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☆ Fed's Powell: Most US policymakers see two or more rate hikes ahead
▼ + stars: | 2023-06-29 | by ( ) www.reuters.com time to read: +2 min

He noted, as he has, that banking stresses that emerged in March "may well lead" to more tightening in credit conditions than would be expected from rate hikes alone. After 10 straight rate hikes since March 2022, the Fed's policy-setting Federal Open Market Committee earlier this month opted to leave its policy rate unchanged at the 5%-5.25% range. "We made this decision in light of the distance we have come in tightening policy, the uncertain lags in monetary policy, and the potential headwinds from credit tightening," Powell said. Rate hikes to date have slowed business investment and the housing sector, where activity is far below its peak last year even as some indicators have recently turned up, Powell said. "It will take time" for the rest of the economy to feel the full impact of rate hikes to date, he said.

Persons: Dado Ruvic, Jerome Powell, Powell, Ann Saphir, Leslie Adler Organizations: REUTERS, Banco, Espana, Thomson Locations: Madrid

Last week Fed policymakers decided to hold the policy rate steady at the current 5%-5.25% range, interrupting what had been a string of 10 straight increases aimed at stomping inflation. The unemployment rate has crept up to 3.7% but is lower than the 4% rate Fed policymakers estimate is consistent with a fully employed American workforce on a sustainable basis. That's one more reason, she said, to slow down on rate hikes. "No wonder there's a couple of extra rate hikes," Daly said. Two more quarter-point rate hikes this year, Daly said, is "a very reasonable projection at this point," she said.

Persons: Florence Lo, Mary Daly, Daly, what's, Banks, I've, Ann Saphir, Dan Burns, Andrea Ricci Organizations: REUTERS, San Francisco Federal Reserve Bank, Reuters, Thomson

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

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

[1/2] The exterior of the Marriner S. Eccles Federal Reserve Board Building is seen in Washington, D.C., U.S., June 14, 2022. They expect the Fed to raise its target rate to 5.25%-5.5% at the July 25-26 meeting. And it's quite likely that if the Fed does hold off on rates it will prep markets for action later on. The last Fed forecasts released at the March meeting had penciled in a 5.1% stopping point for the federal funds rate target, where it is now. Each Fed policymaker's view of the appropriate year-end policy rate is depicted by an anonymous "dot" on a grid.

Persons: Sarah Silbiger, who've, Wrightson ICAP, Wrightson, it's, Jerome Powell's, ’ ”, Powell, Ryan Sweet, Morgan Stanley, Oscar Munoz, Ann Saphir, Michael S, Howard Schneider, Dan Burns Organizations: Eccles Federal Reserve, Washington , D.C, REUTERS, Federal Reserve, Fed, Bank of America, Citibank, Reuters Graphics Reuters, Deutsche Bank, Oxford Economics, Securities, Derby, Thomson Locations: Washington ,, U.S

☆ Fed Chair Powell to testify at US Senate June 22
▼ + stars: | 2023-06-02 | by ( ) www.reuters.com time to read: 1 min

June 2 (Reuters) - Federal Reserve Chair Jerome Powell will testify at the U.S. Senate Banking Committee on June 22 at 10 am Eastern time, panel chief Sherrod Brown said on Friday. The testimony marks the second iteration of the Fed chair's twice-yearly reports to Congress on the state of U.S. monetary policy, and will come a week after the Fed's upcoming interest-rate-setting meeting at which it is expected to leave borrowing costs unchanged despite still-high inflation. Reporting by Ann Saphir Editing by Chris ReeseOur Standards: The Thomson Reuters Trust Principles.

Persons: Jerome Powell, Sherrod Brown, Ann Saphir, Chris Reese Organizations: U.S . Senate, Thomson Locations: U.S

Harker said he sees promising signs the Fed's rate hikes so far -- five full percentage points since March 2022 -- are having a cooling effect, particularly on housing prices. Uncertainty over inflation dynamics and the pace of credit tightening make him wary of continuing to raise rates. Harker said he expects the economy to grow less than 1% this year, and for the unemployment rate, now at 3.4%, to rise to around 4.4%. He said he could envision the Fed cutting rates if unemployment rises significantly faster, or inflation falls more rapidly, than he currently forecasts. "We don't have to keep moving rates up, and then have to reverse course quickly."

Persons: Patrick Harker, Harker, Corp's, Ann Saphir, Paul Simao Organizations: Philadelphia Federal, National Association for Business Economics, Thomson

The rate hike "skip" has now become jargon for an emerging compromise between concerns inflation is not yet controlled with fears the economy may slow sharply as banks pull back on credit. "I don't really see a compelling reason to pause," Cleveland Fed president Loretta Mester said in an interview published Wednesday in the Financial Times. Jefferson acknowledged inflation remains "too high" and that "by some measures progress has been decelerating recently." While Jefferson does not expect a recession, he noted that there are reasons to be careful after 15 months in which the policy rate was raised by 5 percentage points. Reporting by Howard Schneider; Editing by Paul Simao, Nick Zieminski and Daniel WallisOur Standards: The Thomson Reuters Trust Principles.

Persons: Philip Jefferson, Jefferson, Jerome, Powell, Krishna Guha, Patrick Harker, Harker, Loretta Mester, Michelle Bowman, Howard Schneider, Paul Simao, Nick Zieminski, Daniel Wallis Organizations: Federal Reserve, Fed, U.S . Senate, Philadelphia Fed, Cleveland Fed, Financial Times, Thomson Locations: U.S, Washington

Meanwhile districts reported that the pace of inflation had slowed, with prices rising "moderately" and contacts in most parts of the country expecting a similar pace of price increases in the coming months. But many Fed policymakers since then have signaled they may rather wait before undertaking any further policy tightening. Fed policymakers have said credit conditions are a key input to their calculations for monetary policy-setting. About half of districts reported no change in economic activity in recent weeks, the report showed, while four reported small increases and two reported "slight to moderate declines." At the St. Louis Fed, banking contacts said loan demand had softened and they expected further weakening ahead.

Persons: Louis, Ann Saphir, Andrea Ricci, Chizu Organizations: Federal, Silicon Valley Bank, Signature Bank, Cleveland Fed, Minneapolis Fed, St, Louis Fed, Thomson Locations: U.S, Silicon

He said the full impact of central bank rate increases to date had yet to be felt. “I try ... to make it a point not to prejudge and make decisions when you are still weeks out from the meeting," Goolsbee said. "If you did not do that, the consequences for the financial system and for the broader economy would be extremely negative," Goolsbee said. "Even the anticipation of these problems does have consequences on the economy, it does have consequences on financial markets." Still to come before the Fed's June rate decision is another monthly read on the U.S. unemployment rate, now at a decades-low of 3.4%, and on consumer price inflation.

☆ Fed's Goolsbee: won't prejudge June rate decision
▼ + stars: | 2023-05-28 | by ( ) www.reuters.com time to read: 1 min

May 28 (Reuters) - Chicago Federal Reserve Bank President Austan Goolsbee said on Sunday he won't 'prejudge' whether he would support an interest-rate hike at the upcoming Fed meeting in June, but noted that the full impact of the central bank's rate increases to date have yet to be felt. "We are going to get a lot of important data between now and then," Goolsbee told CBS's Face the Nation. "The actions that the Fed takes take months or even years to work their way through the system...there's no doubt inflation is too high, still -- it has come down -- and we are just trying to manage, can we get inflation down without starting a recession." Reporting by Ann Saphir; Editing by Andrea RicciOur Standards: The Thomson Reuters Trust Principles.

And an increase in underlying core inflation to 4.7%, up from a 4.6% pace in March, underscored the less-than-steady progress on the Fed's inflation fight. In March Mester had already expected the Fed to raise the policy rate beyond its current 5.00%-5.25% range. Fed policymakers also say they are watching credit conditions closely, though Mester on Friday said that so far she's not seeing worrisome "extra" tightening from the recent regional bank failures. Odds in futures markets are running three to one in favor of a rate hike by then. Other Fed policymakers have echoed that hawkish call.

☆ Fed's Bowman backs 'targeted' bank rules reform but not 'radical' change
▼ + stars: | 2023-05-19 | by ( ) www.reuters.com time to read: +2 min

"Radical reform of the bank regulatory framework - as opposed to targeted changes to address identified root causes of banking system stress - is incompatible with the fundamental strength of the banking system," she said. During testimony to Congress this week, Barr was repeatedly asked about Bowman's views, which were first laid out in detail last week. He said he welcomed any third-party independent reviews to follow his own review of the failure of Santa Clara, California-based SVB. Barr's review, which was published in late April, found problems in the Fed's own approach to supervision that he said needed fixing. Bowman did not touch on monetary policy or the economic outlook in her prepared remarks.

☆ Fed's hawks make a pitch against a rate-hike pause
▼ + stars: | 2023-05-18 | by ( ) www.reuters.com time to read: +3 min

On Thursday, rate-futures markets reflected a one-in-three chance of a June rate hike, compared with a one-in-10-chance seen a week ago. The Fed has lifted borrowing costs at each meeting since March 2022, bringing them from near zero to a 5.00-5.25% range as of early this month. Consumer price inflation, for instance, edged down to a 4.9% annual pace in April but is still far above the Fed's 2% goal. However, his embrace of the idea that there is still a lot of policy tightening in the pipeline suggests he could be comfortable with a pause. Dallas Fed's Logan had the opposite presumption.

☆ Fed's Logan: data does not yet show June pause is appropriate
▼ + stars: | 2023-05-18 | by ( ) www.reuters.com time to read: 1 min

May 18 (Reuters) - Dallas Federal Reserve Bank President Lorie Logan on Thursday said she's concerned that "much too high" inflation is not cooling fast enough yet to allow the Fed to pause its interest-rate hike campaign in June. "The data in coming weeks could yet show that it is appropriate to skip a meeting," Logan said in remarks prepared for delivery to the Texas Bankers Association in San Antonio, referring to the Fed's twice-quarterly policy-setting meetings, the next of which takes place June 13-14. "As of today, though, we aren’t there yet." Reporting by Ann SaphirOur Standards: The Thomson Reuters Trust Principles.

"I believe it was a series of unprecedented events that all came together in the fastest bank run in history," Becker told the Senate Banking Committee. "I was the CEO of Silicon Valley Bank, I take responsibility for what ultimately happened," Becker said. Executives from Signature Bank also testified alongside Becker on Tuesday, pushing back on assertions from lawmakers that the bank had weak corporate governance. "I don't believe that there was mismanagement at the bank," said Eric Howell, the former president of Signature Bank. The bank tried to cover the loss by raising capital, but in announcing the transaction helped fuel a bank run.

But Fed officials on Monday said the jury is very much out. Bostic said businesses in his southeastern U.S. Fed district "are telling me we think you're close to overdoing it ... Investors have consistently bet that the central bank, due to some combination of recession or a faster-than-expected drop in inflation, will be cutting rates by later this year. Minneapolis Fed President Neel Kashkari said the central bank probably has "more work to do on our end, to try to bring inflation back down." In addition, he says the full impact of Fed rate hikes has yet to be felt.

☆ Fed officials expect US interest rates to stay high
▼ + stars: | 2023-05-15 | by ( ) www.reuters.com time to read: +3 min

May 15 - U.S. central bankers on Monday signaled they see interest rates staying high and, if anything, going higher, given sticky inflation - a stark contrast with the market's view that the Federal Reserve will be cutting rates well before 2023 is over. Inflation has eased some and should cool further, he said, but the process will not be quick enough to merit rate cuts anytime soon. Minneapolis Fed President Neel Kashkari said the Fed probably has "more work to do on our end, to try to bring inflation back down." "We still are well in excess of our 2% inflation target, and we need to finish the job." And he said he believes the full impact of the Fed's rate hikes so far have yet to be felt.

☆ Fed's Goolsbee says May rate hike was 'close call' for him
▼ + stars: | 2023-05-15 | by ( ) www.reuters.com time to read: +1 min

May 15 (Reuters) - Chicago Federal Reserve Bank President Austan Goolsbee said on Monday that his decision to support an interest rate hike at the U.S. central bank's most recent meeting in May was a "close call" as he weighed the impact of credit tightening from recent bank stresses. "The thing that made it a close call for me is this big question mark about what is going to be the impact of this on credit conditions," Goolsbee told CNBC, adding that things did not appear to have become notably worse since the prior Fed meeting. Asked about market expectations for rate cuts later in the year, even though Fed policymaker forecasts do not call for any, Goolsbee appeared to have a warning, noting that failed Silicon Valley Bank took off its own hedges against higher interest rates because it believed markets and not the Fed's projections. Reporting by Ann Saphir; Editing by Chizu NomiyamaOur Standards: The Thomson Reuters Trust Principles.

☆ Fed's Bostic says wants to 'wait and see' on rates
▼ + stars: | 2023-05-15 | by ( ) www.reuters.com time to read: +1 min

"The appropriate policy is really just to wait and see how much the economy slows from the policy actions that we've had," Bostic told CNBC, noting that for months he has believed the Fed would need to get short-term interest rates to the 5%-5.25% range where they are currently. "I think in the next several months the math is going to work in our favor, and the economy is going to work in our favor," Bostic told CNBC. Still, he said, "if there is going to be a bias to action, for me there would be a bias to increase a little further, as opposed to cut," Bostic said. The unemployment rate, at 3.4%, is the lowest it has been in more than 50 years. Even with some increase to that as inflation comes down, Bostic said, the economy would still be very strong.

☆ Fed's Bullard: disinflation prospects 'good' but not guaranteed
▼ + stars: | 2023-05-13 | by ( ) www.reuters.com time to read: +1 min

"Monetary policy is now at the low end of what is arguably sufficiently restrictive given current macroeconomic conditions," Bullard said in remarks prepared for delivery to a monetary policy conference at the Hoover Institution. Inflation expectations, which had risen last year, are now back down to levels Bullard said is consistent with the Fed's 2% inflation target. Accordingly, he said, "the prospects for continued disinflation are good but not guaranteed." Bullard said earlier this month he has an open mind about June, though rates may need to rise further. He did not specifically address the June meeting in his prepared remarks on Friday.

Indeed a third U.S. central banker speaking early in the day, Governor Michelle Bowman, signaled she feels further policy tightening may yet be appropriate, unless inflation drops more convincingly. The Fed has raised its benchmark interest rate five full percentage points over the past 14 months - the fastest pace of tightening in 40 years. Yes," Fed Governor Philip Jefferson said at a monetary policy conference at the Hoover Institution. That's notable from a policymaker who was among the first and most vocal to push for sharp rate hikes to fight inflation, back in mid-2021. But since then, he said, the Fed's rate hikes have helped bring down what had been a worrying rise in inflation expectations that, if left unchecked, could have sent actual inflation spiraling out of control.

☆ Fed's Jefferson: inflation 'insidious,' need to bring it down
▼ + stars: | 2023-05-13 | by ( ) www.reuters.com time to read: 1 min

PALO ALTO, Calif., May 12 - Federal Reserve Governor Philip Jefferson said on Friday he is just as serious about the central bank's goal of full employment as about its mandate for stable prices, but emphasized that bringing high inflation down is critical. "I care very much about how the labor market performs because for most people in the U.S. economy, their standing in the labor market will very much determine their station in life, so that's something I'm very mindful of," Jefferson said in answer to a question at conference at the Hoover Institution. "But I also am aware that inflation is the most insidious of social diseases, and so it's important to try to get it down," he said. Reporting by Ann Saphir; Editing by William MallardOur Standards: The Thomson Reuters Trust Principles.

☆ Banks tighten credit terms, see loan demand drop, Fed survey shows
▼ + stars: | 2023-05-08 | by ( ) www.reuters.com time to read: +4 min

For small firms, conditions were slightly more stringent with a net 46.7% of banks saying credit terms were stiffer now vs 43.8% in the last survey. Banks reported that firms of all sizes were showing less demand for credit than three months earlier. But policymakers don't want the credit tightening to go so far as to cause a recession. One closely watched survey response, for example, is the net share of banks tightening commercial loan standards for large and middle-sized firms. The survey, with tightening standards a leading indicator of eventually falling loan volumes, has "historically helped determine whether a Fed tightening cycle leads to a hard or soft landing."

☆ Biden, McCarthy aim to break US debt-ceiling standoff as default crisis looms
▼ + stars: | 2023-05-08 | by ( David Morgan | ) www.reuters.com time to read: +5 min

Analysts do not expect an immediate deal to avert a historic default, which the Treasury Department has warned could come as soon as June 1. Forecasters warn a default would likely send the U.S. economy into deep recession with soaring unemployment. Outside observers including people who have participated in past fiscal negotiations and business lobby groups have laid out a range of potential compromises largely revolving around extending the debt ceiling past the November 2024 presidential elections while freezing spending. But it is not catastrophic," Democratic Senator Chris Coons said, referring to past shutdowns, adding, "default would be catastrophic." Worries about the standoff have already started to weigh on financial markets, but a default would have a far more immediate effect on average Americans.

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