The US session was focused on a number of Fed officials speaking. We have already heard from Kashkari since the FOMC decision, but Collins from Boston Fed Pres. Collins and Fed Gov. Adriana Kugler, helped to understand their biases. Richard Fed Pres. Barkan also spoke.
All seem to be content with being patient. There is no rush especially given strong jobs markets, and concerns that inflation moving lower is still dependent on some help from wages and service prices moving lower. There also is concerned that goods disinflation will not provide the stimulus it has over the last 6 to 12 months.
Below are the summary of each:
- Minneapolis Fed Pres. Kashkari:
Neel Kashkari of the Federal Reserve shared insights suggesting that the current monetary policy might not be exerting as much pressure on demand reduction as previously believed. He indicated that if the labor market remains robust, the pace of policy rate adjustments could be moderated. Kashkari mentioned that, based on the current economic indicators, 2-3 rate cuts seem appropriate, emphasizing that continued positive inflation data over the next few months would bolster confidence in returning to a 2% inflation target. He noted the commercial real estate sector’s strength, with the exception of the office segment, and highlighted the economy’s remarkable resilience. Kashkari’s comments reflected an optimistic view on the economy’s performance, underlining the need to observe consumer and business behaviors closely, especially regarding spending on goods, as these could have longer-term implications.
- Fed Governor Adriana Kugler:
Fed Governor Kugler expressed satisfaction with the significant progress made on inflation, maintaining an optimistic outlook for its continued improvement. Despite the progress, Kugler emphasized that the Federal Reserve’s work on inflation is ongoing, with a commitment to achieving and maintaining the inflation target at 2%. The stance on monetary policy remains restrictive, balancing the risks to the Fed’s dual mandate and acknowledging that future adjustments, including potential rate cuts, will be contingent on the evolving economic landscape, particularly if disinflationary progress slows or stalls.
Kugler highlighted areas of optimism, such as services inflation and the expectation of moderating wage growth, which are seen as vital contributors to ongoing disinflation efforts. The cooling of labor demand without leading to widespread layoffs was noted as a positive development, alongside the expectation that consumer spending will slow, aiding disinflation. Despite some easing in financial conditions, they are still considered tight, supporting the fight against inflation.
Kugler stressed the importance of wage growth moderation, particularly in the services sector, as crucial for sustaining disinflation. While housing inflation remains persistent, it is expected to decrease. The Governor also mentioned the role of immigration in alleviating sector-specific labor…