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PinnedFederal Reserve officials are expected to leave interest rates unchanged at their meeting on Wednesday, buying themselves more time to assess whether borrowing costs are high enough to weigh down the economy and wrestle inflation under control. Central bankers have already raised interest rates to a range of 5.25 to 5.5 percent, the highest level in 22 years. At least a few officials might stop expecting another quarter-point rate move this year, predicting instead that interest rates have already reached their peak. If, on the other hand, officials expect to lower rates by less in 2024, it could be a signal that policymakers expect inflation to prove more stubborn. Fed officials will release fresh economic forecasts.

Persons: Jerome H, Powell, ”, Antúlio Bomfim, Powell’s, “, William English Organizations: Federal Reserve, Fed, Trust Asset Management, United Auto Workers, Yale Locations: America, Panama

As a result, they’re almost sure to leave their key interest rate unchanged when their meeting ends Wednesday. Claudia Sahm, a former Fed economist, said she thinks a “soft landing,” in which the Fed manages to curb inflation without causing a recession, remains possible. But she cautioned that inflation might stay higher for longer than the central bank expects. Or, she suggested, the cumulative effects of the Fed's 11 rate hikes could ultimately tip the economy into recession. “I expect we’ll need to hold rates at restrictive levels for some time,” said Susan Collins, president of the Federal Reserve Bank of Boston.

Persons: they’re, Jerome Powell, Claudia Sahm, ” Sahm, “ They’re, ”, Christopher Waller, Powell, “, They're, Jose Torres, Susan Collins, Lorie Logan, William English Organizations: WASHINGTON, Federal, Wall Street, Fed, Fed's, Governors, CNBC, Interactive, Federal Reserve Bank of Boston, Dallas Fed, European Central Bank, Bank of England, Bank of Japan, “, Yale School of Management Locations: Jackson Hole , Wyoming, Ukraine, U.S

☆ Fed losses breach $100 billion as interest costs rise
▼ + stars: | 2023-09-15 | by ( Michael S. Derby | ) www.reuters.com time to read: +5 min

NEW YORK, Sept 15 (Reuters) - Federal Reserve losses breached the $100 billion mark, central bank data released on Thursday showed, and they're likely to go a lot higher before the red ink stops. While there's considerable uncertainty around how it will all play out, some observers believe Fed losses, which began a year ago, could eventually as much as double before abating. William English, a former top central bank staffer now at Yale University, said he sees a "peak" loss of around $200 billion by 2025. Meanwhile, Derek Tang of forecasting firm LH Meyer said the loss is likely to be between $150 billion and $200 billion by next year. In 2022, the Fed handed back $76 billion, after returning $109 billion in 2021.

Persons: William English, Derek Tang, Meyer, James Bullard, Louis Fed, that's, What's, John Williams, Michael S, Paul Simao Organizations: Federal, Yale University, Fed, Treasury, . Bank, Securities, New York Fed, Thomson Locations: U.S

The U.S. economy has avoided a threatened banking crisis and financial markets have not only aligned with the Federal Reserve's tight-credit policies but of late even helped the process by bidding up market interest rates. "I think Powell’s main effort is going to be explaining to what degree you want to hold (interest rates) higher for longer in the current outlook." Investors in contracts tied to the Fed's benchmark interest rate currently expect the Fed to begin reducing the policy rate next year from the current level set between 5.25% and 5.5%. Fed officials in fact have begun discussing the possibility of rate cuts down the road, at least in the context of steadily falling inflation. If inflation does decline as expected, Fed officials including Powell have suggested rate reductions might be appropriate to maintain a roughly constant inflation-adjusted "real rate."

Persons: Jerome Powell, Jackson, Jim Urquhart, JACKSON, Antulio Bomfim, Powell, who've, isn't, Adam Posen, William English, Donald Kohn, Howard Schneider, Andrea Ricci Organizations: REUTERS, Federal, Kansas, Fed, Northern Trust, Bank of England's, Committee, Peterson Institute for International Economics, Yale School of Management, Brookings Institution, Thomson Locations: Teton, Jackson , Wyoming, U.S, , Wyoming, Washington

☆ Federal Reserve Chair Jerome Powell hints at more bad news for consumers
▼ + stars: | 2023-08-25 | by ( Bryan Mena | ) edition.cnn.com time to read: +6 min

Washington, DC CNN —Additional interest rate hikes are still on the table and rates could remain elevated for longer than expected, Federal Reserve Chair Jerome Powell said Friday. “Additional evidence of persistently above-trend growth could put further progress on inflation at risk and could warrant further tightening of monetary policy,” Powell said. “So what does that mean for monetary policy? The Fed chair said higher interest rates are likely pulling on the economy’s reins, implying that r* might not be structurally higher, though he said it’s an unobservable concept. But we cannot identify with certainty the neutral rate of interest, and thus there is always uncertainty about the precise level of monetary policy restraint,” Powell said.

Persons: Jerome Powell, Powell, ” Powell, ” William English, Jason Furman, ” Organizations: DC CNN, Kansas City, Fed, Financial, Atlanta Fed, National Federation of Independent, Yale University, Fed’s, Governors, CNN, Commerce Department, Index, Harvard Locations: Washington, Jackson Hole , Wyoming

☆ The Fed has paused before. Here’s what happened next
▼ + stars: | 2023-07-25 | by ( Elisabeth Buchwald | ) edition.cnn.com time to read: +8 min

The Fed had a similar predicament in 2006After raising interest rates 17 consecutive times between June 2004 and June 2006, Fed officials became concerned that they could inadvertently damage the economy if they continued to hike rates. When the Fed met again in September, many officials expressed concerns that raising interest rates after a short, six-week pause would broadcast the wrong message. Lacker continued to be the sole Fed official who favored raising interest rates until his term expired at the end of the year. “It’s pretty easy to believe that the Fed will find that it didn’t raise rates enough and so choose to raise rates somewhat further before stopping and, later on, reducing rates,” he said. Fed officials then opted for a pause in the fall of 1994 and raised rates further in the winter.

Persons: Ben Bernanke, Bernanke, “, ” Michael Moskow, ”, Cathy Minehan, Jeffrey Lacker, Lacker, Jerome Powell, Liu Jie, Athanasios Orphanides, Austan Goolsbee, William English Organizations: New, New York CNN, Federal, Traders, Fed, Committee, Washington , D.C, Bloomberg, Getty, Chicago Fed, Boston Fed, Richmond Fed, Massachusetts Institute of Technology, European Central Bank, Food Forum, Yale University Locations: New York, Washington ,, Xinhua, Chicago

☆ As the Fed Meets, It Shares an Inflation Problem With the World
▼ + stars: | 2023-06-12 | by ( Jeanna Smialek | ) www.nytimes.com time to read: +1 min

The Federal Reserve on Wednesday is expected to stop raising interest rates for the first time in 11 policy meetings. The pattern of stopping and then restarting rate increases is becoming well-established around the world. The Reserve Bank of Australia paused its own campaign earlier this year only to raise rates again twice, including last week. Many central banks are contending with price increases that are only moderating slowly, propped up by higher service costs, which include things like concert tickets, rent and hotel rooms. The European Central Bank’s policymakers also meet this week, and they are expected to continue raising rates.

Persons: ”, William English Organizations: Federal Reserve, Reserve Bank of Australia, Bank of Canada, Fed, Yale University Locations: Melbourne, Munich, Miami, Britain, Central

☆ Explainer: How the Fed might act in a U.S. default
▼ + stars: | 2023-05-02 | by ( ) www.reuters.com time to read: +6 min

Despite Powell's protestations, the Fed would have a role in trying to limit the harm to financial stability. In past debt-ceiling standoffs - in 2011 and 2013 - Fed staff and policymakers developed a playbook that would likely provide a starting point. English, however, had envisioned the bonds being accepted by the Fed at a market price that would likely be impaired by their defaulted status. But, following the bank failures in March, the Fed has a new bank lending facility - one that allows securities with impaired prices to be pledged at face value. Ben Bernanke, Fed chair at the time, quipped: "So you are willing to accept 'loathsome' under some certain circumstances," drawing laughter from others on the call.

When asked about the matter at a news conference after the end of the U.S. central bank's latest policy meeting on Wednesday, Powell declined to say whether Fed officials had begun planning for a possible default. "If there were pressures pushing the funds rate higher the (Fed market desk) would automatically add reserves to deal with that," William English, a Yale School of Management professor, said in a recent interview. As head of the Fed's monetary affairs division at the time, it was English who briefed officials in 2011 on possible options. The approach "appeared acceptable" to Fed officials previously, and was included in a draft statement the central bank had prepared in the event a debt limit compromise was not reached. But I don't want to say what I would and wouldn't do, if we have to actually deal with a catastrophe."

☆ Sooner or later, Fed may need technical tweaks for rate control toolkit
▼ + stars: | 2023-02-01 | by ( Michael S. Derby | ) www.reuters.com time to read: +4 min

The tweaks they envision are not shifts in the federal funds target rate, the central bank’s main tool for influencing the economy to achieve its job and inflation goals. Those two rates exist to keep the market-driven fed funds rate in the desired range. One, called the reverse repo rate, sets a floor underneath short-term rates, while another, which pays deposit-taking banks to park cash at the Fed, sets the high end. Those adjustments happened purely to ensure control of the fed funds rate, while this sort of move would speak more directly to bigger monetary policy concerns around managing the size of its $8.5 trillion balance sheet. Some in the market fear rate control toolkit tweaks might create unneeded headaches if done too aggressively.

☆ Fed on track for tens of billions in losses amid inflation fight
▼ + stars: | 2022-10-28 | by ( Michael S. Derby | ) www.reuters.com time to read: +5 min

Those losses will not impede the central bank’s ability to conduct monetary policy but could over time expose it to friction on the political front. What’s more, getting a handle on how much money the Fed might lose is difficult given the highly unsettled economic outlook. FED PAYS TO PARK CASH ON SIDELINESThe Fed is losing money due to the mechanics of monetary policy. By paying interest to a mix of banks, money funds and others, the Fed keeps the federal funds rate in its desired range. The Fed funds its operations through services it provides banks and via interest from bonds it owns.

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