Bank Deals Blog: Fed / Banking News

The Labor Department released the August Consumer Price Index (CPI) report this morning, and the inflation numbers were below expectations. CPI increased 0.3% for the month, which was below the expected 0.4% increase. Core CPI, which excludes food and energy, increased 0.1% for the month, which was below the expected 0.3% increase. Even though these numbers are below expectations, they’re still elevated. The year-over-year CPI is 5.3%, a level that hasn’t been seen before 2021 in about 13 years. However, we may have passed the peak. Last month’s year-over-year CPI...

Note regarding the CD rates summary: Since yesterday was a holiday, the CD rates summary will be delayed until Wednesday. This will give me time to include all new-month rate changes into the summary.

Friday’s disappointing August jobs report may give the Fed justification to delay tapering of its asset purchases. As we saw during the last zero rate period that lasted seven years, it doesn’t take much bad economic news to convince the Fed to hold steady on its ultra-loose monetary policy. The current Fed is likely to delay tightening...

The Fed’s annual Jackson Hole symposium took place last week, and Fed Chair Powell’s speech suggested that tapering of the Fed’s asset purchases will begin before the end of the year. However, it’s far from a sure thing. The Fed Chair warned that it will depend on future data and risks:

Once tapering begins, there will be a long period before the first Fed rate hike, what Fed Chair Powell calls interest rate liftoff.

The last time that the Fed announced the start of tapering in December 2013, it took another two...

The Fed’s annual Jackson Hole symposium takes place this week with Fed Chair Powell’s speech scheduled for Friday. There had been hopes that the Fed Chair would provide strong clues about the Fed’s taper timeline in the speech. Most analysts are now saying that is unlikely. As described in this MarketWatch article, “analysts now say he may remain vague around the timing of any tapering process, given the risks to the economy from the continuing pandemic.”

Clues to the taper timeline will more likely occur at the next Fed meeting which...

Recent economic data appears to be having some impact on the Fed. Before the Fed starts to hike rates, it will first start the tapering of its asset purchases. The expectations had been for an announcement at the Fed’s December meeting. There are signs that it could be announced at either the November or September meeting. According to this CNBC article:

More clues about the Fed’s taper timeline may come on Wednesday when the Fed releases the minutes of its July meeting.

Recent inflation data may not be enough to convince the...

The stronger-than-expected jobs report that came out on Friday was good news that should keep the Fed moving towards tapering its asset purchases, which is the first step in the long road to Fed rate hikes. On Monday, a couple of the regional Fed presidents were suggesting that tapering is a possibility as early as this fall. In an interview with AP, Boston Fed President Eric Rosengren had this to say (via AP News):

It should be noted that Rosengren is considered a Fed hawk who won’t be a voting FOMC...

The Fed meeting last week gave a sign that the Fed is thinking about tapering in which the Fed will start reducing the amount of their asset purchases. This is the first step in the ramp up to tapering. More hints will likely come in the next meetings in September and November. A formal announcement of tapering in the FOMC statement could then come at the Fed’s December meeting. This will depend on the Fed seeing that “substantial further progress has been made toward its maximum employment and price stability...

The Fed meeting began today. The FOMC statement is scheduled to be released at 2:00pm on Wednesday, followed by Fed Chair Powell’s press conference at 2:30pm. It should be an uneventful meeting. No policy changes are expected, and no new economic projections will be released.

The FOMC statement along with the Fed Chair’s press conference may provide some clues about when the Fed will begin to taper its asset purchases. However, with the recent resurgence of COVID-19 and the risk that it’ll impact the economy, the Fed is unlikely to provide...

I’m happy to report that I have recovered from my sickness that prevented me from publishing the Tuesday summaries last week. Thanks for everyone’s well wishes. It’s very much appreciated.

While I was recovering last week, inflation made news again with the release of the June CPI numbers. It was another month of higher-than-expected inflation. There have now been three straight months of surging inflation, but high inflation is going to have to persist much longer before it impacts the Fed. Last week, Fed Chair Powell testified before Congress on monetary...

Note regarding the CD rates summary: Since yesterday was a holiday, the CD rates summary will be delayed until Wednesday. This will give me time to include all new-month rate changes into the summary.

The June jobs report that came out on Friday was strong, but it was probably not strong enough to worry the Fed about having to tighten policy earlier than had been planned. Employers added 850,000 new jobs in June, which was above the consensus number of 675,000. However, the unemployment rate increased from 5.8% to 5.9% rather...