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Federal Reserve:Meetings/2023 June 14: Difference between revisions
Federal Reserve:Meetings/2023 June 14 (view source)
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==== Additional Rate Hikes ==== | ==== Additional Rate Hikes ==== | ||
* It may make sense for rates to move higher but at a more moderate pace. So the pace of the increases and the ultimate level of increases are separate variables. | * '''It may make sense for rates to move higher but at a more moderate pace. So the pace of the increases and the ultimate level of increases are separate variables.''' | ||
* July meeting a decision hasn’t been made | * '''July meeting a decision hasn’t been made''', expect that it will be a live meeting. We will see the data, will hear Fed people talking about it, and markets will have to make a judgment. Powell reiterated that they don’t go out of their way to surprise markets or the public. | ||
* There are benefits to moderate the pace of hikes: gives us more information to make decisions, allows the economy a little more time to adapt and will allow time to understand the consequences of the banking turmoil | * There are benefits to moderate the pace of hikes: gives us more information to make decisions, allows the economy a little more time to adapt and will allow time to understand the consequences of the banking turmoil | ||
* The committee is completely unified in the need to get inflation down to 2 percent and will do whatever it takes to get it down to 2 percent over time. | * The committee is completely unified in the need to get inflation down to 2 percent and '''will do whatever it takes to get it down to 2 percent over time.''' | ||
==== Inflation ==== | ==== Inflation ==== | ||
* The key to getting inflation down there is to have a continuing loosening in labor market conditions, which we have seen. We need to see that continue. | * The '''key to getting inflation down there is to have a continuing loosening in labor market conditions''', which we have seen. We need to see that continue. | ||
* Poweel still think, and his colleagues agree, that the risks to inflation are to the upside still. | * Poweel still think, and his colleagues agree, that the '''risks to inflation are to the upside still.''' | ||
* Forecasters, including Fed forecasters, have consistently thought that inflation was about to turn down,and they have been wrong. Core PCE inflation overall, over the last six months there is not a lot of progress. Thats why more rate hikes were signaled. | * Forecasters, including Fed forecasters, have consistently thought that inflation was about to turn down,and they have been wrong. '''Core PCE inflation overall, over the last six months there is not a lot of progress. Thats why more rate hikes were signaled.''' | ||
* Need to see rents bottom out here or at least stay quite low in terms of their increases for inflation to come down and rental is a very large part of the CPI. | * '''Need to see rents bottom out here''' or at least stay quite low in terms of their increases for inflation to come down and rental is a very large part of the CPI. | ||
===== Economic Projections ===== | ===== Economic Projections ===== | ||
* All projections point in the same direction, that perhaps more restraint will be necessary than we had thought at the last meeting. | * All projections point in the same direction, that perhaps '''more restraint will be necessary than we had thought at the last meeting.''' | ||
* Projections can actually, in reality, wind up being lower or higher, and there’s really no way to know, as the data comes in, it can move around during the intervening period. Powell never have a lot of confidence that we can see where the federal-funds rate will be that far in advance. | * '''Projections can actually, in reality, wind up being lower or higher, and there’s really no way to know''', as the data comes in, it can move around during the intervening period. Powell never have a lot of confidence that we can see where the federal-funds rate will be that far in advance. | ||
* Powell wouldn’t put too much weight on forecasts even one year out, because they’re so highly uncertain. | * Powell wouldn’t put too much weight on forecasts even one year out, because they’re so highly uncertain. | ||
==== Credit tightening ==== | ==== Credit tightening ==== | ||
* So it’s too early still to try to assess the full extent. If we were to see what we would view as significant tightening beyond what would normally be expected because of this channel | * So it’s too early still to try to assess the full extent. If we were to see what we would view as '''significant tightening beyond what would normally be expected because of this channel then they would factor that into account in making rate decisions.''' | ||
* There is a substantial amount of commercial real estate in the banking system. A large part of it is in smaller banks. It’s well-distributed. To the extent it’s well-distributed, then the system could take losses. | * There is a substantial amount of commercial real estate in the banking system. A large part of it is in smaller banks. It’s well-distributed. To the extent it’s well-distributed, then the system could take losses. | ||
* In the pandemic it really was the nonbank financial sector where issues really arose and, there’s a lot of work going on with the administration in particular leading that to try to address issues in the Treasury market and in all kinds of areas in the nonbank financial market. | * In the pandemic it really was the nonbank financial sector where issues really arose and, there’s a lot of work going on with the administration in particular leading that to try to address issues in the Treasury market and in all kinds of areas in the nonbank financial market. | ||
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==== Liquidity ==== | ==== Liquidity ==== | ||
* Treasury has consulted widely with market participants about how to avoid market disruption and that they are going to watch carefully for that. | * '''Treasury has consulted widely with market participants about how to avoid market disruption''' and that they are going to watch carefully for that. | ||
* Fed, will be monitoring market conditions carefully as the Treasury refills the TGA. The adjustment process is very likely to involve both a reduction in the RRP facility and also in reserves. | * Fed, will be monitoring market conditions carefully as the Treasury refills the TGA. The adjustment process is very likely to involve both a reduction in the RRP facility and also in reserves. | ||
* Don’t think reserves are likely to become scarce in the near term or even over the course of the year. | * '''Don’t think reserves are likely to become scarce in the near term or even over the course of the year.''' | ||
* Lowering the RRP rate is not something that’s likely that we would do in the near term. | * '''Lowering the RRP rate is not something that’s likely that we would do in the near term.''' | ||
* Under no circumstances there has been conversations tabout the Federal Reserve financing some of that debt coming in | * Under no circumstances there has been conversations tabout the Federal Reserve financing some of that debt coming in | ||