The U.S. dollar (USDIDX) is gaining slightly ahead of today's release of PCE inflation data (1:30 PM GMT). S&P pointed out that the U.S. economy continues to perform better than others, and it was the only one among the biggest, developed economies where growth increased in 2023 despite a sharp rise in interest rates. Meanwhile, Federal Reserve members Williams, Collins and Bostic commented yesterday on the outlook for inflation and monetary policy in the US. All members stressed the need to proceed cautiously with monetary easing. Raphael Bostic and John Williams indicated that the path for inflation to fall to 2% could be variable. What else do we learn from their comments?
Fed Williams
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Open account Try demo Download mobile app Download mobile app- Inflation will be 2%-2.25% this year, 2% in 2025. I estimate GDP growth of 1.5% this year and an increase in unemployment to around 4%.
- The current unemployment rate of 3.7% is close to the long-term level.
- I expect a fairly bumpy path back to 2% inflation. The economy and labor market are strong
- It is unclear what impact a potential U.S. government shutdown would have on the economy.
- The current U.S. economic situation is similar to where it was at the time of the December meeting.
- Three interest rate cuts in 2024 sound reasonable to Fed officials
- I am convinced that the challenges for commercial real estate can be overcome
- I see a revaluation of commercial real estate on the horizon. It will take years to adjust.
- The aftermath of the pandemic continues to affect the economy, but I am optimistic about the outlook.
- The Fed is likely to cut interest rates later this year. The debate over rate cuts is a sign of progress in bringing down inflation.
- Risks to the outlook exist on both the upside and downside.
- The 2% inflation target is still some way off. I will let incoming economic data determine the path of monetary policy.
Fed Collins
- It's too early to tell if the housing inflation data is the right signal.
- I expect further declines in bank reserves. We will pay attention to when it may be appropriate to reconsider QT
- I see the risks as more balanced between cutting too early and cutting too late.
- The threat of inflation staying above 2% has receded, but I want to see further declines in housing and services inflation
- I will expect inflation expectations to remain well-anchored and labor demand to moderate.
- A return to 2% will likely require demand to grow at a more moderate pace this year.
- I want to see further evidence that wage growth is not contributing to inflationary pressures.
- Expecting all data to speak uniformly is too high a bar. We should not overreact to individual data readings.
- More time is needed to determine whether the economy is firmly on a path to price stability, with a healthy labor market.
- I need to see more evidence that the disinflation process will continue before I begin a cautiously normalizing approach
Fed Bostic
- It won't be a rapid decline, to 2% inflation target. We expect some volatility.
- I am comfortable being patient with policy changes.
- I expect inflation to continue to move toward 2%.
- There is still a lot of work to be done on this issue, we are not declaring victory
Source: xStation5
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