Another Fed official expressed doubts about whether interest rates will be cut this year
3 hours and 56 minutes ago
In an online discussion with news publication Pensions & Investments, Minnesota Fed President Neel Kaskkari questioned whether the Federal Reserve would be able to cut interest rates as inflation remains stubborn.
While he thought in March that the Fed would cut rates twice this year, it's possible the central bank wouldn't cut rates at all in 2024, he said.
“If we continue to see sideways action, I would question whether we even need to do these rate cuts. There is a lot of momentum in the economy right now,” he said.
Kashkari also said interest rate hikes are not “off the table” but are not likely either, while the 2% annual inflation target is something that cannot be changed.
Kashkari joins his colleagues Atlanta Fed President Raphael Bostic and Fed Governor Christopher Waller, both of whom have expressed doubts about the timing of rate cuts this year.
-Terry Lane
Fed officials see a need for further progress on housing inflation
4 hours and 24 minutes ago
Housing costs pose the biggest threat to bringing inflation down to the Federal Reserve's target rate, Chicago Fed President Austan Goolsbee said Thursday at a meeting of chambers of commerce.
Goolsbee noted that recent inflation reports likely provided “support” on inflation's downward path and said they did not show “overheated” demand that would worry Fed officials. However, Goolsbee said inflation may not fully fall to the 2 percent target unless there is further improvement in home prices.
“Housing inflation remains my most valuable indicator for the immediate future,” Goolsbee said. “Although it has fallen somewhat from a fairly high level, it remains much higher than before the pandemic. Based on the market data on rents for new rentals, I expected them to fall faster than before.”
In an online interview with the Global Interdependence Center, Cleveland Fed President Loretta Mester largely repeated her comments from earlier this week. Mester said that while she still needs more data that inflation is heading toward 2%, she believes the Federal Reserve could begin cutting interest rates sometime this year.
-Terry Lane
The Fed should take its time when it comes to cutting interest rates, says Barkin
8 hours and 32 minutes ago
Richmond Federal Reserve Bank President Thomas Barkin gave no assurances on the timing of rate cuts and said officials should continue to monitor economic data before making rate cuts.
“I think it is wise for the Fed to take its time,” Barkin said in a statement to the Home Building Association of Richmond. “Nobody wants inflation to happen again. And with a strong labor market, we have time for the clouds to clear before we start cutting interest rates.”
Barkin said the Fed needs to gain “greater confidence” that inflation is moving toward its 2% annual target rate. While price increases have moderated significantly since their peak in 2022, recent reports suggest that inflation could stall before reaching the target.
There is still a risk that inflation will rise again, Barkin said, noting that prices remain high in several categories and the cost of housing and services is still above historical levels.
“While I hear that price setters are increasingly convinced that the era of significant pricing power is behind them, the inflation experience of the last two years has certainly given them more courage to use price as leverage,” Barkin said.
-Terry Lane
Mortgage interest rates remain at just under 7%
9 hours 12 minutes ago
If you're looking for a mortgage, the interest rates you're being offered probably haven't changed much, for better or worse, in the last week.
The average interest rate that lenders offer on a 30-year mortgage rose to 6.82% this week from 6.79% the week before, mortgage giant Freddie Mac said. Interest rates have remained in a holding pattern in the high 6% range since the start of the year, after slipping from 7.79% at the end of October.
While interest rates remain below their recent peak – the highest since 2000 – home affordability among buyers has shown little improvement. High mortgage rates and rising property prices are making purchasing a new home out of reach for many first-time buyers. This trend is unlikely to change unless interest rates fall.
Mortgage rates are heavily influenced by the Federal Reserve's interest rate, which the central bank is keeping at a 23-year high to combat inflation. And although policymakers say they expect to cut rates sometime this year, the timing of those cuts — and any associated mortgage rate relief — remains uncertain.
Tomorrow's job gains could derail expectations of a rate cut in June
9 hours and 24 minutes ago
If forecasts are correct, the labor market's winning streak is likely to continue in March as employers continue to add jobs in an already healthy economy.
When the Bureau of Labor Statistics releases its widely watched jobs report on Friday, the economy is expected to have added 200,000 new jobs, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal. That would be down from 275,000 in February, but solid by historical standards – the average in the five years before the pandemic was 191,000.1
The economy has added jobs every month since December 2020, with March likely marking the 39th consecutive month of job gains.
If these forecasts hold true, it would be further evidence of the economy's resilience under the weight of the Federal Reserve's high interest rates, which have kept borrowing costs for all types of credit at their highest in decades to curb inflation.
“Rather than slowing, the U.S. labor market appears to be getting back on track,” Sal Guatieri, senior economist at BMO Capital Markets, wrote in a commentary.
That could derail expectations for a rate cut in June – Fed officials worry that rapid wage growth could keep inflation above the Fed's target of a 2% annual rate. On the other hand, a weaker-than-expected labor market could prompt the Fed to cut interest rates faster and sooner to stimulate business and stave off a recession.
Read more about what to expect from the jobs report here.
US trade deficit widens in February despite growth in oil and aircraft exports
10 hours 48 minutes ago
The US trade deficit widened in February as both exports and imports increased as US oil shipments continued to increase.
The US Bureau of Economic Analysis (BEA) reported a trade deficit of $68.9 billion, up nearly 2% from the previous month. Imports totaled $331.9 billion, exceeding exports of $263.0 billion.
The largest trade deficit was with China, followed by the European Union and Mexico. The report showed that the US had a trade surplus with South and Central America.
U.S. crude oil shipments continued to rise in February, with totals for 2024 coming in higher than last year's production levels. Civil aircraft exports also rose in February, pushing the 2024 level higher this year.
However, Matthew Martin of Oxford Economics said supply chain strength could drive imports higher in 2024, potentially widening the U.S. trade gap with other countries.
“Continued U.S. dollar strength and weaker global demand will weigh on exports overall,” he wrote.
-Terry Lane
Federal Reserve officials aren't sure what to do next given the surprising strength of the economy
10 hours 59 minutes ago
The latest round of data on inflation and the economy leaves Federal Reserve policymakers uncertain about when and how much they should cut interest rates.
In recent speeches, Fed officials have disagreed over how to interpret recent reports showing that the economy may be resilient to the effects of persistently high interest rates. Inflation remains stubbornly above the central bank's target of 2% per year, while the labor market is healthy and consumers continue to spend like there is no tomorrow.
Fed officials are facing a decision about when to cut the central bank's influential benchmark interest rate to 5.50% from the current range of 5.25%, where it has been since July. And they seem to disagree about what to do next.
Fed Chairman Jerome Powell has formulated a “wait-and-see” approach to determining whether the recent rise in inflation was just a fluke or a genuine setback, which he reiterated in comments on Wednesday.
Some officials, such as San Francisco Fed President Mary Daly and Federal Reserve Governor Adriana Kugler, have followed Powell's lead in public comments this week. But not all Fed officials think alike.
Yesterday, Atlanta Fed President Raphael Bostic said that only a rate cut toward the end of the year was likely, and his colleague Fed Governor Christopher Waller also indicated that he had withdrawn his predictions on the timing of the rate cut.
“Disagreement at the Fed is growing, even beyond Powell and Waller, who are seen as the two main voices on the FOMC,” Aditya Bhave and Michael Gapen, economists at Bank of America Securities, wrote in a commentary ahead of Powell’s speech on Wednesday. “Policymakers appear to differ on how to balance the dual mandate: Should the Fed accept a longer path back to 2% inflation to ensure a soft landing?”
Read more about how recent data has impacted Federal Reserve officials' outlook here.
Unemployment insurance claims jumped last week
11 hours 48 minutes ago
The number of people filing initial claims for unemployment benefits rose beyond expectations last week but remains at historically low levels.
According to the Labor Department, initial claims jumped to 221,000 in the week ending March 30, about 9,000 than the week before. That's 8,000 more than the average economists polled by Dow Jones Newswires and the Wall Street Journal predicted.
The jump is not a cause for concern, economists said.
“Initial jobless claims rose in the week ended March 30 to their highest level since late January, but remain well below levels that would signal a significant weakening in labor market conditions,” wrote Nancy Vanden Houten, senior U.S. economist at Oxford Economics. “The claims data and other labor market indicators are consistent with a labor market that remains fairly healthy.”
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