Latest news with #NewCenturyAdvisors
Bloomberg
3 days ago
- Business
- Bloomberg
September Fed Rate Cut Not a Done Deal, Claudia Sahm Says
Claudia Sahm, New Century Advisors chief economist and a Bloomberg Opinion columnist, says a Fed rate cut in September is likely but not "in the bag yet." She speaks on "Bloomberg Open Interest." Sahm's opinions are her own. (Source: Bloomberg)
Yahoo
3 days ago
- Business
- Yahoo
Fed cut isn't the 'easy layup' Trump says it is, CPI data shows
July's Consumer Price Index (CPI) report was roughly in line with expectations on a monthly basis. Headline inflation rose 0.2% month over month, while core CPI gained 0.3% from the prior month. New Century Advisors chief economist and former Federal Reserve Board economist Claudia Sahm, RSM chief economist Joe Brusuelas, and Schwab Center for Financial Research fixed income strategist Collin Martin sit down with Julie Hyman on Morning Brief to share their instant reactions to the economic data print. To watch more expert insights and analysis on the latest market action, check out more Morning Brief. So, uh, Joe, I'm going to go to you first. What's your first blush reaction here to these numbers? The core inflation came in a little hotter than expected. Moreover, the top line was flattered by a 1.1% decline in gasoline prices. So, once we begin to dig deeper, what my sense is is you're going to see goods inflation moved up and sticky service sector inflation. This is not conducive to arguments that there's no inflation via the trade channel. Basically, tariffs look like they're going to be all over this report. And Claudia, this would seem to make the Fed's job a lot tougher. The Fed's job is always tough, but it's certainly, you know, we do see an inflation moving up, but in terms of the component, for them, if it's largely this tariff effect, if it's a good effect, goods effect, well, then that is something that there's a case to quote-unquote look through it. Like that we're doing a one-time price adjustment and that'll cause rising inflation, but once that adjustment's done, it'll, you know, subside. You know, the core services numbers did firm a little bit relative to last month, but really they've not seen the pickup. Like this is really coming, you're getting the lift is coming here from the tariff effects. Um, to your point, I'm noting in here, the index for shelter was up 0.2%, and the statement saying that was the primary factor in the all items monthly index. So, um, that perhaps, Claudia, particularly problematic here because we had been looking at that number moderating. Right. Well, that actually at 0.2% for shelter, that's a good number. Uh, we're, and we've, it just shelter looms so large in the CPI that it's going to be a big contributor of, you know, of inflation. So, I think actually the shelter is doing what we had actually been looking for it to do for quite some time, which is kind of get back to a pace that's that is pre-pandemic. Um, so I think that one actually here looks looks pretty good. But you're right, it is it's a big piece of inflation and for regular people, like the housing affordability, all those issues, that looms large, no question. Um, I'm also looking at some of the other commentary here. Um, indexes that increased over the month, medical care, airline fares, recreation, household furnishings, as we were looking for, and operations, household furnishings and operations, and used cars and trucks as well. Um, it looks like the indexes for lodging away from home and communication were among the few major indexes that decreased in July. Um, Colin, I want to get you here in here on this as well and sort of how you're thinking about the effect on the rates market and the Fed also by extension. Yeah, well, I think Joe and Claudia both made some really good points where we don't just want to look at those headline numbers. We want to look at the breakdown between goods and services, and because services really does do make up a much larger share of inflation than goods do. So I agree with Claudia that we see the tariff impact in in goods. But what is the impact of the softening labor market? What's that going to do to the services side of the equation? Because if you look at tariffs, that's trade policy, that's not really monetary policy. The Fed can't do too much there. But if we start to see more of that softness in services, in consumer spending, and the cyclical areas like that, I think the Fed might start to focus right there. But just looking at this number specifically, a core reading of 3.1% year over year, obviously there's so many numbers that we can point to, that's probably going to scare some officials because we have a number of officials who are talking about the weaker labor market right now and hinting that they might be open to cuts, some more explicitly, others more implicitly. But then there's others who are talking about the fact that inflation is still too high and frankly above target. So I'd say this probably does confuse the outlook a little bit, and we'll have to see how the PCE report and then the August CPI release comes out. Right, and that's a good point because we all focus very heavily on the CPI report. It is important, but the gauge that the Fed focuses most heavily on is that PCE report, which we don't have yet. Joe, I can see you busily on your phone over there, going through all of the numbers. I know there's some stuff you want to pursue. So core services ex-energy was up 0.4%. That's 3.6 on a year-ago basis. That's that sticky service sector inflation that we worried about. Moreover, you can see it in transportation services, which jumped 0.8%, as did medical care services. After increasing 0.6% last month, it's up 0.8%, and that's up 4.3 on a year-ago basis. As I'm digging through the data just here on the first blush, you know, guys, this is a meaningful increase in inflation. This is going to require a reconciliation of the Fed's dual mandate. You know, you've got inflation rising, you've got job gains that are going to probably continue to be soft. This is going to recreate a real problem as we head towards the September meeting. Now, my sense is that when you get a challenge of the dual mandate, you get tension inside of it. You lean towards the portion that's furthest from its mandate, and that's inflation. So that means more patience, not the 80% chance of a rate cut that I saw in the federal funds market before we came on air this morning, right? Moreover, look, service inflation looks like it's just real sticky, and we're not really seeing the big pass-through from tariffs just yet. This is when we thought it would start. We've been able to see it in the granular data, apparel, toys, appliances, that sort of thing. And with the tariffs finally being set, the effective tariff is 17.6%, it's going to start showing up materially in October, November, December. This is not the easy layup that many market players and investors are portraying in terms of Fed rate cuts, whether it be one, two, three, or whatever, right? So the detail is definitely in the data here this morning, and this is going to, I think, lead to a certain reassessment of those Fed rate cut probabilities.
Bloomberg
24-07-2025
- Business
- Bloomberg
Tough to See Rumored Fed Candidates As Independent: Sahm
Claudia Sahm, New Century Advisors Chief Economist, talks about the latest developments between President Donald Trump and Fed Chair Jerome Powell, and says the White House "shouldn't be dictating what the mission of the Fed is." She speaks with Romaine Bostick and Scarlet Fu on 'Bloomberg: The Close.' (Source: Bloomberg)
Yahoo
15-07-2025
- Business
- Yahoo
June CPI: Fed still needs 'reassurance' to cut rates
The latest Consumer Price Index (CPI) data came in hotter than expected, with inflation rising 2.6% in June, higher than the 2.4% seen in May but lower than the 2.7% economists expected. Investors weigh whether President Trump's tariff policy is fueling inflation in the US economy and what it means for the Federal Reserve. New Century Advisors chief economist Claudia Sahm and EY chief economist Gregory Daco join Morning Brief with Julie Hyman moments after the data release to discuss their expectations for the Fed in light of the fresh economic data. To watch more expert insights and analysis on the latest market action, check out more Morning Brief here. So, Claudia, um, let's bring it to the Fed. I mean, they've got a tough decision once again and ahead of them. What are the risks of them continuing to wait? Why the, the federal funds rate is what the Fed characterizes as moderately restrictive. Right, so it is putting downward pressure on the economy, on demand. I mean, that's the tool the Fed has to bring inflation down. And I think to add to what Greg said, it's really important to set this in context. The inflation in the United States has been above the Fed's target since 2021. It is still elevated. In particular, services inflation has remained quite elevated. The Fed is committed to getting inflation back to its 2% target. And I think a concern or risk with tariffs, which might not normally apply, but a risk here is that because we've been at an inflation elevated pace for so much time, that people are just going to build that into their thinking. Right? Are they going to think, hey, we're going to get 2% inflation going forward, or maybe they'll get stuck at this around the 3% level. And that's a big risk to the Fed, and that's the only reason that it is keeping interest rates in a restrictive place because it wants to get inflation back down to target. And I think, you know, we see, we have seen some progress this year in terms of inflation. I think it's really important to look at these core services. We have made some progress, but they need more reassurance that we're on the path to 2% and that these tariffs are not going to throw us off and really get stuck above target. And Claudia, you know, when we talk about tariffs, we're mostly talking about goods pricing. But of course, services pricing is the thing that until we got into this whole tariff discussion was the thing that was stubbornly not coming down. Are we seeing any progress on that front? Right. Well, in recent months, we did see some notable progress. And I think you saw travel inflation, recreation being really soft. Things where you think, oh, maybe this is like there's kind of a softening of demand, which again would be an environment where maybe tariffs wouldn't have that spark to inflation. And and we have seen, you know, a real kick to some of the rent, owner's equivalent rent slowing down, which we've been waiting for for a long time. I think we saw a little bit of giveback in today's data, you know, I mean things are noisy. We're not going to, you know, be on a glide path, but like the Fed, you know, tariffs are risk. Normally you would quote-unquote look through them, the Fed would ignore them because they're a one-time adjustment, but it's really important. If the Fed looks through, the rest of inflation, which is largely these core services, have to give them encouragement that we are, we have the momentum to 2%. I think they're building that case, but we're not, I don't think it's a slam dunk yet. And particularly because the economy, the labor market seems to be holding up relatively well. They got a little more time to do their fact-finding and bring the data in. And Greg, um, I want to ask you about the Federal Reserve as well and its reaction to all of this, especially in an environment where, you know, we, I don't know if we've had a post on Truth Social yet, but I'm sure it's only a matter of time before the president reiterates his call for rates to be cut. And this, of course, as we know, that the White House is looking for the next Fed chief. So amidst all that pressure, what do you think the Fed does? Well, I think generally speaking, I I agree with what Claudia was mentioning in terms of the disinflation on the services front. I'm a little bit more optimistic because I I have seen some very encouraging news in terms of uh what we're seeing on the shelter core disinflation front, also the auto insurance disinflation front. And if you look at some of the details in today's data, you'll see that hotel prices are falling, you'll see that airfares are also falling. So you're seeing signs of consumers being more cautious with their outlays, which is generally disinflationary. So we have these two currents. On the one side, disinflation that continues and has been occurring over the past 18 months. And on the other, the onset of the inflationary push from tariffs. As we know, the Fed is quite divided. There are seven policymakers that would favor no rate cuts over the course of 2025. There are eight that would favor two rate cuts, and a couple that would favor one rate cut. So there is a big split within FOMC policymakers. I would tend to believe that there is room to be easing, but as policymakers, those that favor rate cuts will want to see more evidence of an economic slowdown in the data before they proceed with such easing. That's not yet evident, and I think the Fed will wait until the later part of the fall before it proceeds with the onset of any rate cuts. 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Bloomberg
03-07-2025
- Business
- Bloomberg
Sahm: Jobs Report Makes it Difficult for Fed to Cut Rates
US job growth exceeded expectations in June for a fourth straight month and the unemployment rate fell, showcasing a labor market that is holding up despite a slowing economy. Payrolls increased 147,000 last month, driven by a jump in state and local government employment, according to a Bureau of Labor Statistics report out Thursday, a day early because of the Independence Day holiday. The unemployment rate fell to 4.1%. Private payrolls rose just 74,000 in June, the least since October and largely due to health care. Claudia Sahm, chief economist at New Century Advisors says this print combined with the inflation rate makes it unlikely the Fed will cut rates (Source: Bloomberg)
