Federal Reserve

  • 2019-06-10 11:19

    By Jean Yung

    WASHINGTON (MNI) - Softer U.S. macro data do not present a clear case for an imminent interest rate cut, but persistent trade tensions may prove disruptive enough to warrant a course correction, senior Federal Reserve economists told MNI last week.

    Officials at the Richmond and Dallas Fed banks said in interviews that, in aggregate, the past few months' employment, consumer spending and other indicators look strong, even as they noted softness in recent manufacturing, investment and other data.

  • 2019-06-06 13:00

    By Jean Yung

    WASHINGTON (MNI) - With little room to cut interest rates should another crisis hit the U.S. economy, the Federal Reserve should reevaluate its strategies for hitting its 2% inflation target, New York Fed President John Williams said.

    "What can we do to prepare ourselves and our economies for the next crisis?" he said in remarks prepared for the Council on Foreign Relations in New York. "Starting with monetary policy, central banks should reassess their strategies, goals, and the tools they use to achieve them. This might include things like reassessing how we achieve our 2% goal."

    Inflation that's too low is "now a more pressing problem" following the financial crisis, he said, on the heels of a two-day Fed conference to reassess its policy framework.

  • 2019-06-04 09:55

    By Jean Yung

    WASHINGTON (MNI) - The Federal Reserve is closely monitoring developments in trade negotiations and is prepared to act "as appropriate" to sustain the expansion, Fed Chair Jay Powell said Tuesday.

    His comments come on the heels of U.S. President Donald Trump's latest plans to impose tariffs on Mexican goods, which has roiled markets in the past week, setting off fears of prolonged trade wars and calls for the Fed to lower interest rates this year.

    "We do not know how or when these issues will be resolved. We are closely monitoring the implications of these developments for the U.S.

  • 2019-06-03 15:15

    By Jean Yung

    WASHINGTON (MNI) - The narrative on global trade has darkened in recent days, driving Federal Reserve Bank of St. Louis President Jim Bullard's call for lowering interest rates soon, he told reporters Monday.

    "It's the global trade regime uncertainty," he said, adding he previously thought trade issues would get resolved over the medium term, but recent reports suggest "trade deals are not around the corner."

    He declined to give further details on how the Fed should loosen policy, including the timing and magnitude of rate cuts.

    "I'm anxious to see how my colleagues interpret the incoming data" at the June FOMC meeting, he said. "There is already a case on the table to cut because inflation is too low ...

  • 2019-06-03 13:25

    By Jean Yung

    WASHINGTON (MNI) - The Federal Reserve may need to lower interest rates soon to move inflation and inflation expectations back toward target and insure against a slowdown in U.S. growth exacerbated by trade tensions, St. Louis Fed President Jim Bullard said Monday.

    "A downward policy rate adjustment may be warranted soon to help recenter inflation and inflation expectations at target and also to provide some insurance in case of a sharper-than-expected slowdown," he said in slides prepared for the Union League Club of Chicago.

    Inflation and inflation expectations remain below the Fed's 2% target, "clearly concerning" for the Fed's credibility, Bullard said.

  • 2019-06-03 10:04

    By Jean Yung

    WASHINGTON (MNI) - The expectation that a central bank will maintain a large balance sheet after concluding a period of extraordinarily easy monetary policy could result in a deeper recession, according to new research into the potential costs of quantitative easing to be presented to the FOMC on Wednesday.

    Notre Dame economists Eric Sims and Cynthia Wu find that plans for balance sheet normalization can impact how the economy fares during a period at which interest rates are near zero. Specifically, a smooth balance sheet normalization is preferable to immediate normalization or to carrying a significantly larger balance sheet going forward.

  • 2019-06-03 10:00

    By Jean Yung

    WASHINGTON (MNI) - The Fed's should simplify its post-meeting statement and convert the quarterly Summary of Economic Projections into a more detailed Bank-of-England-style Inflation Report, according to a paper based on a survey of 24 policy experts to be presented to the FOMC Tuesday.

    The dot plot would be replaced with a matrix that links each FOMC member's projections for growth, unemployment, inflation and interest rates.

  • 2019-06-03 10:00

    By Jean Yung

    WASHINGTON (MNI) - Average-inflation targeting has some advantages over price-level targeting, but Federal Reserve credibility is key for making any inflation make-up strategy work, according to a study to be presented to the Federal Open Market Committee on Wednesday as it prepares to review its policy framework.

    Lars Svensson of the Stockholm School of Economics argues that inflation make-up strategies have some desirable "automatic stabilization" properties. An inflation shortfall will raise inflation expectations, lower the real interest rate and provide stimulus to the economy, and help move inflation back toward the target.

    Average-inflation targeting also allows for flexibility.

  • 2019-06-03 10:00

    By Jean Yung

    WASHINGTON (MNI) - The U.S. labor market was "considerably less tight" at the end of 2018 than the unemployment rate might have suggested, if large numbers of people not seeking actively work or working part time but wanting to work more are taken into account, according to research to be presented to the Federal Open Market Committee on Tuesday.

    While a standard measure of labor market tightness -- the vacancy to unemployment ratio -- is about 30% higher than its value in 2001, a broader measure constructed by University of Maryland economists Katharine Abraham and John Haltiwanger is roughly at the same level as 18 years ago.

  • 2019-05-31 12:00

    By Jean Yung

    WASHINGTON (MNI) - The conduct of monetary policy after lowering interest rates to zero is a key challenge for the Federal Reserve as it prepares to review its strategic framework this year, New York Fed President John Williams said Friday.

    "With estimates of the neutral real interest rate much lower than those that prevailed 20 years ago, the (zero lower bound) is likely to be an even more powerful force than was imagined in 1999," he said in remarks prepared for a conference at the New York Fed.

    Some of the tools the Fed used in the Great Recession trace their roots to a key conference from 20 years ago, Williams noted.