Latest news with #SummaryofEconomicProjections
Mint
7 days ago
- Business
- Mint
The Fed minutes are today. Here's what to watch.
Market participants are hoping to glean how Federal Reserve officials are weighing mixed economic data, renewed inflation concerns, and political threats from the Trump administration from the minutes of the bank's May policy gathering. The Fed held rates steady at the May 6-7 meeting of the Federal Open Market Committee, emphasizing a wait-and-see approach. The meeting minutes, scheduled to be made public at 2 p.m. Eastern on Wednesday, 'should repeat the hawkish message from the May meeting and beyond," wrote Andrew Hollenhorst at Citigroup in a note Tuesday. Fed Chair Jerome Powell expressed worry over tariff-induced inflation during a press conference that followed the meeting, but didn't explicitly rule out rate cuts later this year. Since then, the economic data have been complicated: There are signs of slowing in parts of the economy, but not the kind that would prompt the Fed to move quickly. The April consumer price index report showed a slowing of price growth, but core inflation remains persistent. While retail sales were lackluster, the labor market has so far been resilient. Consumer sentiment has also been a mixed bag. A new survey by the Conference Board showed that Americans improved their view on the economy for the first time in five months in May. But the University of Michigan's preliminary May release showed sentiment falling to its second-lowest level on record. 'The Fed is stuck between generally solid 'hard' economic data but declining 'soft' sentiment and survey data, with the complicating factor that trade policy can and has changed continuously," wrote Jeffrey Hibbeler, director of portfolio management at Exencial Wealth Advisors, in a note Tuesday. 'Under normal circumstances, the Fed may have cut pre-emptively, had inflation not been running above their target for over four years and policy uncertainty at record levels." Other Fed officials have echoed Powell's caution, warning that they are still waiting for clarity on President Donald Trump's trade policy and for his moves to work their way through the economy. At the same time, several have acknowledged that they now expect fewer cuts in 2025 than they had projected earlier this year. That shift will likely show up in the updated Summary of Economic Projections, which includes policymakers' forecasts of interest rates, due at the June meeting. Another area of interest in the minutes will be how much discussion there was regarding market volatility, especially in longer-dated Treasuries. 'Some officials may have mentioned that a sustained move higher in longer-term Treasury yields could ultimately prove a headwind to the economy," said Hollenhorst. The minutes may also offer insight into how unified the committee remains. Some officials have expressed reluctance to cut rates until inflation declines further, while others have warned about the risk of holding too tight for too long. Markets are still pricing in two cuts this year, according to the CME FedWatch Tool, but expectations have pulled back since earlier in the spring. Then there is the question of central bank independence. Trump has openly criticized Powell and pressured the Fed to cut interest rates. A recent Supreme Court decision gave Trump the authority to remove agency heads without cause, at least for now. But it drew a clear distinction between the Fed and other regulators. While the ruling doesn't explicitly prevent the president from firing Powell or any other member of the central bank, it did provide some relief to market participants. It is unlikely the minutes will refer directly to the bank's independence, but if political risk is creeping into the conversation among policymakers, market participants will want to know. The next FOMC meeting is less than a month away. Wednesday's release won't give much in the way of clues about coming policy, but it could shape how investors interpret the Fed's next move and show how confident officials really are in their current path. Write to Nicole Goodkind at
Axios
20-05-2025
- Business
- Axios
Exclusive: Cleveland Fed official's three scenarios for tariff-hit economy
The traditional way to approach projecting the economy is to describe a baseline scenario — what seems like the most likely trajectory — with risks on either side. That may not be the best way to think of the outlook right now, a top Fed official tells Axios. The big picture: With uncertainty around both what trade and other policy changes will bring, and how they will affect employment and inflation, Cleveland Fed president Beth Hammack is thinking about a range of distinct economic scenarios, rather than one base case. She and other leaders of the central bank will submit their projections for GDP, inflation, interest rate policy and more next month. It's an especially fraught time to be doing so, given complex policy crosscurrents around trade, tax and other policies. The so-called Summary of Economic Projections will be published when the Fed's next two-day meeting concludes on June 18. What they're saying:"I'm grateful that I have four weeks to work on coming up with a modal case, because right now I haven't really been operating with a base case," Hammack said. "I've been operating in a couple different scenarios." "To come up with a modal case that you have a lot of confidence in, I think at this particular moment is going to be really challenging," Hammack says. Scenario 1: Tariffs have a one-off price effect, but economic growth takes a hit from policy uncertainty. The possibility that tariffs bring up price levels, but don't do so consistently, results in a one-time increase in prices. But Hammack says this might come alongside a "tremendous amount of uncertainty that weighs on economic activity," with growth declining and the labor market falling off. "In that situation, we'd want to be attentive to the employment side of our mandate and potentially ease policy — and potentially very quickly, if we had the evidence that this is what was happening," she says. Scenario 2: The labor market holds up, but tariffs are inflationary. It's possible that businesses hold the line on their workforces, a pandemic-era fear that they might not be able to replace staff when the economy bounces back. "Because it took them so long and it was so difficult to hire and train their staff over the past several years, it could be the case that they hold on to people for a really long time," Hammack says. She adds that in this scenario, price pressures from tariffs become sticky because of the way the levies have been rolled out. "It becomes more persistent and more inflationary because the tariffs are layered in — the announcement, the withdrawal, and then the possibility of new announcements," Hammack says. Scenario 3 is what Hammack sees as most likely: a stagflationary outcome where the economy slows alongside higher inflation. "That's where it's really difficult for monetary policy," Hammack says. "We're going to have to have good insights and good understanding of how much we're missing each side of the mandate and how long those misses persist — and then we can decide what the right course of action is." Yes, but: Hammack says there are other factors — including the White House tax bill or its deregulatory efforts — that complicate the forecast.
Mint
19-05-2025
- Business
- Mint
The US Fed's policy framework must aim to minimize its scope for error
In a speech last week, US Federal Reserve Chair Jerome Powell hinted that the American central bank's five-year framework review will focus on the particulars of its maximum employment and stable price goals, as well as efforts to communicate clearly with the public. In both cases, the Fed should be guided by humility in the face of uncertainty. The potential fracturing of the global trading system and a return to 1930s-style tariffs are developments that are expected to boost consumer prices and hurt economic growth in the US, but these propositions haven't been tested in nearly a century. It's impossible to know for sure whether price or growth effects will dominate—or whether some unforeseen third outcome will materialize. Also Read: The US-China trade truce doesn't solve the Fed's headache After the last framework review in 2020, the Fed's rate-setting committee famously implemented a policy based on the bold assumption that the future would look a lot like the past. Influenced by the so-so labour market and low inflation of the post-financial crisis period, the rate-setting committee agreed to target inflation that averaged 2% over time and permit inflation moderately above that level following periods of persistently low price increases, based on the concept of 'flexible average inflation targeting.' In addition, it committed itself to responding to perceived shortfalls in its maximum employment goal, but not necessarily to overshoots, despite its risks to inflation. When inflation took off in 2021 and 2022, critics said these principles had slowed the Fed down, and there appears to be a measure of truth to that criticism, despite Powell's denials. That wasn't the only error and maybe not even the primary one. Powell argued last week—as he has in the past—that the mistakes of 2021 were largely the result of widespread forecast errors, both inside the Fed and beyond, rather than a conscious decision to allow consumer prices and the labour market to run hot. Also Read: The US Fed should inject itself with a good dose of humility By and large, US policymakers and forecasters initially viewed the 2021 inflation as an idiosyncratic supply shock—impacting just used cars and a few other items—and decided to look through the data that was staring them in the face. It was overconfidence in this narrow interpretation and the audacity to ignore the evolving data that ultimately led the Fed astray. With that sorry episode behind us, the Fed's goals should return to a simple 2% inflation target and maximum employment, but policymakers shouldn't pretend that will solve all their problems. There's also more to be done involving forecasts and how they're communicated. The Fed's Summary of Economic Projections (SEP), first published in 2007, is one of the great innovations of US central bank communication. It provides markets and the public with transparency on how the rate-setting committee sees the economy developing. But the now-quarterly reports allow policymakers to hide behind anonymous projections and tacitly encourage market participants to focus on the median outlook for where rates are heading—a summary statistic that conveys a false sense of certainty about the destination. Also Read: Powell versus Trump: Why Fed independence matters in times of turmoil A more candid and helpful SEP might reveal the Federal Reserve Board members and Federal Reserve Bank presidents behind the anonymous projections, and, equally as important, demand that they submit scenario analyses to show how their outlook would change under different assumptions. The latter would be similar to a suggestion that former Fed Chair Ben Bernanke made in an independent review of practices for the Bank of England. Beyond improving communications, a heightened focus on scenarios—rather than a 'base case'—will also help prevent policymakers from falling into the overconfidence trap, as they did in 2020. Alternatively, as my Bloomberg Opinion colleague Bill Dudley, a former president of the Federal Reserve Bank of New York, has suggested that the Fed should publish staff forecasts after each monetary policy-making meeting. All in all, the Fed's framework review isn't a moment to throw the baby out with the bathwater. In his latest remarks, Powell said 'we remain fully committed to the 2% target today." There is no reason to revisit that target, despite some claims that it's become too dated for a world of more frequent supply shocks. Some people believe that we've moved permanently to a higher inflation regime, but it would be an error to assume that with any high degree of confidence—just as it was an error to think that the low-inflation world of 2008-2020 would last forever. The best framework for the world's most powerful central bank, therefore, is one which assumes maximum uncertainty and consistently conveys its anchors to the market and the public. ©Bloomberg The author is a columnist focused on US markets and economics.
Yahoo
18-04-2025
- Business
- Yahoo
Fed's Daly Says Rates on Hold But Cuts Still Possible This Year
(Bloomberg) -- Federal Reserve Bank of San Francisco President Mary Daly said the US central bank may hold interest rates longer than anticipated due to inflation risks, but could yet cut later this year. Trump Signs Executive Orders on Federal Purchasing, Office Space Trump Administration Takes Over New York Penn Station Revamp DOGE Places Entire Staff of Federal Homelessness Agency on Leave How Did This Suburb Figure Out Mass Transit? Why the Best Bike Lanes Always Get Blamed 'The risks to inflation are more elevated than they they were a year ago, so the consequence of that is we might have to hold policy tighter for longer than we had thought,' Daly said Friday during an event at the University of California, Berkeley. 'But that doesn't mean tight forever because, ultimately, inflation is coming down.' Daly said she remained comfortable with the median forecast in the Fed's March Summary of Economic Projections that pointed to two quarter-point rate cuts this year. If inflation does eventually decline, 'we do have to make gradual reductions in the interest rate, something like what we said in the SEP, in order to ensure that we don't over-tighten the economy,' Daly said. The San Francisco Fed chief stressed, however, there was no need to rush. 'I could imagine a place where we can adjust the policy rate over time, but we don't have to be urgent about it,' she said. 'We have plenty of time, and we're in a good place to kind of wait this out a bit.' The Fed has been on hold this year in response to sticky inflation and, more recently, President Donald Trump's aggressive trade policies, which seek to drastically raise the average tariff on imported goods. Most economists expect the duties to lower growth and boost inflation, at least in the near term. Chair Jerome Powell — and a number of other Fed officials — said this week the central bank is focused on ensuring that tariff-driven price hikes don't trigger a more persistent rise in inflation. Daly sounded somewhat more sanguine about their potential impact. 'We're in a solid place and, of course, monetary policy remains restrictive to continue to put downward pressure on inflation,' she said. She added that firms she's contacted are avoiding taking on more risk but aren't severely curtailing planned investments or cutting jobs. 'So far we haven't heard a lot about layoffs. We haven't heard a lot about pulling back and hunkering down,' she said. Daly said she estimated the so-called neutral level for interest rates, after adjusting for inflation, at about 1%. How Mar-a-Lago Memberships Explain Trump's Tariff Obsession Trade Tensions With China Clear Path for Salt-Powered Batteries It's Legal to Pay US Workers With Disabilities as Little as 25¢ an Hour Trump Is Firing the Wrong People, on Purpose GM's Mary Barra Has to Make a $35 Billion EV Bet Work in Trump's America ©2025 Bloomberg L.P. Sign in to access your portfolio
Yahoo
09-04-2025
- Business
- Yahoo
Americans are anxious about the impact of Trump's policies — 3 things to do now to protect your finances
Economists, traders and industry leaders are worried about the impact of President Donald Trump's policies. So it's no wonder the average American is worried as well. A stock market correction — like the one happening now — might be good for billionaires who see it as a buying opportunity. But for the average American? Not so great, as they watch their 401(k)s decline in value. Tariffs, trade wars, and cuts to government programs have many Americans worried about what Trump's policies will do to their finances — and their retirement savings. Only 4 in 10 voters view his handling of trade and the economy favorably, according to an AP-NORC poll. Consumers' expectations for the future fell for a fourth consecutive month, reaching a 12-year low of 65.2, according to the most recent Conference Board Consumer Confidence Survey. That's 'well below the threshold of 80 that usually signals a recession ahead.' These findings suggest that 'worries about the economy and labor market have started to spread into consumers' assessments of their personal situations,' said Stephanie Guichard, senior economist of global indicators at The Conference Board. I'm 49 years old and have nothing saved for retirement — what should I do? Don't panic. Here are 5 of the easiest ways you can catch up (and fast) Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10) Here are 3 'must have' items that Americans (almost) always overpay for — and very quickly regret. How many are hurting you? These fears may be justified, given some of Trump's proposals. One such proposal, reiterated by U.S. Commerce Secretary Howard Lutnick to Fox News, is to replace income taxes with tariffs. Although it's difficult to accurately quantify the effects of Trump's tariffs at this point, research has shown that his 2018 tariffs resulted in price increases for goods subject to the tariffs, hurt U.S. GDP, cost jobs and reduced real income by about $674 per household. Analysis by the Peterson Institute for International Economics (PIIE), an independent and non-partisan research group, also shows that price increases from tariffs will hurt middle- and lower income Americans the most. And, if used to replace income taxes, the middle quintile of income earners — defined as those earning on average $74,730 — would see a reduction in net after-tax income while top earners would see an increase. And In their most recent Summary of Economic Projections (SEP), Federal Open Market Committee (FOMC) participants downgraded their expectations for GDP and increased their forecast for inflation. There's 'already at least a whiff of stagflation right now' in the U.S., Richard Clarida, global economic advisor at Pacific Investment Management (Pimco), told Bloomberg Surveillance. Along with higher prices, consumers are also concerned about cuts to social services, including their Social Security and Medicaid benefits. Read more: Trump warns his tariffs will spark a 'disturbance' in America — use this 1 dead-simple move to help shockproof your retirement plans ASAP While Trump has said several times that he's not going to touch these, dramatic cuts to the Social Security Administration (SSA) could lead to 'system collapse and interruption of benefits,' Martin O'Malley, former commissioner of the SSA, told CNBC — a move that some believe will be used to justify privatization. In 2025, almost 69 million Americans per month will receive a Social Security benefit, according to the SSA. But DOGE is cutting 12% of the Social Security Administration (SSA) workforce, consolidating regional offices (from 10 to four) and closing 45 field offices, which is expected to impact service levels. If you're looking for ways to safeguard your financial future, here are three ways to shore up your finances right now: Protect your income: Now is a good time to make sure you can weather shocks, including reduced income or unemployment. If you don't already have one, build an emergency fund. Given the prospects for the economy, set aside enough to cover at least six months of expenses — and, if you think it could be hard to find a new job in your field, set aside a year's worth. As you're saving, it's also a good time to pay down any debt you may have (like that credit card bill) in case you're not able to pay it back right away should you lose your main source of income. You might also want to review your insurance coverage with a qualified broker to mitigate risks should you need to tap on coverage in the event of an emergency. Save, save, save: With rising prices, it could be harder to save for retirement. But, to the extent possible, save as much now as you can. Revisit your financial plan with an advisor to see what you need to save — particularly if you're highly dependent on your Social Security benefit. If income taxes were to disappear, tax-deferred accounts would likely disappear with them — but in the meantime, try to max out the employer contribution on your 401(k) and use top-ups if you're over 50 and qualify. Create a budget that helps you find some money to put away each month and hold off on large purchases (you'll thank yourself later). Make sure your money is working as hard as it can for you: Speak to your financial advisor about stagflation-proofing your portfolio and reducing the impacts of tariffs. This likely means greater diversification into different assets — and potentially alternative assets — and into wider geographies to reduce exposure to the U.S. and countries most affected by U.S. tariffs. Big changes may be coming to the U.S. economy, and while we've yet to see if the promised benefits will take root in the long run, we do know the short-term pain may be an indication of things to come. Want an extra $1,300,000 when you retire? Dave Ramsey says this 7-step plan 'works every single time' to kill debt, get rich in America — and that 'anyone' can do it Rich, young Americans are ditching the stormy stock market — here are the alternative assets they're banking on instead Cost-of-living in America is still out of control — and prices could keep climbing. Use these 3 'real assets' to protect your wealth today, no matter what Trump does This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
