Upcoming Events
Feb 13 Survey of Consumer Expectations Release
Feb 13 Bowman Speaks at American Bankers Association Conference for Community Bankers
Feb 14 CPI Release
Feb 15 Industrial Production and Capacity Utilization Release
Feb 15 GDPNow Update
Feb 16 PPI Release
Feb 16 GDPNow Update
Feb 16 Quarterly Report on Household Debt and Credit Release
Feb 16 Cook Speaks at the Brookings Sadie Collective Research Reception
Feb 16 Mester Speaks at Financial Executives International Northeast Ohio Chapter
Recent News
Open mouth operations… The end of the blackout period means Fed officials are talking again. Here’s what they’ve been saying:
Our message really was: this process is likely to take quite a bit of time. It’s not going to be—we don’t think—smooth. It’s probably going to be bumpy. And, so, we think we are going to need to do further rate increases, as we said. And we think we’ll need to hold policy at a restrictive level for a period of time.
Some believe that inflation will come down quite quickly this year. That would be a welcome outcome. But I'm not seeing signals of this quick decline in the economic data, and I am prepared for a longer fight to get inflation down to our target.
We are determined to bring inflation down to our target. So I think we are not done yet with raising interest rates, and we will need to keep interest rates sufficiently restrictive.
To me, the important thing is we need a sufficiently restrictive – we need to retain a sufficiently restrictive stance of policy. We’re going to need to maintain that for a few years to make sure we get inflation to 2 percent. And then eventually, over time, you know, we’ll get interest rates, you know, presumably back to more normal levels.
- New York Fed President John Williams
I, too, was surprised by the big jobs number. It tells me that so far we’re not seeing much of an imprint of our tightening to date on the labor market. There’s some evidence that it’s having some effect. But it’s pretty muted so far. So I haven’t seen anything yet to lower my rate path, but I am obviously keeping my eyes open and we’ll see how the data comes in. But, right now, I’m still at around 5.4 percent. If I had to pick a number today, I’d be where I was in December.
- Minneapolis Fed President Neel Kashkari
If this strength is sustained and we see this over several months, then it would suggest that maybe some of the economic slowdown has not been as robust as possible and that imbalances between aggregate supply and aggregate demand will persist for a longer period of time. If that’s the case, it’ll probably mean we have to do a little more work. And I would expect that that would translate into us raising interest rates more than I have projected right now.
- Atlanta Fed President Raphael Bostic
Switching it up… Has the annual rotation of regional Reserve Bank presidents changed the median voter at the FOMC? Monetary Policy Analytics CEO and co-founder Derek Tang seems to think so. He notes that three of the four previous voting members were somewhat hawkish, compared with only two of the four new voting members.
GDP Wow… The Atlanta Fed’s running estimate of real economic growth shot up last week. The international trade report released on February 7 pushed GDPNow from 0.7 percent to 2.1 percent. Then, following the wholesale trade release on February 8, GDPNow climbed to 2.2 percent. In December, the median FOMC member projected just 0.5 percent growth for the year.
Ask the pros… Professional forecasters surveyed by the Philadelphia Fed now say the economy will grow much faster than they thought back in November. They put 2023 real GDP growth at 1.3 percent, up from 0.7 percent. They also see inflation moderating a bit more this year, with PCEPI inflation at 2.8 percent compared with 2.9 percent in the previous survey.
Survey says… Year-ahead inflation expectations increased to 4.2 percent this month in the University of Michigan’s Surveys of Consumers. In January, consumers were expecting 3.9 percent inflation over the next year.
Hot TIPS… Breakeven inflation ticked up a bit last week. On Friday, bond markets were pricing in 2.47 percent CPI inflation per year over the next five years, compared with 2.33 percent last Monday.