Upcoming Events
Monday, April 1
GDPNow Update
Cook Speaks at Duke University
Tuesday, April 2
JOLTS Release
Divisia Release
Bowman Speaks at Kansas City Fed Event
Williams Speaks at Economic Club of New York
Mester Speaks at Cleveland Association for Business Economics and Team NEO Event
Wednesday, April 3
Powell Speaks at Stanford Business, Government, and Society Forum
Barr Speaks at Just Economy Conference
Bowman Speaks at Committee on Capital Markets Regulation Roundtable on Lender of Last Resort
Kugler Speaks at St. Louis Fed
Goolsbee Speaks at Chicago Fed
Thursday, April 4
GDPNow Update
Kugler Speaks at Women in Economics Symposium
Mester Speaks at Global Interdependence Center
Goolsbee Speaks at Multi-Chamber Economic Outlook Luncheon and Expo
Harker Speaks at University of Pennsylvania
Friday, April 5
Jobs Report Release
Bowman Speaks at Shadow Open Market Committee Spring Meeting
Collins Speaks at Boston Fed Conference
Logan Speaks at Duke University
Recent News
Persistent price hikes… It was easy to write off January’s high inflation print as a blip. The latest data from the Bureau of Economic Analysis (BEA) should give one pause.
The Personal Consumption Expenditures Price Index (PCEPI), which is the Federal Reserve’s preferred measure of inflation, grew at a continuously compounding annual rate of 4.0 percent in February. The PCEPI has grown at an annualized rate of 3.3 percent over the last three months and 2.5 percent over the last six months.
Prices today are 8.7 percentage points higher than they would have been had they grown at an annualized rate of 2.0 percent since January 2020.
Core inflation, which excludes volatile food and energy prices, also remained elevated. Core PCEPI grew at a continuously compounding annual rate of 3.1 percent in February. It has grown at an annualized rate of 3.5 percent over the last three months and 2.9 percent over the last six months.
Waiting it out… With two consecutive months of above-target inflation prints, the Fed is proceeding cautiously.
“I continue to believe that further progress will make it appropriate for the FOMC to begin reducing the target range for the federal funds rate this year,” Fed Gov. Christopher Waller told attendees at the Economic Club of New York last week. “But until that progress materializes, I am not ready to take that step.”
It is appropriate to point out that a month or two of data does not necessarily indicate a trend, and there are good reasons to think that progress on inflation will be uneven but likely to continue down toward 2 percent. At the same time, monetary policy is data driven, and I do want to take it into account when formulating my economic outlook. While I don't want to over-react to two months of data, I do think it is appropriate to react to it.
[…]
In my view, it is appropriate to reduce the overall number of rate cuts or push them further into the future in response to the recent data. This reflects the reality of managing an outlook in real time as data comes in. Subsequent data may well alter this outlook again, but we shall see. Based on what we know now, there is no urgency in taking that step.
Waller added that, “in the absence of an unexpected and material deterioration in the economy,” he would “need to see at least a couple months of better inflation data” before voting to cut the federal funds rate target.
According to the CME Group, the federal funds futures market is currently pricing in a 96.1 percent chance that the Fed holds its target range at 5.25 to 5.5 percent through the May meeting, and a 31.5 percent chance that it will hold through the June meeting. Last week, the market was pricing in a 24.4 percent chance that the Fed will hold rates at the current level through the June meeting.
Final output… The BEA now says real Gross Domestic Product (GDP) grew at an annualized rate of 3.4 percent in Q4-2023, compared with 3.2 percent in its prior estimate and 3.3 percent in its initial estimate.
Real GDP grew at an annualized rate of 4.9 percent in Q3-2023.
The Atlanta Fed’s GDPNow model currently estimates real GDP will grow at an annualized rate of 2.3 percent in Q1-2024, up from 2.1 percent estimated on March 26.
In March, the median Federal Open Market Committee member projected real GDP will grow 2.1 percent this year.