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"Financial markets have consistently front-run the Fed ... That has already eased credit conditions and could stoke an acceleration in growth." Reuters GraphicsBALANCING RISKSIn the six weeks since their June 13-14 meeting, Fed policymakers have digested data offering a mirror image of what they faced a year ago. Signs of a slowdown are there, to be sure, and some policymakers expect more weakness is coming - an argument for caution in considering further rate increases. Still, unless there's a sharp drop in activity soon, it could mean Fed officials have underestimated the economy's strength and may become doubtful about the prospect of a continued decline in inflation. That will likely keep the door open to more rate increases - for now.

Persons: Diane Swonk, Jerome Powell, That's, Tim Duy, Duy, Powell, Howard Schneider, Dan Burns, Paul Simao Organizations: Federal, KPMG, stoke, Reuters, Fed, Atlanta Fed, SGH Macro, Thomson Locations: U.S

While recent inflation data was encouraging, he said, "one data point does not make a trend." Reuters Graphics Reuters Graphics'STRANGE BUSINESS CYCLE'Until the Fed declares its inflation war at an end, however, economists and market analysts say risks to a benign outcome will remain. "At 3.5%, July won't be the last time the Fed hikes," Furman said in an interview. Ed Al-Hussainy, senior rates analyst at Columbia Threadneedle, meanwhile, is skeptical that the impact of rapid rate hikes has already been absorbed. "To say we have the same economy with real rates at negative 2% as we do at positive 2%, I don't buy it."

Persons: Jerome Powell, Christopher Waller, Waller, Thomas Barkin, Nick Bunker, Jason Furman, Obama, Furman, Ed Al, Columbia Threadneedle, Raphael Bostic, Austan Goolsbee, shouldn't, Goolsbee, Howard Schneider, Dan Burns, Paul Simao Organizations: Federal Reserve, Reuters Graphics, Richmond Fed, Reuters Graphics Reuters, Fed, Harvard University, White, Columbia, Atlanta Fed, Chicago Fed, CNBC, Thomson Locations: U.S

That could help lower overall inflation when the next CPI report is released on Aug. 10, with the details in Wednesday's report suggesting "downside risks" to any forecast of July's inflation rate. Indeed, at least one Fed official on Wednesday stuck to policymakers' prevailing hawkish mantra that inflation is still too high. While not specifically addressing the CPI report, Richmond Fed President Thomas Barkin told a Maryland business group that he still felt inflation had "been stubbornly persistent." 'FINAL INNINGS'But the latest CPI data could undercut arguments for yet another rate increase beyond the July meeting. Fed officials, blindsided by the persistence of inflation they initially thought would dissipate on its own, have been reluctant to bank on good news continuing.

Persons: Omair Sharif, Rick Rieder, Lael Brainard, Brainard, Thomas Barkin, Goldman Sachs, they've, Raphael Bostic, Bostic, Howard Schneider, Michael S, Ann Saphir, Dan Burns, Paul Simao Organizations: Federal Reserve, U.S . Labor Department, Reuters Graphics Reuters, BlackRock, Fed, White, Economic Council, Economic, of New, Richmond Fed, U.S, Cleveland Fed's Center, Inflation Research, Atlanta Fed, Derby, Thomson Locations: U.S, of New York, Maryland

But it could begin to undercut arguments for more hikes beyond that, and may shift the Fed's relentlessly hawkish tone. That ratio has dropped as the Fed's rate hikes have slowed labor market demand, and in May hit its lowest level since November 2021 at around 1.6-to-1. If June's auto sales data is any indication, though, a marked slowdown does not appear imminent. Last month's annualized sales rate came in at nearly 15.7 million vehicles, well above industry-watcher estimates. Reuters Graphics Reuters GraphicsBANK DATA: Released every Thursday and FridayTo some degree the Fed wants credit to become more expensive and less available.

Persons: Jerome Powell, delinquencies, Howard Schneider, Andrea Ricci Organizations: Reuters Graphics Reuters, Fed, Labor, Survey, Reuters Graphics, Thomson Locations: U.S

The Fed has raised interest rates by 5 percentage points since March 2022 to bring down the highest U.S. inflation in four decades. "We may end up doing less because we need to do less; we may end up doing just that; we could end up doing more. Fed policymakers are widely expected to deliver a rate hike at their meeting later this month, a move that would bring the policy rate to the 5.25%-5.50% range. That could buttress the case that price pressures are weakening, which in turn could take some pressure off the central bank to hike rates again. Atlanta Fed President Raphael Bostic, speaking at yet another event on Monday, repeated his view that the Fed can be "patient" on rates and allow restrictive policy to bring down inflation without further action by the central bank.

Persons: Mary Daly, Daly, Jerome Powell, Ann Saphir, Michael Barr, Raphael Bostic, Loretta Mester, Mester, Dan Burns, Howard Schneider, Paul Simao Organizations: Federal Reserve, San Francisco Fed, Brookings Institution, San Francisco Federal, REUTERS, New York Fed, Atlanta Fed, Cleveland Fed, Thomson Locations: U.S, San Francisco , California

"The economy is still adding more jobs than new entrants to the labor market," wrote Vanguard Global Chief Economist Joseph Davis and Senior International Economist Andrew Patterson. Wage growth "remains well above levels the Fed would be comfortable with" in the fight to return inflation to the 2% target. With job growth in prior months revised down by more than 100,000 jobs, the June jobs report is "a fairly soft print" with three-month average job gains now at 244,000 compared to more than 400,000 a year ago, said Omair Sharif of Inflation Insights. But progress towards a more balanced labor market is coming "slowly, slowly...These are still healthy figures" even as the pace softens. Reporting by Howard Schneider; Editing by Dan Burns, Nick Zieminski, Andrea Ricci and Chizu NomiyamaOur Standards: The Thomson Reuters Trust Principles.

Persons: Joseph Davis, Andrew Patterson, Omair Sharif, Austan Goolsbee, Let's, Goolsbee, Jerome Powell, Powell, Howard Schneider, Dan Burns, Nick Zieminski, Andrea Ricci, Chizu Organizations: Federal Reserve, Vanguard Global, Senior, Fed, Chicago Fed, CNBC, Reuters Graphics Reuters, Labor Statistics, Thomson Locations: U.S

WASHINGTON, July 6 (Reuters) - New data from the New York Federal Reserve shows underlying inflation may have slowed faster than the headline measures that have kept U.S. central bank officials poised for further interest rate increases. The New York Fed core trend also factors out the food and energy items that central bankers try to look beyond in assessing the direction of inflation. That's because recent data on rents, which have been moderating, gets incorporated faster into the New York Fed's estimates. From a monetary policy perspective, the new estimate could add fodder to arguments for being more cautious about further rate increases. Some policymakers have been concerned that the main measure of core inflation has shown little improvement; the New York Fed's alternate measure suggests that may be the result of temporary factors rather than a more persistent trend.

Persons: Howard Schneider, Chizu Organizations: New York Federal Reserve, Reuters, New, Fed, New York Fed, York, Thomson Locations: York

While "some participants" wanted to move ahead with a rate hike in June because progress in cooling inflation had been slow, "almost all participants judged it appropriate or acceptable to maintain" the federal funds rate at the existing 5% to 5.25%, the minutes said. The minutes added detail to the policy statement and economic projections issued after the June 13-14 session, when the Fed ended its 10-meeting streak of rate hikes with a decision to hold the benchmark federal funds rate steady. Markets were little changed after the minutes, with traders in futures tied to the Fed policy rate continuing to price in a rate hike in July and about a one-in-three chance of another increase before the end of the year. "Stretching out into a more moderate pace is appropriate to allow you to make that judgment" over time, Powell said. Investors in contracts tied to the overnight federal funds rate feel the Fed is highly likely to raise the benchmark rate by a quarter point, to a range between 5.25% and 5.5%, at its July 25-26 meeting.

Persons: Jerome Powell, Powell, Howard Schneider, Andrea Ricci, Chizu Organizations: Federal Reserve, Fed, Thomson Locations: U.S

WASHINGTON, June 22 (Reuters) - U.S. Federal Reserve Chair Jerome Powell on Thursday defended the likely need for further interest rate increases despite the possible impact on jobs. "It is working families who suffer most directly and quickly from inflation," Powell responded, adding that Fed officials at this point feel "it will be appropriate to raise rates again this year, and perhaps twice, assuming the economy performs as expected." But Powell also elaborated on the Fed's approach in coming months as policymakers debate how much further rates need to rise. "We moved very, very quickly when we had to move quickly," with rates moving higher by 75 basis point per meeting at one point, Powell said. But now "we're at least close to where we think our destination is...and it only makes common sense to move...at a careful pace," Powell said, with rates held steady at the June meeting.

Persons: Jerome Powell, Powell, Sherrod Brown, ” Brown, Howard Schneider, Ann Saphir, Andrea Ricci Organizations: . Federal, U.S . Congress, Ohio Democratic, Banking Committee, Thomson Locations: Ohio

"My baseline is that we should stay at this level for the rest of the year," and not cut rates until the latter half of 2024, Bostic said in an interview on Yahoo Finance. "Letting restrictive policy work for a while is prudent because the policy has been truly restrictive for less than a year, and it takes time for monetary policy changes to meaningfully influence economic activity. Bostic is the first official to say explicitly that may be too soon. Therefore, the real economic effects of tighter monetary policy are only just beginning to take hold," Bostic said. The risk of waiting is that inflation may resurge, but "that is not my baseline."

Persons: Raphael Bostic, Bostic, Howard Schneider, Andrea Ricci Organizations: Atlanta Federal Reserve, Yahoo Finance, Fed, Thomson Locations: U.S, Atlanta

As Powell spoke, comments from other Fed officials showed the contours of the debate emerging at the central bank over whether further rate increases will, in fact, be needed. "If we simply press on with additional rate hikes, we could needlessly drain too much momentum from the economy," Bostic said. On monetary policy Powell kept the focus on the central bank's fight to lower inflation and said the process "has a long way to go." Despite the consensus on lowering inflation, the Fed is at a point where opinions about the need for and timing of additional interest rate increases may start to diverge. Reporting by Howard Schneider; Additional reporting by Jason Lange; Editing by Dan Burns and Andrea RicciOur Standards: The Thomson Reuters Trust Principles.

Persons: Jerome Powell, Jonathan Ernst WASHINGTON, Powell, ” Powell, Austan Goolsbee, Raphael Bostic, Bostic, Democrat Joe Biden, Donald Trump, Biden, Howard Schneider, Jason Lange, Dan Burns, Andrea Ricci Organizations: U.S . Federal, Financial, REUTERS, Capitol, Financial Services, Fed, Chicago Fed, Atlanta Fed, Bank, Democrat, Republican, Thomson Locations: Washington , U.S, Silicon

[1/2] The U.S. Capitol dome is seen from the Russell Senate Office Building on Capitol Hill in Washington, U.S., April 19, 2023. Despite the consensus on lowering inflation, the Fed is also reaching a point where opinions about the need for and timing of additional interest rate increases may start to diverge. In large part that job has fallen to the Fed, but it is a central bank of Biden's making. If the current crop of nominees is approved five of seven board members would be Biden appointees. The Fed under Powell has raised interest rates faster than at any time since former Fed Chair Paul Volcker's inflation fights of the 1970s and 1980s.

Persons: Sarah Silbiger WASHINGTON, Jerome Powell, haven't, Democrat Joe Biden, Donald Trump, Philip Jefferson, Lisa Cook, Adriana Kugler, Powell, Biden, Preston Mui, Mui, Paul, Howard Schneider, Jason Lange, Dan Burns, Andrea Ricci Organizations: U.S, Russell Senate, REUTERS, . Federal, Democrat, Republican, Federal, of Governors, World Bank, Fed, Financial, America, Reuters, Biden, Trump, Black Americans, Thomson Locations: Russell, Washington , U.S, U.S, Biden's

WASHINGTON, June 21 (Reuters) - The Federal Reserve's fight to lower inflation back to its 2% target "has a long way to go," Federal Reserve Chair Jerome Powell said on Wednesday in testimony prepared for delivery to the House Financial Services Committee. "Inflation has moderated somewhat since the middle of last year," with the Fed's preferred measure of inflation falling substantially from a peak around 7% last year to 4.4% as of April. Investors broadly expect increases to resume at the Fed's July meeting, though financial market indicators reflect doubts that the Fed will deliver more increases beyond that meeting. "We have been seeing the effects of our policy tightening on demand in the most interest-rate–sensitive sectors of the economy" such as housing, Powell said. Stress in the banking sector is also creating "headwinds" for households and businesses, the effect of which remains uncertain, Powell said.

Persons: Jerome Powell, Powell, Howard Schneider, Andrea Ricci Organizations: Financial Services Committee, Fed, Federal, Thomson

Inflation has "started to abate" but the Fed will remain focused on returning it to the 2% target, Fed governor and vice chair nominee Philip Jefferson said in testimony prepared for his confirmation hearing on Wednesday before the Senate Banking Committee. "The economy faces multiple challenges, including inflation, banking-sector stress, and geopolitical instability. "Inflation has started to abate, and I remain focused on returning it to our 2% target." As a group, Fed policymakers last week signaled two more interest-rate hikes are likely by the end of the year. The Senate Banking committee on Tuesday also released prepared remarks from Fed Board nominee Adriana Kugler, who said returning inflation to the central bank's 2% target is key to setting a strong foundation for the U.S. economy.

Persons: Philip Jefferson, Jefferson, Lisa Cook, ” Cook, Cook, Adriana Kugler, " Kugler, Kugler, Bob Menendez, Menendez, Howard Schneider, Michael S, Dan Burns, Ann Saphir, Matthew Lewis Organizations: Reserve, Committee, Federal, World Bank, Fed, of Governors, Senate, Derby, Thomson Locations: Washington, U.S, New York, Berkeley , California

[1/3] The exterior of the Marriner S. Eccles Federal Reserve Board Building is seen in Washington, D.C., U.S., June 14, 2022. "Core inflation is not coming down like I thought it would," Federal Reserve Gov. The U.S. economy was "still ripping along for the most part," he said, with the underlying pace of price increases "moving sideways." The Fed this week ended its run of 10 consecutive rate hikes when policymakers decided to keep the benchmark overnight interest rate in a range of from 5% to 5.25%. Though Fed chair Jerome Powell at a press conference Wednesday said no decision had been made about the upcoming July Fed meeting, investors and other analysts broadly expect the Fed to resume rate increases.

Persons: Sarah Silbiger WASHINGTON, Christopher Waller, Waller, Thomas Barkin, Barkin, I’m, Jerome Powell, Austan Goolsbee, Goolsbee, Howard Schneider, Chizu Nomiyama, Alistair Bell Organizations: Eccles Federal Reserve, Washington , D.C, REUTERS, . Federal Reserve, Federal, Silicon Valley Bank, Richmond Federal, Fed, Chicago Fed, Thomson Locations: Washington ,, Norway, Silicon, U.S, Maryland

"Financial stresses in the banking sector are a factor that my colleagues and I are closely watching as we determine the appropriate stance of monetary policy going forward," Waller said. But "it is still not clear that recent strains in thebanking sector materially intensified the tightening of lending conditions," beyond what the Fed was trying to do anyway through its interest rate policy, Waller said. His remarks are the first by a Fed official since policymakers this week held the U.S. interest rate steady. That notion was partly behind the Fed's decision this week to delay further rate increases for at least a single meeting, to take stock of how the financial system and the economy overall are faring. However the Fed is now broadly expected to approve another quarter point rate increase when officials meet on July 25-26.

Persons: Christopher Waller, Waller, Howard Schneider, Chizu Organizations: Silicon Valley Bank, Federal Reserve, Fed, Thomson Locations: Silicon, Norway

WASHINGTON, June 16 (Reuters) - Richmond Federal Reserve president Thomas Barkin said Friday he is comfortable with further interest rate increases if coming data does not show that weakening demand for goods and services is feeding through to slower inflation. "I am still looking to be convinced of the plausible story that slowing demand returns inflation relatively quickly" to the 2% target, Barkin said in comments prepared for delivery to the Maryland Government Finance Officer Association. Many investors now expect the central bank to resume rate increases at its meeting in July. But he did say the focus remained on returning "stubbornly persistent" inflation to the Fed's 2% target, from a current level more than twice that. "The ’70s provides a clear lesson: If you back off inflation too soon, inflation comes back stronger, requiring the Fed to do even more, with even more damage," Barkin said.

Persons: Thomas Barkin, Barkin, I’m, Howard Schneider, Chizu Organizations: Richmond Federal, Maryland Government, Association, Thomson Locations: U.S

[1/3] The exterior of the Marriner S. Eccles Federal Reserve Board Building is seen in Washington, D.C., U.S., June 14, 2022. REUTERS/Sarah SilbigerWASHINGTON, June 16 (Reuters) - U.S. Federal Reserve officials struck a hawkish tone in their first comments since the central bank held the policy interest rate steady at its meeting this week but signaled that rate hikes will likely resume. "Core inflation is not coming down like I thought it would," Federal Reserve Gov. The U.S. economy was "still ripping along for the most part," he said, with the underlying pace of price increases "moving sideways." Though Fed chair Jerome Powell at a press conference Wednesday said no decision had been made about the upcoming July Fed meeting, investors and other analysts broadly expect the Fed to resume rate increases.

Persons: Sarah Silbiger WASHINGTON, Christopher Waller, Waller, Thomas Barkin, Barkin, I’m, Jerome Powell, Howard Schneider, Chizu Organizations: Eccles Federal Reserve, Washington , D.C, REUTERS, . Federal Reserve, Federal, Silicon Valley Bank, Richmond Federal, Fed, Thomson Locations: Washington ,, Norway, Silicon, U.S, Maryland

But coupled with the anticipated path of inflation, those projections actually indicate monetary policy will grow more restrictive through 2024 on a "real" or inflation-adjusted basis. It's a nuance undergirding why the Fed sees inflation continuing to fall through next year and unemployment rise despite expected lower interest rates. And in fact, that seems to be what many on the Fed intend: A real policy rate of interest that gradually tightens next year even as the "nominal" rate printed in its policy statement declines. Reuters Graphics Reuters GraphicsREAL VS NOMINALUnder the median projections provided this week, monetary policy actually grows slightly more restrictive next year. By the end of 2024 that spread actually widens to 2%, as the interest rate declines but the rate of inflation falls more sharply.

Persons: Jerome Powell nodded, We're, Howard Schneider, Dan Burns, Andrea Ricci Organizations: . Federal, U.S, Reuters Graphics Reuters, Silicon Valley Bank, Thomson Locations: Silicon

More rate increases were coming, she said. LAST MILEThe Fed's pause was partly out of respect for the time lag between rate increases and their impact on the economy. The ECB needs to see the effects of policy go "all the way down to inflation," Lagarde said. "I still think, and my colleagues agree, that the risks to inflation are to the upside," Powell said. "What we'd like to see is credible evidence that inflation is topping out and then beginning to come down."

Persons: Dado Ruvic, Christine Lagarde, Lagarde, Jerome Powell, Powell, Howard Schneider, Dan Burns, Paul Simao Organizations: REUTERS, WASHINGTON, European Central Bank, ECB, U.S . Federal Reserve, The Bank of England, Reserve Bank of Australia, Bank of Canada, Bank of Japan, Reuters, Fed, Reuters Graphics, Thomson Locations: FRANKFURT, New U.S, U.S, Europe

It was a subtly optimistic message that tempered otherwise hawkish projections that see the policy rate rising higher than market participants anticipated. In fact, investors in contracts tied to the Fed's policy rate see the central bank delivering only one quarter-percentage-point increase by the end of the year. They see about a 65% chance of a rate hike next month, up only slightly from before this week's meeting. A dovish decision, a hawkish statement, and very hawkish dots," wrote economists at the analytics firm of Larry Meyer, a former Fed governor. Fed officials at the median more than doubled their outlook for 2023 economic growth to 1%, from 0.4% in the March projections.

Persons: Fed's Powell, Jerome Powell, Powell, Subadra Rajappa, Larry Meyer, Howard Schneider, Bansari Mayur, Chizu Nomiyama, Paul Simao Organizations: Federal Reserve, Societe Generale, Fed, Market, Nasdaq, Dow Jones, Wednesday, Thomson Locations: WASHINGTON, U.S

It means that the increases in prices will happen, so there will be inflation but that the process of inflation will stop." BARGAININGAt the Fed's annual Jackson Hole conference in Wyoming, Powell laid out systematically what he'd be watching to see if inflation was becoming more persistent. History also teaches, however, that central banks cannot take for granted that inflation due to transitory factors will fade." The Fed kicked its rate increases into overdrive and Powell explained with this June 15, 2022 comment: "Contrary to expectations, inflation again surprised to the upside. Some indicators of inflation expectations have risen, and (inflation) projections this year have moved up notably.

Persons: Jerome Powell's, Don Lee, Powell, We're, we're, Howard Schneider, Paul Simao Organizations: Federal Reserve, Reuters Graphics Reuters, Los Angeles Times, Jackson, Fed, Thomson Locations: U.S, Wyoming

The Fed is scheduled to release its policy statement and new quarterly economic projections at 2 p.m. EDT (1800 GMT). POLICY COMPROMISEData since the last Fed meeting in early May has left policymakers with a tough set of signals to read, and ample room for debate. The decision won't mean rate hikes are in for an extended pause, or - a point Powell is likely to emphasize - that rate cuts are anticipated anytime soon. The Fed's last set of quarterly projections anticipated the benchmark overnight interest rate would only move down by the end of 2024 as inflation also declined - movements that keep the inflation-adjusted rate of interest roughly the same. A true "pivot" towards looser policy was only seen occurring in 2025, when the policy rate was projected by year's end to decline more than inflation.

Persons: Blerina Uruci, Rowe Price, Jerome Powell, Powell, Howard Schneider, Paul Simao Organizations: Federal, Reuters Graphics Reuters, Rowe Price Associates, Fed, Thomson Locations: U.S

Further rate increases would "take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments," it said. The new projections, adding a hawkish tilt to Wednesday's interest rate decision, show policymakers at the median see the benchmark overnight interest rate rising from the current 5.00%-5.25% range to a 5.50%-5.75% range by the end of the year. Half of the 18 Fed officials penciled in their "dot" at that level, with three seeing the policy rate moving even higher - including one official who sees it rising above 6%. Two Fed officials see rates staying where they are, and four see a single additional quarter-percentage-point increase as likely appropriate. Reporting by Howard Schneider; Additional reporting by Bansari Mayur Kamdar; Editing by Paul SimaoOur Standards: The Thomson Reuters Trust Principles.

Persons: Sam Stovall, Howard Schneider, Bansari Mayur, Paul Simao Organizations: Federal Reserve, Market, SFRA Research, Thomson Locations: WASHINGTON, U.S

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