Fed's Daly emphasizes “patience” message at rate cut timing
9 hrs 6 mins ago
The Federal Reserve needs more time and data to make sure inflation is truly subdued before cutting its key interest rate, Mary Daly, president of the Federal Reserve Bank of San Francisco and a member of the Fed's policy committee, said at a National Association conference for business administration on Friday.
Their comments adhered to the principle that other Fed officials have reiterated in recent weeks: With inflation appearing to be on a bumpy path toward the central bank's 2% annual rate target – but not quite there yet – and the economy and job market remain robust, you are in no hurry to lower interest rates.
“The economy is healthy, price stability is in sight and there is still much to do,” she said.
Daly and other members of the Federal Open Market Committee are at a crucial stage in their attempt to bring the economy to a “soft landing” (rather than a crash) after the high inflation that flared up in late 2021. Since March 2021 The central bank has curbed inflation by raising its key interest rate and keeping it at a 23-year high since July, raising borrowing costs for all types of loans, discouraging spending and slowing economic growth.
Daly pointed to progress in the fight against inflation. The Fed's preferred inflation gauge rose 2.6% for the year in December, compared to a peak of 7.1% in June 2022.
“For households and businesses, the treadmill of persistently rising inflation has slowed,” she said.
But she said there was a risk that the forces that have depressed inflation – such as increases in labor productivity – could reverse and that disruptions such as the conflict in the Middle East could fuel inflation again.
Daly said the Federal Open Market Committee's December forecast of three quarter-point rate cuts in 2024 was “reasonable.”
Mary Daly, President of the San Francisco Federal Reserve, speaks at an event in November 2023.
Alex Kraus/Bloomberg/Getty Images
Fed's Bostic: Inflation is on track for a rate cut in the summer, there is still more “work” to do on inflation
11 hrs 9 mins ago
Noting that inflation readings are still too high, Atlanta Fed President Raphael Bostic said today that while price pressures in some categories need to continue to ease, inflation trends appear to indicate that the Federal Reserve is in The reduction in interest rates will begin in the “summer”.
With only two rate cuts this year, Bostic told CNBC that inflation's downward path would be “a little bumpy” and there was still “work to be done,” citing the spike in recent inflation reports such as today's data Wholesale prices.
While he reiterated the view of other Fed officials that a strong economy gives the central bank time to wait for more data on inflation, he said there are some specific measurements that need to show improvement.
For example, the Dallas Federal Reserve's trimmed mean measure of inflation over the past six months has been about 2.6%. And about a third of the basket of goods measured for the personal consumption expenditures (PCE) inflation index still showed price increases of 5%.
“So when there are a lot of products with a lot of price changes, it's hard to imagine that you're already there,” he said of officials' confidence that inflation would continue to fall toward the 2% target.
-Terry Lane
Barr says bank regulators have a “keen focus” on commercial real estate risks
12 hours 18 minutes ago
Banking regulators are “heavily focused” on commercial real estate (CRE) risks that are putting pressure on some financial institutions closely tied to the industry, Michael S. Barr, the Fed's deputy supervisory chairman, said at a banking conference this morning .
Barr said Federal Reserve regulators consider several factors in how banks handle commercial real estate loans, including how they measure and monitor risks, what measures have been taken to mitigate risks, how they report those risks to management and whether the case is financially prepared for future losses of consumer properties.
Additionally, Barr pointed to the Fed's report on Silicon Valley Bank's collapse last year, noting that regulators “continue to evaluate” whether to impose temporary increased capital requirements on banks that are having difficulty managing their risks.
In comments at a banking conference at Columbia Law School, Barr reiterated Fed officials' concerns that a weak market for office space is hurting the commercial real estate sector, which helps shore up many banks' balance sheets. Those worries intensified recently when Moody's downgraded New York Community Bancorp Inc.'s (NYCB) credit rating because of concerns about its exposure to commercial real estate, which was undermined by higher interest rates and work-from-home trends.
-Terry Lane
Consumer sentiment rises by inches; Inflation concerns remain
13 hours and 27 minutes ago
Consumer sentiment improved in February, but not as much as economists had predicted, while inflation expectations also rose slightly to reflect recent inflation moves.
Preliminary February results for the University of Michigan Consumer Sentiment Index came in at 79.6, up from 79.0 the previous month and up 19% from the same month last year. However, economists expected the index to rise to 80.0. The largely flat development compared to the previous month is due to the fact that sentiment has increased over the last two months.
“The fact that sentiment has not lost ground this month suggests that consumers continue to feel more confident about the economy, confirming the significant improvements in December and January in various areas of the economy,” said Joanne Hsu , survey leader.
The closely watched data also showed that consumers in the February survey expect inflation to rise to 3.0% next year, up slightly from 2.9% the previous month. The rise comes as other measures of inflation showed prices proving more stable than expected, including a better-than-expected consumer price index this week. Short-term inflation expectations remained at pre-pandemic levels.
Federal Reserve officials have said they consider consumers' inflation expectations as part of their decision-making process for setting interest rates.
-Terry Lane
Fewer new houses are being built than expected
15 hours 26 minutes ago
According to figures from the Census Bureau on Friday, January saw a significant decline in housing starts, which had risen sharply over the previous four months.
14.8% fewer new homes began construction in January than in December, an annual rate of 1.33 million. That number was 0.7% compared to January a year ago and was below the 1.45 million economists expected.
Building permits, a precursor to housing starts, also fell in January and were lower than economists expected. In January, 1.47 million building permits for single-family homes were issued on an annual basis, 1.5% less than in December and 8.6% more than in January 2023.
Housing starts were closely watched as fewer people sold their existing homes.
Interest rates have caused many buyers to shy away from selling their homes. According to Freddie Mac, this would require them to swap their pandemic-era low-interest mortgages for mortgages now averaging 6.77%.
This has led to newly built houses being held responsible for alleviating the housing shortage on the market.
“A housing revival is coming, but it didn't come in January,” said Robert Frick, corporate economist at Navy Federal Credit Union. “High mortgage rates and possibly a touch of cold weather caused housing starts and permits to decline starting in December. We know builders are ready to ramp up construction when interest rates fall, which could happen as early as spring.”
Wholesale inflation rises in January
15 hours 50 minutes ago
Wholesale prices may have predicted some increase in consumer inflation in January.
The prices that producers receive for their goods and services rose 0.3% in January compared to the previous month. That's higher than the expected 0.1%, according to economists polled by Dow Jones and the Wall Street Journal. Prices fell 0.1% in December, wiping out a 0.1% rise in November.
Prices rose by 0.9% year-on-year. That's down from 1% in December.
These prices, measured by the Bureau of Labor Statistics' producer price index, are considered precursors to consumer inflation. When prices are inflated for manufacturers, these costs are often passed on to the retailers who sell the products, who in turn pass them on to the consumer.
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