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Fed’s Bullard Says U.S. Soft Landing Potential Is Rising By Reuters

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© Reuters. Louis Federal Reserve Bank of St. Louis President James Bullard stands with his back to the Teton Range outside the Federal Reserve Board of Kansas City’s annual economic policy symposium in Jackson Hole, Wyoming, US August 25, 2022. REUTERS/Ann Safire

Written by Michael S Derby

(Reuters) – St. Lewis Federal Reserve Chairman James Bullard expressed optimism Thursday that the new year may finally ease inflation, adding that the risk of a recession in the United States has decreased in recent weeks.

Materially Bullard said the FOMC rate setting “has been aggressive through 2022, with continued policy rate increases planned for 2023, and this has brought inflation expectations back to a level consistent with the Fed’s 2% inflation target.” Prepared for a presentation prior to the CFA meeting in St. Louis. “Through 2023, actual inflation is likely to follow inflation expectations to a lower level as the real economy returns to normal,” he said.

Bullard held the voting role on the FOMC through 2022, but it won’t happen this year due to the annual rotation of the Fed’s regional leaders on that committee. The past year was dominated by the central bank’s historically aggressive campaign to raise interest rates to bring down some of the highest levels of inflation seen in decades.

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This led the central bank to take its short-term overnight interest rate target from near zero levels in March to the current range of 4.25% to 4.50%. The Fed last raised that target in December, rising by 50 basis points, and has begun moving to 5.1% this year. Officials said wherever prices stop they are likely to stay for a while because they ensure inflation pressures recede.

Bullard said he’s increasingly optimistic that the Fed can achieve its goal of lowering inflation without tipping the economy into a recession, as many Fed pundits and economists now believe it will.

“The probability of a soft landing has increased compared to what it did in the fall of 2022, when it looked more suspicious,” Pollard told reporters after his remarks. “The reason I think the odds of a soft landing have increased is that the labor market has not weakened in the way many expected,” he said, and growth levels rebounded from weakness.

“The labor market could remain somewhat resilient through 2023,” the official said, noting that many companies are still hiring.

“This is a great time to fight inflation” because of the strength of the labor market, Bullard said, adding, “Fight inflation now, get it under control, get it back to 2% while you have a flexible labor market.”

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Bullard said monetary policy is not yet in the space where it is holding back the economy but soon it will be. “The policy rate is still a little bit below the sufficiently restricted area, so I think the committee will have to get into that area as quickly as it can,” he told reporters.

Bullard also said he sees no reason to change the drawdown of the Fed’s balance sheet, adding that the Fed may have an opportunity to reassess how many bonds to sell in six months to a year. He said the Fed’s balance sheet contraction, which hit $9 trillion this summer and now stands at $8.6 trillion, is going well.

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Economic

White House Says It Doesn’t Want to “Round Congress” on Debt Ceiling By Reuters

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January 8, 2023

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© Reuters. White House Press Secretary Karen Jean-Pierre holds the daily news conference at the White House in Washington, December 7, 2022. REUTERS/Jonathan Ernst

WASHINGTON (Reuters) – The White House said on Sunday that it does not plan to circumvent Congress in order to raise the U.S. debt ceiling, a regular flashpoint in times of divided government.

“We are not considering any measures that would circumvent Congress,” White House press secretary Karen Jean-Pierre told reporters, calling on lawmakers to raise the cap without preconditions.

The Republicans, who recently assumed control of the US House of Representatives, have promised to fight without question over any move to increase the cap. They say they plan to extract concessions to prevent the US government from defaulting.

Jean-Pierre told reporters aboard Air Force One that the White House under Democratic President Joe Biden will not make any concessions on the debt ceiling.

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“Attempts to use the debt ceiling as leverage will not work,” she said. There will be no hostage-taking.”

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Romer says the Fed faces a “difficult” call to avoid exaggerating interest rates

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January 8, 2023

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© Reuters. The Federal Reserve building is seen before the Federal Reserve signals plans to raise interest rates in March as it focuses on fighting inflation in Washington, US, January 26, 2022. REUTERS/Joshua Roberts

Written by Howard Schneider

NEW ORLEANS (Reuters) – The Federal Reserve’s efforts to shock the economy back to the low inflation rates in its early days, making it difficult for the US central bank to avoid hitting interest rates higher than needed, a senior US economic advisor said. The Obama White House said after a new review of Fed policy since World War II.

The Fed raised its target policy rate by more than 4 percentage points in the past year, and “we are now entering the window where the effects may start to be noticed,” Christina Romer, professor of economics at the University of California, Berkeley, and chair of the White House Council of Economic Advisers (CEA) from 2009 to 2010, in front of a national gathering of economists late Saturday.

“Because of the delays involved, policymakers will face a very difficult decision about when to stop or reverse interest rate increases,” Romer said in a keynote address to the American Economic Association’s annual meeting in New Orleans.

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“Policy makers will need to go back before the problem is fully resolved if they want to bring down inflation without causing more pain than necessary,” she said.

Federal Reserve officials have acknowledged how difficult it is to judge how high and how long to raise interest rates, and have scaled back the pace of increases in borrowing costs to try to avoid missteps.

Minutes of the Fed’s last policy meeting in December showed central banks grappling with risks, while economists see a high probability that an interest rate hike could lead to a US recession next year.

Policy shock

Roemer, the outgoing president of the AEA, is an expert on the causes and recovery of the Great Depression of the 1930s and has argued as CEA president for the fiscal response to the 2007-2009 recession to be far greater than was approved. She teamed up with Berkeley economist David Romer, her husband, to extract transcripts of a Fed meeting and minutes from the 1940s to review US central bank policy.

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They identified 10 cases when the Fed purposely tried to change the course of economic growth, in all but one of the cases to try to reduce inflation, which it felt was too high.

Since the transcripts are only available up to 2016, they relied on the minutes alone of recent years and concluded that the current tightening cycle is the eleventh monetary policy “shock”.

These events contrast with other Fed decisions on interest rates that aim to stay in sync with the business cycle or respond to external economic events, such as the housing market crash and the onset of a recession in 2007. Isolating the shocks, she said, allows for a clearer view of how reserve rate increases will affect Federal on economic production and employment, and in what time frame.

It found that as interest rates rose, overall output began to slow about six months after the policy shock began, and after nine quarters it was 4.5% lower than it would otherwise have been. The unemployment rate begins to rise after about five months and rises by an average of 1.6 percentage points after 27 months, with the effect fading after five years.

The Fed began raising rates last March, but accelerated the rate hikes in June to one similar to the rapid tightening former Fed Chairman Paul Volcker used in the late 1970s and early 1980s. The central bank’s policy rate now stands in a range of 4.25%-4.50% and officials are widely expected to raise it by another quarter percentage point on Jan-Feb 31. One meeting, with an eye on driving it above 5% in the coming months.

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Heralds the return of a new normal | financial times

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January 8, 2023

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This article is an on-site version of The Week Ahead newsletter. Participation here Get our newsletter sent straight to your inbox every Sunday

Hello, and welcome to the first full work week of the new year.

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How are your events going in 2023? Amid the economic gloom and ongoing conflict in Ukraine, there are signs that things are returning to normal. The Golden Globe Awards are back this week at their Los Angeles home, after interruptions over a lack of diversity led to the event’s cancellation last year. Looking ahead, world leaders, business leaders and economic thinkers will begin arriving in the Swiss resort of Davos on Sunday for the following week’s World Economic Forum.

The next seven days also see the official start of the fourth quarter earnings season, starting with Wall Street banks and British retailers. This will of course remind us that we are far from returning to normal for the global economy – more details below.

For the UK, normal for now means a large-scale industrial move. Ambulance workers and driving instructors stage more strikes this week, while the strike closes ballots for teaching unions in England and Wales.

At least normal life has been restored in Congress. Focus can now focus on the economic challenges this year will bring – more on upcoming data announcements this week below.

Japanese Prime Minister Fumio Kishida will tour the capitals of the G7 countries this week, to consult with his counterparts to agree on topics for this year’s summit in May, something he has made a major item on his political agenda this year. Kishida personally convened the summit in his hometown of Hiroshima.

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Can things search? Yes, if you are in Cornwall. Monday promises to be a historic day for the uk boycott – at least according to the Virgin Orbit press release – with the launch of the first space satellite from mainland Britain. It is perhaps best described as a classic British eccentric as nine satellites will be launched into orbit using a rocket launched from a re-purposed Boeing 747, which is due to take off from Newquay airport on Monday night. He certainly shows a degree of creativity and should at least boost British morale.

Thanks to those who responded to the alternative guide last week for next year and for your comments about our regular newsletter. Send me an email to jonathan.moules@ft.com or by clicking reply if you received this via email (see subscription details here).

Economic data

Expect the Consumer Price Index (CPI) and other inflation data over the coming days from the US, China, Japan, Australia, Brazil and Mexico.

The British Retail Consortium updates its monthly survey of UK high street sales on Tuesday, while on Friday the Office for National Statistics publishes its monthly GDP estimate to give an idea of ​​where the country stands in terms of recession.

Monetary policy this week comes from the Bank of Korea, which is expected to raise its benchmark interest rate by another 25 basis points to 3.50 percent on Friday.

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Who likes high interest rates? Banks, that is. That will become evident this week when several of Wall Street’s largest lenders reported fourth-quarter numbers on Friday.

These companies profited from Fed tightening by raising loan rates more than deposits. Analysts estimate c. B. Morgan ChaseAnd American bankAnd Citigroup And Wells Fargo to report collective net interest income for the final three months of 2022 at nearly $60 billion, up 30 percent year-over-year, according to consensus data compiled by Bloomberg. The concern is that this revenue-raising party cannot continue and net interest margins have peaked.

The flip side of rising interest rates is the problem of high inflation, which brings me to the other topic on the corporate calendar this week: retailers.

Increased exit prices may seem like a good thing for retail traders. Not when inflation reaches double digits, it isn’t. We’ll find out exactly how bad it was over the Christmas period – or indeed whether stocking up to watch the World Cup provided any kind of boost – via trading updates from British street and online brands this week.

Consumer spending could of course be better than expected next one showed last week. Games Workshopwhich announces first-half results on Tuesday, is generating a lot of excitement (and not just Ben Dungeons & Dragons nerdy teens) about growth opportunities due to the sharp rise in role-playing games during the pandemic. Investors (as well as teens) expectations have been raised even more recently for a fantasy game product Amazon TV and Movie Deal.

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Major economic reports and company reports

Below is a complete list of what to expect in terms of company reports and economic data this week.

Monday

  • Germany, monthly industrial production data

  • Mexico, December Consumer Price Index Inflation (CPI) data

  • US monthly consumer credit numbers

  • results: Tata Advisory Services Q3

Tuesday

  • The World Bank releases the winter edition of its Global Economic Prospects, its biannual World Economic Outlook

  • France, Monthly Industrial Production Figures

  • United Kingdom, Office for National Statistics Publishing Interactive maps For data from the 2021 Census of England and Wales down to local authority and community level

  • UK consumer spending data, Barclaycard

  • UK Retail Controller, British Retail Consortium- KPMG

  • UK Jobs Report, Employment and Employment Consortium-KPMG

  • United States, ex-brother Coinbase Production Manager, Nikhil Wahidue to be sentenced today after guilt in September Insider trading fees

  • results: Games Workshop H1, Robert Walters Q4 Trading Update

Wednesday

  • Italy, Monthly Retail Sales Figures

  • Mexico, industrial production data for November

  • United kingdom, Heathrow Monthly traffic figures for December

  • results: bars circulation update, fireexpo Q4 production report, Grafton circulation update, Jaguar Land Rover sales update, JD Sports christmas trading statement, Page group Q4 Trading Update, Sainsbury’s trading statement Q3, Tops Tiles Trading Statement Q1

Thursday

  • China, data on China’s inflation rate, consumer price index and producer prices for December, in addition to trade balance data for December

  • France, December CPI and the Harmonized Index of Consumer Prices (HICP) inflation rate data

  • Germany, Unemployment Claims Numbers

  • India, CPI inflation data for December

  • Japan, trade balance data for November (AM local time)

  • US inflation data, consumer price index for December

  • results: Asus circulation update, Retail Express Q1, Hafords Q3 Trading Update, John Wood Fiscal year trading update, Marks and Spencer christmas trading update, n brown trading statement Q3, persimmon circulation update, Tesco Q3 and Christmas trading update, TSMC Q4, whitcool Q3 Trading Update

Friday

  • France, the final monthly inflation rate in the consumer price index and industrial production figures

  • Germany, Rapid Annual GDP Numbers

  • South Korea, monetary policy committee rate setting meeting

  • UK, November GDP estimates and Goods Trade Balance figures

  • results: American bank Q4, Bank of New York Mellon Q4, Black stone Q4, Citigroup Q4, Delta Airlines Q4, DFS Furniture h1 trading statement, c. B. Morgan Chase Q4, Taylor Wimby trading update, United Health Group Q4, Wells Fargo Q4

world events

Finally, here’s a rundown of other events and milestones this week.

Monday

  • Japan, a public holiday on Old Age Day, celebrates those who turn 20 in the 12 months to April 1 this year.

  • Mexico, President Andrés Manuel López Obrador hosts the North Summit with counterparts from the United States and Canada at the National Palace in Mexico City. The event will conclude on Wednesday with a bilateral meeting between López Obrador and Canadian Prime Minister Justin Trudeau.

  • The UK and members of the Public Services and Commercial Services Union of the Rural Payments Agency and the DVLA in Swansea will be locked in an ongoing dispute over salaries, pensions, job security and redundancy terms. Separately, the NASUWT teachers’ union is closing a voting strike among members working in schools and Year 6 colleges in England and Wales, recommending that they vote in favor of the pay strike.

  • United Kingdom The first orbital launch from mainland Britain is set to take place from Cornwall Airport in Newquay, where Virgin Orbit is using a repurposed Boeing 747 to launch a rocket carrying nine satellites into space.

Tuesday

  • Sweden, Bank of England Governor Andrew Bailey chairs a panel discussion on central bank independence and potential future risks at an event Hosted by the Swedish Riksbank.

  • United States, the 80th Golden Globe Awards returns after a year off. The Los Angeles ceremony in particular took place in 2022 amid a boycott by actors and media companies over the lack of diversity in the Hollywood Foreign Press Association membership.

Wednesday

Thursday

  • European Union President Ursula von der Leyen is leading the European Commission’s visit to Sweden to discuss the country’s priorities during the bloc’s presidency, which began this month.

  • The UK, NHS England publishes figures for November and December, along with quarterly waiting time data for A&E attendance and emergency admissions.

  • UK Other rail strikes over wages, this time by TSSA union members at Rail for London Infrastructure, operator of London’s new Elizabeth Line service.

Friday

  • Czech Republic, the first two-day elections to determine the country’s next president and head of state. Incumbent President Milos Zeman will not be able to run again after serving two five-year terms, but former Prime Minister Andrej Babić has confirmed his candidacy.

  • The UK and the National Education Union are closing a wage strike among some 300,000 teachers and support staff in England and Wales.

  • The United States, the Trump Organization is due to be sentenced after the ex-president’s real estate firm indicted in December on tax fraud charges.

  • US and Japanese Prime Minister Fumio Kishida meets with US President Joe Biden at the White House, wrapping up a week of visits to five G7 countries to build consensus on the economic group’s annual summit this year, which Japan will host in May.

Saturday

Sunday

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