Inflation Has Been Hotter Than Expected. Will the Fed Delay Rate Cuts?
11 hr 36 min ago
The Federal Reserve likely won’t cut rates in their meeting next week, but officials could indicate how recent inflation data has altered their thinking.
The Federal Reserve Open Markets Committee (FOMC) will meet on Tuesday and Wednesday. Economists said there’s a chance policymakers will pare back their expectations for three cuts to the Fed’s benchmark interest rate this year.
In addition to their typical rate decision and statement, the FOMC will release their quarterly “dot plot” forecasts. The graphs will show how FOMC members view the economic outlook and how high officials think the fed funds rate will be for the next few years.
Back in December, Fed officials had projected that they would lower the rate by 0.75 percentage points from its current range of 5.25% to 5.50% in 2024. However, consumer price increases in January and February have thrown some doubt on those projections, as some think the data could indicate inflation’s downward trajectory has stalled.
“This may be fanciful thinking on our part, but there are several inflation reports and plenty of time between now and June to change course if needed,” Michael Gapen, U.S. economist at Bank of America, wrote in a commentary. “The clear risk is less confidence on inflation reduces the number of cuts in 2024, if not 2025.”
Read more about the Federal Reserve’s anticipated projections here.
Consumer Sentiment Remains Stagnant
17 hr 39 min ago
Consumer sentiment remained largely unchanged in March, one report showed perceptions of the economy remain mostly stagnant.
The University of Michigan’s Consumer Sentiment Index dropped to 76.5 in March, a decrease that fell within the margin of error for the survey. The index came in lower than projections of 77.4, according to a survey of economists conducted by the Dow Jones Newswires and the Wall Street Journal.
Consumer inflation expectations ticked slightly higher in February, with survey respondents anticipating year-ahead inflation to come in at 3.0%, while five-year inflation expectations remained at 2.9%. Federal Reserve officials closely watch consumer inflation expectations when considering interest rate changes.
Overall, consumers’ opinions of the economy have largely fallen somewhere between the pre-pandemic highs and the lows when inflation peaked in summer 2022, said Joanne Hsu, the survey director.
“After strong gains between November 2023 and January 2024, consumer views have stabilized into a holding pattern; consumers perceived few signals that the economy is currently improving or deteriorating,” said Hsu, adding that many are withholding judgment on the economy until the results of November’s election.
-Terry Lane
Industrial Production, Capacity Utilization Little Changed in February
18 hr 20 min ago
Industrial production moved slightly higher in February, with manufacturing and mining both jumping, while capacity utilization remained steady, according to Federal Reserve data released today.
The Federal Reserve’s industrial production index moved higher by 0.1% in February to reach 102.3, while the index still came in slightly below the year-ago levels. Economists were anticipating no movement in the index.
Manufacturing output climbed 0.8% in the month, while mining surged by 2.2%, both moving higher after weather-related issues affected January’s results.
Slower consumer spending could be weighing on manufacturing, wrote Bernard Yaros, Oxford Economics’ lead U.S. economist.
“High-tech manufacturing will remain on a tear thanks to cloud computing, artificial intelligence, fiscal policy, and business investment in labor-saving technology,” Yaros wrote.
-Terry Lane
New York Manufacturing Falls ‘Significantly’ in March
19 hr 25 min ago
Business activity in New York fell in March, pushed lower by a drop in new orders and shipments as manufacturers cut their payrolls.
The Empire State Manufacturing Survey came in at -20.9 for March, with the New York Federal Reserve report dropping 18.5 points in the month.
“Manufacturing activity fell significantly in New York State in March, with a decline in new orders pointing to softening demand,” said Richard Dietz, economic research advisor at the New York Federal Reserve. “Labor market conditions remained weak as both employment and hours worked decreased.”
The survey showed that new orders fell nearly 11 points, while shipments fell almost 10 points. The number of employees fell roughly seven points, with the data pointing to declines in hours worked.
New York manufacturers are still anticipating business conditions to improve in the six months ahead, with that index little changed in March at 21.6.
“Firms expect conditions to improve over the next six months, though optimism continued to be subdued,” the report said.
-Terry Lane
