point hikes for the year, which implied a terminal rate range of 4.75 to 5.0 percent.
In December, the median FOMC member put the terminal rate range at 5.0 to 5.25 percent. However, some FOMC members now say rates may need to go higher.
Still climbing… GDPNow ticked up again last week. The Atlanta Fed now estimates GDP will grow at an annualized rate of 2.5 percent in Q1-2023—up from 0.7 percent at the start of the month.
Onward and upward… It’s official: Vice Chair Lael Brainard will step down from her current post to serve as director of President Biden’s National Economic Council.
Who will replace Brainard as Vice Chair at the Fed? Victoria Guida (POLITICO) offers a list of potential candidates, including Governor Lisa Cook; regional Reserve Bank presidents Mary Daly (San Francisco), Austan Goolsbee (Chicago), and Susan Collins (Boston); as well as Betsey Stevenson, Karen Dynan, Christina Romer, Janice Eberly, Brian Sack, and Seth Carpenter.
I’d rather not say… Governors Christopher Waller and Michelle Bowman abstained in the confirmation vote for Austan Goolsbee, Craig Torres (Bloomberg) reports. Neither have publicly explained why they abstained.
Some see the decision to abstain as mere partisan politics. Goolsbee previously served as Chair of the Council of Economic Advisers under President Obama. Both Waller and Bowman were appointed by President Trump.
Others say it was to register concern that Goolsbee’s appointment might compromise the Fed’s independence. Goolsbee has not shied away from voicing his support for Democrats.