Fed’s Collins Cites Housing Costs, Inflation Expectations as Key Data to Watch

Boston Fed President Susan Collins was another in the 澳洲幸运5官方开奖结果体彩网:line of Federal Reserve officials who broadly said they needed more “澳洲幸运5官方开奖结果体彩网:confidence” that inflation is sustainably declining before cutting interest rates. She did, how💜ever, lay out a 𒉰few fundamental indicators she is watching.

In remarks to the Boston Economic Club, Collins said housing inflation was taking longer to come down than other categories and she wants to see more progress there.

Consumers’ inflation expectations needed to remain “well anchored." Recent 澳洲幸运5官方开奖结𝓡果体彩网:consumer confidence surveys h𝓀ave jumped as peopꩵle start to feel better about inflation and the ec💟onomy. 

Collins also said she is closely monitoring wages, pointing to data from Boston Fed economists. The data suggests “there is room for wages to catch up and continue increasing at a healthy pace for some time without necessarily spurring inflationary pressures” due to gains in 澳洲幸运5官方开奖结果体彩网:productivity.

However, she was looking to see declines in 澳洲幸运5官方开奖结果体彩网:labor demand to help bring better balance. Employers continued to 澳洲幸运5官方开奖结果体彩网:add more jobs than anticipated in January, while wages also surged. 

-Terry Lane

Consumer Spending Could Keep Inflation High, Fed’s Kugler Says

Inflation should continue to decline, so long as consumers begin to put away their wallets, Fed Governor 澳洲幸运5官方开奖结果体彩网:Adriana Kugler told the Brookings Institute Wednesday. 

澳洲幸运5官方开奖结果体彩网:Consumer spending consistently beat expectations in 2023, helping keep economic growth strong. Another “surprise” year of strong spending could keep inflation high, Kugler said.

“I expect consumer 🌳spending to grow more slowly this year than last—which should help with disinf🌸lation,” Kugler said.

Many households have spent through the savings that they built up over the pandemic, she said. She also pointed to a tightening of 澳洲幸运5官方开奖结果体彩网:credit card lending standards shown in the latest Federal Reserve’s 澳洲幸运5官方开奖结果体彩网:Senior Loan Officer Survey as aℱnother indicator that spending is likely to 🍸decline.

Adding to a string of fed speakers over the past few days, Kugler said it may be appropriate to lower rates “at some point" and she will continue to focus on inflation data “until I am confident that inflation is returning durably to our 2% target."

Wealth Inequality Worsened Since Pandemic

The wealth of Black households has shrunk since 2019, while it’s soared for other racial groups.

After adjusting for inflation, Black household wealth fell 1.4% between 2019 and the third quarter of 2023, while wealth for White households rose 28.9%  and Hispanic households rose 20%, researchers at the Federal Reserve Bank of New York said in an analysis Wednesday.

The analysis did not include the wealth of Asian and Pacific Islander households because researchers worried that their data source—the Federal Reser♒v🀅e’s distributional and financial accounts report—didn’t have a large enough sa🌺mple size to accurately gauge it.

Wea🃏lth inequality is worsening because Black households have little invested in equities, businesses, and mutual funds compared to their White counterparts, researchers said. Those investments make up less than 20% of Black households’ overall wealth on average compared to about 50% for White households, according to the New York Fed.

That means they missed out on the massive stock market boom over the last few years—the S&P 500 stock index, for example, is up more than 53% since the beginning of 2020.

The data wasn’t detailed enough to show whether other factors might also be in play—whether Black households lost more in the 澳洲幸运5官方开奖结果体彩网:cryptocurrency crash, or what role 澳洲幸运5官方开奖结果体彩网:systemic racism might play.

Commercial Real Estate Weakness Confined to Office Market, Fed's Kashkari Says

Weakness in the commercial real estate market will likely be limited to individual institutions, posing less of a risk to the broader banking sector, according to 澳洲幸运5官方开奖结果体彩网:Minneapolis Fed Presiden♛t Neel Kashkari.

“As of right now, it does seem to be more 澳洲幸运5官方开奖结果体彩网:idiosyncratic within individual banks with individual ex𒅌posure,” Kashkari said in an interview on CNBC Wednesday. “It doesn’t seem to be systemic.”

He said that bank regulators are closely watching the commercial real estate sector as 澳洲幸运5🧜官方开奖结果体彩网:delinquencies in office spaces are on the rise, putting pressure on澳洲幸运5官方开奖结果体彩网: banks like New York Community ♕Bancorp Inc. (NYCB) and raising worries that 澳洲幸运5官方开奖结果体彩网:other regional banks will sᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚtruggle to recou꧒p on commercial loans. 

On interest rates, Kashkari said that his “gut” told him that conditions would limit the Federal Reserve to just two to three interest rate♑ cuts throughout 2024, lower than some estimates that the central bank will cut rates as many as six times. 

He said a bigger question is where the “澳洲幸运5官方开奖结果体彩网:neutral rate” will end up, noting that if productivity remains high due to technology like artificial in🤡telligence, interest rates could settle at a higher rate than expected. Changes in economic behavior observed after the pandemic, like increased goods consumption, could also work to keep interest rates higher.

-Terry Lane

Total Trade Deficit Shrank in 2023

 The trade deficit came in at $62.2 billion in December, just above economists' expectations, and the deficit shrank through the course of the year.

Wells Fargo Economists Shannon Seery Grein and Nicole Cervi said they expect exports to have little influence on economic growth in 2024.

"While the trade deficit is not yet back to the level that prevailed ahead of the pandemic, a lot of normalization has taken place," the pair wrote in an analysis Wednesday. "The past year's stronger-than-expected outturn in exports also appears set to moderate as global economic growth is expected to be weaker this year relative to 2023. At the same time, imports will likely stabilize as domestic consumer spending is forecast to continue expanding at a solid rate."

Trade Deficit With China Fell To Lowest Since 2010

The U.S. is relying less and less on its biggest economic rival for goods and services.

The trade deficit with China shrank to its lowest level in more than a dec🍬ade in 2023, the Census Bureau said Wednesday. The U.S. imported $279.4 billion more than it exported to China last year, down from $382.3 billion in 2022, and the lowest since 2010, as the chart below shows.

The reduced trade deficit comes amid a 澳洲幸运5官方开奖结果体彩网:mania for “friendshoring” policies by the U.S. and other countries, in which governments have favored domestic manufacturing and trading with their geopolitical allies rather than their competitors. For example, the CHIPS Act of 2022 massively sub♍sidized the produ🔜ction of computer chips in the U.S.

That, along with the 澳洲幸运5官方开奖结果体彩网:faltering Chinese economy, has contributed to 澳洲幸运5官方开奖结果体彩网:China falling well behind C🔯ana𝐆da and Mexico as America’s top trading partner.

You're More Likely to Be Unemployed Depending on Where You Live

If you lived in California i🙈n December, you were more l🌄ikely to be unemployed in December.

That's according to a Zip Recruiter analysis of Bureau of Labor Statistics data released Tuesday. The job board company found that 80% of the metro areas with the highest unemployment rate were in California in December. The Golden State also is home to six out of the top ten metro areas with the largest year-over-year unemployment increases.

That's a stark contrast to Pennsylvania, where the unemployment rate declined. Seven of the top ten metros with the largest decline in unemployment rate were in Pennsylvania.

Mortgage Applications Increase on Purchase Activity

Applications for mortgages increased by 3.7% for the week ending on Feb. 2 despite mortgage rates holding steady so far in 2024, according to  澳洲幸运5官方开奖结果体彩网:Mortgage Bankers Association data released Wednesday.

“Purchase activity has been strong to start 2024 compared to the final quarter of 2023,” said Joel Kan, MBA vice pre🅰sident. “However, activity is still weaker than a year ago because of low housing suppl🍬y.”

Rates for the 30-year fixed mortgage were at 6.8%, slightly higher than last week, but near where they were at the start of the year. 澳洲幸运5官方开奖结果体彩网:Mortgage rates have remained steady deꦜspite swings in influential Treasury yields.

On an unadjusted basis, all applications increased by 8% compared to the 澳洲幸运5官方开奖结果体彩网:previous week and were 41% higher than four weeks ago. Purchase applications w🅷ere higher by 6% fജrom the previous week, but were 19% lower than the same week one year ago. The average loan size for mortgages for home purchases was $434,800.

Refinancing a𒅌ctivity increased by 12% from the previous week and wa▨s less than 1% higher than last year.

-Terry Lane

Philadelphia Fed’s Harker Says Economy on Path for Soft Landing

The U.S. economy is on the path to a 澳洲幸运5官方开奖结果体彩网:soft landing, Philadelp💯hia Federal Reserve President Patr🎀ick Harker told a college audience Wednesday night.

“Now certainly we haven’t touched down, and we’re going to have to keep our seatbelts on, but with inflation continuing to fall back to our 2% target, with employment remaining strong, and with consumer sentiment looking up, the runway at our destina🐲tion is in sight,” Harker said in a speech to Rowan University.

Harker is among a 澳洲幸运5官方开奖结果体彩网:string of Fed speakers this week who are addressing monetary policy following 澳洲幸运5官方开奖结果体彩网:last week’s decision by the 澳洲幸运5官方开奖结果体彩网🌞:Federal Open Market Committee (FOMC) to keep the 澳洲幸运5官方开奖结果体彩网:fed funds rate at📖 5.25%-5.5%. Harker isꦆn’t a voting member of the FOMC this year. 

In his remarks, Harker described his transition from two years ago when he was a “hawk” who wanted to quickly raise interest rates high, to a “dove” who was one of the first members of the FOMC to 澳洲幸运5官方开奖结果体彩网:argue for holding rates steady. 

-Terry Lane