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☆ Morning Bid: Bank stress, bond volatility and disinflation
▼ + stars: | 2023-03-14 | by ( ) www.reuters.com time to read: +5 min

But the implications of this sudden bout of financial instability - and its potential economic and policy fallout - were most clearly seen in the interest rate and bond markets. Implied terminal rates for the European Central Bank and Bank of England have been dramatically scaled back too - though one or two further hikes are still priced for those central banks. But the Fed rethink has led to seismic action on the U.S. Treasury market, with the biggest drop in 2-year Treasury yields on Monday since the stock market crash of 1987. Credit spreads in the corporate bond markets have also widened sharply as investors fear an economy-wide tightening of borrowing standards and financial conditions. It would certainly think twice about tightening policy again into this level of financial stress and bond market upheaval.

Companies Rite Aid Corp FollowWASHINGTON, March 13 (Reuters) - The U.S. government on Monday sued Rite Aid Corp (RAD.N), accusing the pharmacy chain of missing red flags as it illegally filled hundreds of thousands of prescriptions for controlled substances, including opioids. Rite Aid pharmacists were accused of filling prescriptions for controlled substances despite clear signs it was wrong. The Justice Department also said Rite Aid intentionally deleted some pharmacists' internal warnings about suspicious prescribers, such as "cash only pill mill??? Rite Aid is one of the country's largest pharmacy chains, with more than 2,330 stores in 17 U.S. states. The case is U.S. ex rel White et al v Rite Aid Corp et al, U.S. District Court, Northern District of Ohio, No.

Based on traditional and long-abandoned fixed policy models, Cleveland Fed researchers reckon policy is already more aggressive than any of those rules suggest. The political and policy appetite for zero interest rates or quantitative easing - which seemed to chase estimates of R-star ever lower over the past decade - is gone. At the same time, real yields above 4% have proven unsustainable historically. Bhatia feels real yields somewhere in the middle is where markets will settle. Given the economy-wide accumulation of debt over recent years, real 10-year yields in a 1.5%-2.0% range probably works.

☆ Fed's Powell heads to Capitol Hill this week, and he's going to have his hands full
▼ + stars: | 2023-03-06 | by ( Jeff Cox | ) www.cnbc.com time to read: +5 min

It was made worse by the Fed not recognizing it in 2021," said Komal Sri-Kumar, president of Sri-Kumar Global Strategies. "If you're going to have a no-landing scenario, then you're going to accept 5% inflation, and that's politically unacceptable. He has to work on bringing inflation down, and because the economy is so strong it's going to get delayed. 'Ongoing increases' aheadFor his part, Powell will have to find a landing spot between the competing views on policy. However, Guha said that Powell is unlikely to tee up the half-point, or 50 basis point, rate hike later this month that some investors fear.

The biggest question in world finance right now is whether the eye-watering rebound in borrowing rates we've seen over the past month is just another overshoot - or the new reality. G7 2-year yields soarFed, ECB and BoE 'terminal rates' riseWorld economy surprising in 2023LOSING THE PLOTSince the middle of last year, futures markets have consistently priced peak Fed rates below where Fed officials themselves were guiding. But for at least six of the past nine months, futures markets priced a lower terminal rate than the central Fed view. Five-year equivalents have risen sharply too, while long-term euro zone inflation swaps are pricing the highest rates in more than a decade. The outcome is "strongly bimodal", they said, and either a recession hits and rates are cut, or it doesn't and rates go to 6.5%.

☆ Gold hovers near 2-month low after U.S. data fans rate-hike fears
▼ + stars: | 2023-02-27 | by ( ) www.cnbc.com time to read: +2 min

Gold was flat and hovered near a two-month low on Monday, after strong U.S. economic data stoked fears that the Federal Reserve would implement more interest rate hikes to rein in inflation. Data on Friday showed consumer spending shot up 1.8% last month — the largest increase since March 2021. The personal consumption expenditures price index, the Fed's preferred inflation measure, rose 0.6% last month, after gaining 0.2% in December. Money markets expect the Fed's target rate to peak at 5.4% in July, from a current range of 4.50% to 4.75%. The dollar index was near a seven-week peak, making bullion expensive for buyers holding other currencies.

☆ Wall Street is upping its expectations for rate hikes — and a recession
▼ + stars: | 2023-02-27 | by ( Jeff Cox | ) www.cnbc.com time to read: +4 min

The outlook comes ahead of the central bank's March meeting when investors expect another quarter-percentage point — or 25 basis point — rate increase. Bank of America, for instance, said it thinks policymakers may have to take the benchmark funds rate to the 6% range. "This will likely lead to a recession, because the non-consumer sectors of the economy already look soft. In the Cleveland Fed white paper , the authors suggested the central bank reconsider its 2% inflation target because it isn't likely to achieve it anytime soon. It said core PCE inflation is likely to cool only to 2.75% by 2025, adding that "a deep recession would be necessary" for the Fed to achieve its goal.

"We've been talking about impending recession for several quarters now," said Malone, whose Virginia Beach-based company has a national footprint. So has unexpectedly strong consumer spending and, for the world outlook, the reopening of China's economy from strict COVID lockdowns. That poured cold water on the idea that the Fed would "pivot" on a dime to lower rates. "Government bond yields are up" since the last Fed policy meeting, Durham wrote. "It kind of seems the U.S. economy might be more resilient than markets thought six or eight weeks ago."

☆ Inflation is doing a crab walk and Fed officials fear its pinch
▼ + stars: | 2023-02-26 | by ( Nicole Goodkind | ) edition.cnn.com time to read: +7 min

Some background: The Covid-19 crisis triggered a sudden shift in student loan policy and a new openness to forgiveness. About 40% of those with federal student loan debt would have a zero balance; even more would have a much smaller monthly payment. But, “if payments resume without debt relief, we expect both student loan default and delinquencies to rise and potentially surpass pre-pandemic levels,” warned Fed researchers. Those missed payments suggest that some federal student loan borrowers are having trouble meeting their monthly debt obligations. “We expect these delinquency patterns to worsen if federal student loan payments resume without relief,” said the report.

☆ Fed's Mester says she has hope that inflation can be brought down without a recession
▼ + stars: | 2023-02-24 | by ( Jeff Cox | ) www.cnbc.com time to read: +2 min

Cleveland Federal Reserve President Loretta Mester said Friday that interest rates likely need to keep moving higher to get inflation back to acceptable levels. In a CNBC interview, Mester said she sees the central bank's benchmark interest rate having to rise above 5% and stay there for a while. Many economists expect the Fed won't be able to achieve its inflation goal without tipping the economy into a recession. She also expressed hope that the Fed can achieve its goal without crushing a labor market that has been surprisingly resilient despite all the rate increases. We can have a healthy labor market and we can get back to price stability," she said.

☆ Here’s where ‘Halftime Report’ trader Jason Snipe sees opportunity after the latest inflation reading
▼ + stars: | 2023-02-24 | by ( Tanaya Macheel | ) www.cnbc.com time to read: +2 min

Friday's hot inflation data sparked a selloff led by tech names, but investors could still find good opportunities in the sector, according to Jason Snipe, principal at Odyssey Capital Advisors. Tech stocks are especially sensitive to rising rates because higher interest rates make future profits, like those promised by growth companies, less attractive. That doesn't necessarily mean it's time to bail from those tech names altogether, but some pruning might be in order, according to Snipe. Snipe added that semiconductor stocks are "where the real opportunity is in Tech Land." He said he isn't as excited about megacap tech names "with a Fed that's as engaged as they are in 'higher for longer.'"

The personal consumption expenditures (PCE) price index, the Fed's preferred gauge of inflation, shot up 0.6% last month after gaining 0.2% in December. In the 12 months through January, the PCE index accelerated 5.4% after rising 5.3% in December. "This PCE number, which to me is a vital number, clearly suggests that the Fed has more to do. ET, Dow e-minis were down 352 points, or 1.06%, S&P 500 e-minis were down 48.25 points, or 1.2%, and Nasdaq 100 e-minis were down 202.5 points, or 1.66%. A string of Fed policymakers including Cleveland Fed President Loretta Mester and Boston Fed President Susan Collins are also slated to speak.

☆ Jim Cramer's top 10 things to watch in the stock market Friday: Hot inflation — bond yields up and stocks down
▼ + stars: | 2023-02-24 | by ( Jim Cramer | ) www.cnbc.com time to read: +5 min

As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. ET: Jim and Jeff discuss the Club portfolio (Part 1)12:15--1:30 p.m. ET: Jim and Jeff discuss the portfolio (Part 2)2:15-2:45 p.m.

☆ Two Fed measures see notable recession risk despite strong data
▼ + stars: | 2023-02-24 | by ( Michael S. Derby | ) www.reuters.com time to read: +5 min

Meanwhile, a New York Fed measure, updated earlier this month, flags a 57.1% recession probability by January 2024, up from the 47.3% chance seen in December. Another commonly tracked measure - the spread between 2-year and 10-year Treasury notes - has been inverted for even longer, but San Francisco Fed economists have identified the 3-month versus 10-year spread as having the stronger relationship with recessions. Fed officials have said so far that they see slow growth this year and no recession, although a number of policymakers view it as a real risk. The Fed's own internal approach to making sense of the economic implications of the yield curve remains unsettled. A paper by Fed Board economists last year downplayed the implications of inversion.

☆ Cleveland Fed's Mester: Need to do more to get back to price stability
▼ + stars: | 2023-02-24 | by ( ) www.cnbc.com time to read: 1 min

Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailCleveland Fed's Mester: Need to do more to get back to price stabilityCleveland Fed Chair Loretta Mester joins 'Squawk Box' to discuss whether the markets can help the Fed bring down inflation, her thoughts on the trade-off between labor and price stability, and more.

"It's going to take more effort on the part of the Fed to get inflation on that sustainable downward path to 2%." She is among the minority of Fed policymakers who back in December thought they would need to lift the policy rate to 5.4% to stop inflation, while most believed 5.1% would suffice. Similarly none of the other Fed policymakers who spoke Friday, including the normally hawkish Governor Christopher Waller and St. Louis Fed President James Bullard, focused on the fresh inflation data to argue for a more muscular Fed response, though all continued to signal more rate hikes would be required. And traders largely erased what had been consistent bets on Fed rate cuts towards the end of the year, pricing in a year-end Fed policy rate of 5.26%. "It looks like the Fed will have to be more aggressive," said Yelena Shulyatyeva, an economist at BNP Paribas.

☆ Morning Bid: War and PCE
▼ + stars: | 2023-02-24 | by ( ) www.reuters.com time to read: +4 min

A look at the day ahead in U.S. and global markets from Mike DolanWith world headlines focussed on first anniversary of Russia's invasion of Ukraine, the inflationary consequences that pounded world markets last year still smoulder. Curiously, the initial energy shock from the Ukraine war is already less of a problem than the change in pricing behaviour that it seeded - especially in services still distorted by the pandemic, in corporate margin building and rising wage settlements. But it's the pickup and stickiness in underlying "core" prices, excluding energy and food, that is irking the central banks and the Federal Reserve most of all. Alongside another tight U.S. weekly jobs report, markets got another glimpse of those price pressures on Thursday. And increasingly buoyed by the still intense geopolitical fallout from a year of the war in Ukraine, the dollar pushed higher yet again.

☆ Fed economists say the central bank will have to cause serious pain to Americans and the economy if it sticks to its current path
▼ + stars: | 2023-02-24 | by ( Phil Rosen | ) www.businessinsider.com time to read: +6 min

In the Fed minutes released this week, the central bank's own economists have started to sound the alarm on a recession. Jerome Powell, for his part, has insisted that the Fed's 2% inflation target is set in stone. The jobless rate today stands at 3.4%. We will have other things to worry about at that point besides whether the Fed's inflation target should be 2.0 or 2.75 percent." How realistic do you think the Fed's 2% inflation target is?

☆ Key Fed inflation measure rose 0.6% in January, more than expected
▼ + stars: | 2023-02-24 | by ( Jeff Cox | ) www.cnbc.com time to read: +2 min

A measure the Federal Reserve watches closely to gauge inflation rose more than expected in January, indicating the central bank has more work to do to bring down prices. Including the volatile food and energy components, headline inflation increased 0.6% and 5.4% respectively. Consumer spending also rose more than expected as prices increased, jumping 1.8% for the month vs. the estimate for 1.4%. Food prices increased 0.4%. On an annual basis, food prices rose 11.1%, while energy was up 9.6%.

☆ Inflation takes a back seat to earnings next week as stocks look to bounce back
▼ + stars: | 2023-02-24 | by ( Matthew J. Belvedere | ) www.cnbc.com time to read: +7 min

The latest Fed projection for the so-called terminal rate — the level where the rate hikes stop — was just over 5%. Before this past week, those intraday levels hadn't been seen since November 2022. ET: ISM Services Looking back January's hot reading on core PCE on Friday was the most influential economic number of the past week. In Club earnings this past week, Nvidia (NVDA) was certainly the highlight. As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade.

☆ Fed's Mester sticks with December interest rate projection for now
▼ + stars: | 2023-02-24 | by ( ) www.reuters.com time to read: +1 min

Feb 24 (Reuters) - Cleveland Federal Reserve President Loretta Mester said on Friday that she was keeping to her previous forecast made at the end of last year for the U.S. central bank's interest rate peak as economic data since then has not caused her to change her mind. "I had my funds rate a little bit above the median in that projection, and I haven't really seen much change in my outlook for the economy since that time," Mester said in an interview with broadcaster CNBC. "So I see that we're going to have to bring interest rates above 5%...I do think we need to be somewhat about 5% and hold there for a time in order to get inflation on that sustainable downward path." Mester was speaking before inflation data was published which showed price pressures accelerating once again, causing investors to bet the Fed will raise interest rates at least three more times. Reporting by Lindsay Dunsmuir; Editing by Jane Merriman and Andrea RicciOur Standards: The Thomson Reuters Trust Principles.

☆ Lowering inflation to the Fed's target would require a deep recession that more than doubles unemployment, say Cleveland Fed economists
▼ + stars: | 2023-02-23 | by ( Phil Rosen | ) www.businessinsider.com time to read: +3 min

Cleveland Fed economists wrote a working paper arguing that inflation will remain above the Fed's 2% goal by the end of 2025. Unemployment will soar and a deep recession will ensue if the Fed remains committed to its current goals, the economists said. But the Cleveland Fed economists are warning of the downsides to that, noting that policymakers' Summary of Economic Projections (SEP) appears to be a stretch. The economists added that for the Fed's stated 2% inflation target to be achieved, the unemployment rate would have to climb to 7.4% for one year. We will have other things to worry about at that point besides whether the Fed's inflation target should be 2.0 or 2.75 percent."

☆ Premarket stocks: It's bulls vs. hawks on Wall Street
▼ + stars: | 2023-02-23 | by ( Nicole Goodkind | ) edition.cnn.com time to read: +9 min

New York CNN —There’s a new tussle brewing in the animal kingdom of Wall Street: Hawks vs. Bulls. The question is, will the Fed be able to break through and convince Wall Street to finally give in to market pessimism? “Setting aside what financial market participants expected us to do, I saw a compelling economic case for a 50 basis-point increase,” she said at an event in Florida. Asda told CNN that it was temporarily limiting purchases of some items to three packs per customer. Morrisons told CNN that it had imposed a cap of two packs per customer on the same products.

☆ Fed's James Bullard pushes for faster rate hikes, sees 'good shot' at beating inflation
▼ + stars: | 2023-02-22 | by ( Jeff Cox | ) www.cnbc.com time to read: +2 min

St. Louis Federal Reserve President James Bullard expressed confidence that the central bank can beat inflation and advocated Wednesday for stepping up the pace in the battle. "It has become popular to say, 'Let's slow down and feel our way to where we need to be.' But Bullard said the more aggressive move would be part of a strategy that he thinks ultimately will be successful. "Our risk now is inflation doesn't come down and reaccelerates, and then what do you do? Let's be sharp now, let's get inflation under control in 2023."

St. Louis Federal Reserve President James Bullard said Thursday that he pushed for a higher interest rate increase at the last meeting and could see a more aggressive move ahead. The policymaker said he advocated for a half percentage point rate increase at the Jan. 31-Feb. 1 Fed meeting and said he wouldn't rule out pushing for one at the March session. Cleveland Fed President Loretta Mester also said Thursday she wanted a higher increase than the quarter-point approved by the Federal Open Market Committee. Bullard added that he sees the larger economic trend moving toward disinflation, despite recent high readings for inflation. "In part due to front-loaded Fed policy during 2022, market-based measures of inflation expectations are now relatively low," Bullard said.

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