Upcoming Events
Feb 27 GDPNow Update
Feb 27 Jefferson Speaks at Harvard University
Feb 28 H.6 Money Stock Measures Release
Mar 01 GDPNow Update
Mar 02 Waller Speaks at Mid-Size Bank Coalition of America Event
Mar 03 Bowman Speaks at Chicago Booth Workshop on Market Disfunction
Recent News
Inflation surge… The PCEPI grew at an annualized rate of 7.4 percent in January—the highest one-month posting since June 2022. Core PCEPI inflation, which excludes volatile food and energy prices and is widely thought to be a better predictor of future inflation, was 6.8 percent.
Terminal rate… Higher CPI and PCEPI inflation readings in January have caused markets to revise their expectations of the terminal rate. On Sunday, the CME Group reported a 40.3 percent chance that the Fed’s target rate would exceeded 5.5 percent in July.
In December, the median FOMC member put the terminal rate range at 5.0 to 5.25 percent. FOMC members will submit new projections ahead of their meeting in March.
Minute detail… The most recent FOMC meeting minutes—released last Wednesday—indicate that a few participants “favored raising the target range for the federal funds rate 50 basis points” at the previous meeting or “could have supported raising the target by that amount.”
Cleveland Fed president Lorretta Mester and St. Louis Fed president James Bullard were among those pushing for higher rates. Neither Mester nor Bullard currently vote on the FOMC, but they do participate in the policy discussion.
Managing disinflations… Stephen G Cecchetti (Brandeis International Business School), Michael Feroli (JP Morgan), Peter Hooper (Deutsche Bank), Frederic Mishkin (Columbia University), and Kermit Schoenholtz (NYU Stern) presented the 2023 report at the US Economic Monetary Policy Forum sponsored by the Initiative on Global Markets at the University of Chicago Booth School of Business. The 2023 report offers historical and model-based analyses of managing disinflations. Specifically, the authors estimate the costs of sizable disinflations since the 1950s, assess the extent to which policymakers might have foreseen the high inflation realized over the last two years, and consider what Fed officials will likely need to do in order to bring inflation back down.
Governor Philip Jefferson and Cleveland Fed president Loretta Mester discussed the report.
Revisions… Real GDP growth for Q4-2022 was revised down from an annualized rate of 2.9 to 2.7 percent in the second estimate released by the Bureau of Economic Analysis. The BEA now says nominal GDP grew 6.7 percent in Q4-2022, up from 6.5 percent in the advanced estimate. Correspondingly, the price index for gross domestic purchases was revised up 0.4 percentage points.
Short staffed… Lael Brainard’s move to the National Economic Council has left a vacancy at the Fed Board. President Biden appears to have narrowed the list of candidates to Janice Eberly and Karen Dynan.
Eberly is the Senior Associate Dean for Strategy and Academics and the James R. and Helen D. Russell Professor of Finance at the Kellogg School of Management of Northwestern University.
Dynan is a Professor of the Practice of Economics at Harvard University and a Non-resident Senior Fellow at the Peterson Institute for International Economics.
Both served as Assistant Secretary for Economic Policy at the U.S. Treasury under President Obama.