Former Richmond Fed President Lacker: Fed will keep powder dry beyond mid-year
The Fed is happy for markets to put some stock in the notion that the Funds rate will be lower at the end of the yearThe centre of gravity at the Fed doesn't think they will cut in March and won't cut soonto my mind, I think they're gonna keep their powder dry for a couple of meetings, probably extends, you know, past mid year, you know, past the June meeting.PCE inflation has averaged 2% inflation over six months, which is really good but they need that over 12 monthsThey're going to keep their powder dry for a couple of meetings, I think, it's not obvious from the data that where they want to end up in a year or two is 200 basis points below where they are now or 150 you've still got super core services, very, you know, labor intensive sectors that are not at 2% and not consistent with 2%.Goods and services inflation need to meet eventually but it's not clear if that's at 2% or 3%The Fed has to put some weight on the idea that they haven't hiked enough, in part because employment is so strongThis year we're supposed to be going into a recession but so far we're chugging alongThe number one hypothesis I think is that the Fed hasn't tightened policy enoughOne thing you see is that if the fiscal authority is running a bigger deficit, if there's more fiscal stimulus, the real rate is going to have to be higher.commercial real estate is sort of the obvious candidate for what else could go wrong.unless like initial unemployment claims double in the next five weeks, they're not going to cut rates in MarchLacker has always been a hawk so his comment about waiting until after June isn't a big surprise but he makes some good points. The comments came in an interview with Kathleen Hayes. Watch it here. This article was written by Adam Button at www.forexlive.com.
- The Fed is happy for markets to put some stock in the notion that the Funds rate will be lower at the end of the year
- The centre of gravity at the Fed doesn't think they will cut in March and won't cut soon
- to my mind, I think they're gonna keep their powder dry for a couple of meetings, probably extends, you know, past mid year, you know, past the June meeting.
- PCE inflation has averaged 2% inflation over six months, which is really good but they need that over 12 months
- They're going to keep their powder dry for a couple of meetings, I think,
- it's not obvious from the data that where they want to end up in a year or two is 200 basis points below where they are now or 150
- you've still got super core services, very, you know, labor intensive sectors that are not at 2% and not consistent with 2%.
- Goods and services inflation need to meet eventually but it's not clear if that's at 2% or 3%
- The Fed has to put some weight on the idea that they haven't hiked enough, in part because employment is so strong
- This year we're supposed to be going into a recession but so far we're chugging along
- The number one hypothesis I think is that the Fed hasn't tightened policy enough
- One thing you see is that if the fiscal authority is running a bigger deficit, if there's more fiscal stimulus, the real rate is going to have to be higher.
- commercial real estate is sort of the obvious candidate for what else could go wrong.
- unless like initial unemployment claims double in the next five weeks, they're not going to cut rates in March
Lacker has always been a hawk so his comment about waiting until after June isn't a big surprise but he makes some good points. The comments came in an interview with Kathleen Hayes. Watch it here.
