Powell cites a solid economy and will cut rates at a slower pace “carefully”.
Fed Will Move Carefully
The Wall Street Journal reports Powell Says Solid Economy Allows Fed to Consider Rate Cuts ‘Carefully’
Federal Reserve Chair Jerome Powell said recent signs of economic health would allow the central bank to take its time in deciding how quickly to continue reducing interest rates, including by potentially slowing down the pace of cuts.
“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said at a talk in Dallas on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”
Federal Reserve Chair Jerome Powell said recent signs of economic health would allow the central bank to take its time in deciding how quickly to continue reducing interest rates, including by potentially slowing down the pace of cuts.
“The economy is not sending any signals that we need to be in a hurry to lower rates,” Powell said at a talk in Dallas on Thursday. “The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.”
Inflation reports released this week were slightly higher than officials expected, Powell said. “We’re going to tear this report apart and look at all the details,” he said. Still, he repeated his view that inflation was likely to continue to move lower, “albeit on a sometimes-bumpy path.”
Powell repeated his view that it was too soon to say how policy changes by President-elect Donald Trump and a Republican-led Congress next year might reshape the outlook for economic activity and interest rates.
Trump has said he intends to raise or impose new tariffs to boost domestic production. Powell said it was difficult to model the effects of any new tariffs, though he allowed that the current situation differed from an episode in 2018-19, when Trump launched a trade war with China.
Back then, inflation was low, and consumers and businesses didn’t have any recent memory of being asked to accept notable price hikes. “We’re in a different situation,” Powell said.
I am not surprised by any of this, as mentioned in two recent posts.
CPI Rises 0.2 Percent But Another Hot Month for Shelter
November 13: CPI Rises 0.2 Percent But Another Hot Month for Shelter
The Fed will have a tough go of things if there is lack of progress on the cost of shelter.
November 14: Producer Price Index (PPI) Increases 0.2 Percent, With Services Up 0.3 Percent
PPI service prices, which the Fed is more concerned about, are not headed in the right direction.
Neither the CPI nor the PPI reports should inspire confidence in a mass of rate cuts by the Fed.
And today Powell said the same thing.
The yield curve out to 10 years is very close to un-inverting.
As Waller, Williams, and Logan previously remarked. They “believe the Fed can keep unloading bonds even when officials cut interest rates at some future date.”
Interest is the price of credit. The price of money is the reciprocal of the price level. The FED should cut rates while draining reserves. The 1966 Interest Rate Adjustment Act is the precedent.
re: “According to its Balance Sheet Normalization Principles and Plans, the Fed will not abruptly shift between decreasing and increasing the size of its balance sheet from one month to the next.”
But that’s exactly what needs to be done to destroy inflation, to destroy inflation expectations, bitcoin, gold, etc.
An example: Some people think Feb 27, 2007 started across the ocean. “On Feb. 28, Bernanke told the House Budget Committee he could see no single factor that caused the market’s pullback a day earlier”.
In fact, it was home grown. It was the seventh biggest one-day point drop ever for the Dow. On a percentage basis, the Dow lost about 3.3 percent – its biggest one-day percentage loss since March 2003.
The 2y minus10y US sovereign debt now as now been inverted for over 710 days exceeding the 700 days preceding the 1929 crash and the 500+ days in 2008 and 1974. In a recent post-election speech President elect Trump stated that his second presidency should be considered to date from 5-6 November 2024. He might want a mulligan on that ownership. In the near future the Hoover and Trump administrations will be often compared.
… sovereign debt yield …
Erratum: The 2y minus 10 yield uninverted 30 August 2024; the 3 month minus 10 year exceeds 710 days…
link to Senior loan officer survey from Bk of Canada
https://www.bankofcanada.ca/publications/slos/
This quarterly publication shows lending conditions in Canada. Overall conditions were weak.
In a way since being as so much interconnections between US and Canadian economies and in spite of Trudeau, a form of Canary in coal mine.
Loan demand from private economy breaking down substantially.
Since everything depends upon expansion of Debt, this is not a favorable sign.
Powell, how about just stand still?
– Powell cites a solid economy and will cut rates at a slower pace “carefully”.
> A solid economy? Hahahaha… Seriously, what’s he drinking? There is absolutely nothing solid about this economy, unless you call High Inflation, due to over borrowing and over spending, a solid thing?
– Powell said recent signs of economic health would allow the central bank to take its time in deciding how quickly to continue reducing interest rates, including by potentially slowing down the pace of cuts.
> Signs of economic health, is not a flailing economy. Our Country is “In Debt” way over its head, and that’s a sign of strength? Our Citizens are “In Debt” way over their heads, and that’s a sign of strength?
> Homes are not being built, because nobody can afford them, and homes have started to sit and weather, as they can’t afford to finish them with no buyers.
>> The only rental units, being rented out at high enough dollars to pay the mortgages, are being “Lived In by Illegals” and the Mortgages “Paid for by Taxpayers” (Aka Government) via Your Tax dollars. They must cover their cost of ownership, and their Friends cost of ownership, or they will ALL lose their shirts.
>>> Rates are controlled by the Feds, so interest rates are set at what benefits them and their friends and donors personally first and foremost (Ex,, BlackRock). Hopefully this changes quickly, and they get set at what the “Free” and not currently “Controlled” Markets say they should be at. Stopping “Borrowing & Spending” should be at the Top of the List!!!
– Powell said. “We’re going to tear this report apart and look at all the details,”
> Where the heck was he, over the past 4 Years? Maybe the details mattered then, but now, your choices are made for you, if you know what you’re doing. No need to rip or look at it again, as it hasn’t changed since the last 40 times you looked at it, and hehehe… tore it apart (literally I am guessing)…
The mainstream media, academia, politicians, etc and even many “alternative” sources like Wolf Richter are going with the “everything is awesome” story.
Meanwhile in the real economy basically no one says anything other than it sucks — it’s the most Orwellian inversion of reality I’ve seen. Even the Obama years weren’t this bad.
Yeah, good luck with that, lol.
We’re still waiting for an explanation of where the magic money supply and magic consumer cash for your imaginary inflation comes from. Meanwhile, deflation continues to be revealed behind the synthetic scarcity.
Answers on a postcard please.
Unlike the last two and a half years, homebuyers can’t currently get a significantly lower rate by paying 1/2 – 2 points. That implies that buyers of mortgage-backed securities (and mortgage servicers) don’t expect rates to fall soon and aren’t worried about “runoff” (borrowers refinancing) in the near term.
The Fed will stay the course in front of a potential correction. In the last four years the cost of debt doubled. House prices, rent and pickup trucks are up 50%. Rent is cash. It’s not the only cash payment. Rent + cash + debt payments might be equal or higher than disposable income. Trump might retaliate against old enemies : Googl, Meta and MSFT. No rush to cut rates before the mag7 drags SPY down to enable institutions to liquidate.
In 2 months interest rates on the 10 yr US bond went from 3.66% to 4.42%. That’s a huge swing in a short time. The bond market is forcing the FED to rethink interest rate cuts.
Nice window, try making it wider.
What’s next? I sense a bit of confusion there.
Spin the wheel, it’s all babble.
It’s either confusion or evil. I just find it difficult to believe these clowns with all their educations and data can consistently get it wrong so often. All the Fed does is blow bubbles then bust them with their idiotic moves. At some point we’ll all have to pay the piper again, it’s just a matter of how much longer they’re able to kick the can down the road.
Mr. Market has always been right about wht the FED is going to do.
I go for a rate cut of 25 basispoints. Some time ago I thought the FED could cut rates by 50 basispoints.
Mr. Market is also very clear in one other regard. He predicts that – for the time being – the FED has no intention of cutting rates more.
(No, I never look at all the claptrp coming out of the FED, Mr. Market is a much better predictor of what is going to happen.)
The Florida Republican has championed consumer and privacy reforms, breaking up Silicon Valley monopolies, and opposes corporate money in politics.https://www.leefang.com/p/the-populist-progressive-case-for
Powell says he is “data dependent.” For once, it appears he is telling the truth based on recent inflation numbers.
If Trump has his way, we will dispense with FED independence, data dependency and the truth. I’d add once & for all, but given time, the pendulum will swing back.
Rates are headed to zero. Whatever they say will not matter. $35 trillion in Federal debt alone! You cannot carry all this debt service (public or private) with ANY interest rate. And Trump will demand that he get 0% for all his buddies so they can continue to buy up America with free money (as they did 2008-2022). No one cares, except the families who cant get houses, or new investors who wonder if it is ok to buy stocks when people are buying stocks hand-over-fist with no-risk money. I dont like predictions (I was for Kamala) but this one is burning bright.
Low rates bails out the banks and The Fed itself.
It’s a win-win-win for everyone except the citizen-saver.
Japan, stagnation here we come!
China is already there.
So you’re saying that the 0% interest rates that “Trump and his buddies” demand…. were granted under Obama and Biden? Got it! SMH.
Your comment is sound until it unnecessarily devolves in one place. Does your comment require mentioning DJT? Does Trump live in folks’ heads 24×7? Why the implication it points to him? Goodness gracious.
Face it, ZIRP were ONLY in place for all but the last month of Obama’s entire 8 year term and the pandemic period of 8 months of DJT and 14 months of Biden.
We’ve been having this convo on this blog for 2 decades, long before Trump was in the political picture. The Fed has, in concert with a federal government spending like drunken sailors, created this entire mess. Rates MAY head to zero, they MAY not. Surely it would take the pressure off of the onerous burden of interest payments, though it would require the Treasury swapping of old debt to the new rates and nothing will matter if we keep running massive deficits.
As Mish is fond of saying, I don’t know where the rates are going and neither do you. Sadly, neither do they. The market is currently exerting its potentially wiser view to factor in inflation, economic growth, Fed policy, fiscal policy, repayment risk, opportunity cost, time value of money……
If rates absolutely have to go to zero why aren’t the long bond holders buying them up. 30Y UST 4.61% > 0. 10Y UST 4.45% > 0. If you have conviction in your “Rates are headed to zero” you will make boatloads of money loading up at these bond prices. Go all in.
My (new) retirement is now based on the 4.45% 10-year yield, and Im taking advantage of it. But, I dont expect it to hold. A trillion dollars a year for the Federal govt in interest alone? Im also not rich enough to “buy bonds whenever.” See? I made my point in 1 paragraph.