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"The markets will also be following what the scenarios are looking like," he said, and whether, after decades of instability in the Middle East, this outbreak of violence evolves differently. "The question will be is this iteration something that will throw the long-term equilibrium out of balance?" "The conflict poses a risk of higher oil prices, and risks to both inflation and the growth outlook," said Karim Basta, chief economist at III Capital Management, leaving the Fed to sort out whether higher prices or slower growth is the greater concern. To the extent the Israeli war with Hamas heightens concerns about the global economy it could reverse that trend if capital rushes towards the relative safety of U.S. Treasury bonds, as often happens at times of potential crisis. Reporting by Howard Schneider and Ann Saphir; Editing by Andrea RicciOur Standards: The Thomson Reuters Trust Principles.

Persons: Ronen, It’s, Agustin Carstens, Carl Tannenbaum, Karim Basta, Howard Schneider, Ann Saphir, Andrea Ricci Organizations: REUTERS, Rights, Bank for International, National Association for Business Economics, Federal Reserve, Northern Trust, International Monetary Fund, World Bank, III Capital Management, Fed, Treasury, Thomson Locations: Gaza, Sderot, Israel, Ukraine, U.S, Morocco, Iran, Saudi Arabia, Gulf, Suez

☆ Fed interest-rate hike seen a lock for July
▼ + stars: | 2023-07-07 | by ( ) www.reuters.com time to read: +1 min

Before the Labor Department report, they had seen a nearly even chance that rates would get to a 5.5%-5.75% range by November. The report, which showed employers hired 209,000 workers last month, is "consistent with steady and gradual slowing of the labor market," wrote III Capital Management's Karim Basta. While that's not enough to dissuade the Fed a July rate hike, he said, an increase in September is "very much an open question." The Fed held its policy rate steady last month, targeting a 5%-5.25% range, but policymakers signaled further rate hikes ahead given still unacceptably high inflation and its slow progress toward's the Fed's 2% goal amid a strong labor market. Reporting by Ann Saphir; Editing by Toby ChopraOur Standards: The Thomson Reuters Trust Principles.

Persons: Management's Karim Basta, that's, Ann Saphir, Toby Chopra Organizations: Federal Reserve, Traders, U.S, Labor Department, Fed, Thomson

WASHINGTON, March 12 (Reuters) - Earlier this month the U.S. Federal Reserve in a report to Congress gave what has become a standard reassurance: Banks were strong and the overall financial system in solid shape. Regulators on Sunday were working on a response to contain any fallout from the bank's collapse, including a sale to another institution able to make depositors whole. More broadly, the Fed has tools that are always available to shore up the financial system, including direct loans to banks with adequate collateral through its so-called discount window. Karim Basta, chief economist for III Capital Management, wrote on Sunday, mapping out the potential trail from SVB's collapse to broader macroeconomic implications. "Large banks continue to have ample liquidity to meet severe deposit outflows," the Fed report said.

The stronger-than-expected hiring pushed the unemployment rate to 3.4%, the lowest since the spring of 1969. “It will give the Fed absolutely no reassurance that labor market imbalances – which have been adding to wage pressures - are easing," said Brian Coulton, chief economist at Fitch Ratings. "It will reinforce the message that the Fed still has quite a lot of work to do to tame core inflation." U.S. Labor Secretary Martin Walsh said he thought Friday's report showed signs of an economy and labor market steadily returning to normal. Powell pointed out that the years just before the COVID-19 health crisis included simultaneously low unemployment, low inflation, and sustainably modest wage growth, proof that a best-case set of conditions was achievable.

☆ Fed's words in focus as markets bet rate hikes will soon end
▼ + stars: | 2023-01-30 | by ( Ann Saphir | ) www.reuters.com time to read: +6 min

The rate increase expected at the Federal Open Market Committee's Jan. 31-Feb. 1 meeting would bring the policy rate to the 4.5%-4.75% range. That's two quarter-point rate hikes short of the level most Fed policymakers in December thought would be "sufficiently restrictive" to bring inflation under control. At the same time, he said, "there's going to be some caution" about doing anything that could feed market expectations that a pause in rate hikes is imminent. Fed policymakers, as of December at least, all see no rate cuts until 2024. "The key question is how committed they are to further rate hikes."

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