Upcoming Events
Monday, May 15
Cook Speaks at U.C. Berkeley
Williams Speaks at University of the Virgin Islands
Tuesday, May 16
Industrial Production and Capacity Utilization Release
GDPNow Update
Barr Speaks Appears Before the House Financial Services Committee
Bostic and Goolsbee Speak at Atlanta Fed Event
Mester Speaks at Global Interdependence Center
Wednesday, May 17
GDPNow Update
Thursday, May 18
Barr Appears Before the Senate Committee on Banking, Housing, and Urban Affairs
Jefferson Speaks at National Association of Insurance Commissioners International Insurance Forum
Logan Speaks at Texas Bankers Association Annual Convention
Friday, May 19
Powell Speaks at Thomas Laubach Research Conference
Williams Speaks at Thomas Laubach Research Conference
Bowman Speaks at Texas Bankers Association Annual Convention
Recent News
No-ing your audience… Gov. Christopher Waller pulled no punches in his talk at the IE University – Banco de España – Federal Reserve Bank of St. Louis Conference on Current Challenges in Economics and Finance held in Madrid, Spain last week. “Climate change is real, but I do not believe it poses a serious risk to the safety and soundness of large banks or the financial stability of the United States,” he told attendees. “Risks are risks. There is no need for us to focus on one set of risks in a way that crowds out our focus on others.”
In his remarks, Waller reviewed both the physical risks of climate change, like fires, heatwaves, and hurricanes, as well as the transition risks, which may come from changing policy, consumer preferences, or technology. He acknowledged that natural disasters “are devastating to local communities,” but maintained that “they are not material enough to pose an outsized risk to the overall U.S. economy.” He said transition risks “are generally neither near-term nor likely to be material given their slow-moving nature and the ability of economic agents to price transition costs into contracts.”
Waller could not have made his position any more clear:
I don't see a need for special treatment for climate-related risks in our financial stability monitoring and policies. As policymakers, we must balance the broad set of risks we face, and we have a responsibility to prioritize using evidence and analysis. Based on what I've seen so far, I believe that placing an outsized focus on climate-related risks is not needed, and the Federal Reserve should focus on more near-term and material risks in keeping with our mandate.
The disinflation process… The Consumer Price Index (CPI) grew 4.9 percent over the twelve-month period ending in April, down from 5.0 percent in the prior month, new data from the Bureau of Labor Statistics show. Core CPI, which excludes volatile food and energy prices, declined from 5.6 to 5.5 percent.
Since the latest twelve-month headline and core inflation rates share eleven months of data with the prior estimates, one should review annualized monthly inflation rates to get a better sense of how prices have grown recently. The CPI grew at an annualized rate of 4.0 percent in April, compared with 4.4 percent in February and 0.6 percent in March. Core CPI grew at an annualized rate of 4.9 percent in April, compared with 5.4 percent in February and 4.6 percent in March. Inflation is falling, but perhaps not as fast as many Americans would like.
The Producer Price Index (PPI) grew 0.2 percent in April, compared with 0.0 percent in February and -0.4 percent in March. The PPI has grown 18.3 percent since January 2020, which amounts to a continuously compounding annual rate of 5.2 percent.
This is the way… New York Federal Reserve Bank President John Williams reaffirmed the Fed’s commitment to bringing down inflation in a talk at the New York Economic Club last week. “Inflation remains too high, and high inflation is hardest on those who can least afford to pay higher prices for food, shelter, and transportation,” he said.
On track… Gov. Jefferson took issue with the Hoover Institution’s Monetary Policy Conference theme, which implied the Federal Reserve was not on track. “If you are willing to widen your lens to include a more commonplace definition,” he told attendees, “then it is possible to conclude that current monetary policy is, in fact, ‘on track.’”
Jefferson acknowledged that inflation remains too high, but maintained that the Fed is “achieving or doing what is necessary or expected.”
Inflation expectations… The New York Fed’s latest Survey of Consumer Expectations shows inflation expectations declined from 4.7 in March to 4.4 percent in April at the one-year-ahead horizon. Inflation expectations increased from 2.8 to 2.9 percent at the three-year-ahead horizon and from 2.5 to 2.6 percent at the five-year-ahead horizon.
On Friday, the five-year breakeven inflation rate was 2.1 percent.
The vibes… Consumer sentiment declined 9 percent in March, according to the University of Michigan’s Surveys of Consumers. Year-ahead expectations for the economy declined 23 percent, while long-run expectations fell 16 percent.
And the nominees are… On Friday, President Biden nominated Adriana Kugler to fill a vacancy on the Federal Reserve’s Board of Governors. Kugler currently serves as the U.S. Executive Director at the World Bank Group and was previously Chief Economist at the U.S. Department of Labor under President Obama. She earned her Ph.D. from the University of California at Berkeley, under the direction of George Akerlof—former Fed Chair and current Treasury Secretary Janet Yellen’s husband. Originally from Colombia, Kugler would be the first latino person to sit on the Fed Board.
Biden also nominated Gov. Phillip Jefferson to serve as Vice Chair. The Vice Chair position was previously held by Lael Brainard, who joined the National Economic Council in February.
Gov. Cook, who was initially appointed to fill an unexpired term ending in January 2024, was nominated for a full term.