by Nicholas Jasinski
Barron’s
inflation goals argues for a continued, gradual decline in interest rates, said Federal Reserve Bank of New York President John Williams on Monday.
The U.S. economy is strong today and inflation is above the Fed’s 2% annual target, with monetary policy that remains restrictive, Williams said in remarks before the Queens Chamber of Commerce in New York on Monday. So why should the Fed cut at all?
“The simple answer is that while growth in demand has been strong, growth in supply has been even stronger,” Williams said in prepared remarks. “Specifically, robust growth in both the labor force and in productivity has meant that the economy can expand at a higher pace than we saw before the pandemic, without creating inflationary pressures.”
Federal Reserve Governor Christopher Waller said Monday he is anticipating an interest rate cut in December but is concerned about recent trends on inflation that could change his mind.
If you want a glimpse of the looming tug of war between US corporations and consumers over prices, look at the drama unfolding at McDonald’s Corp. The fast-food icon raised prices in response to the spike in post-pandemic inflation only to discover that a broad swath of Americans can no longer afford Big Macs. Now it’s rolling back some of those price hikes.
The shift from fossil fuels to renewable technologies may render the global economy less oil-intensive and more metals-intensive. This column examines how metals supply shocks propagate through production networks and impact inflation. It finds that copper supply shocks have significant and persistent effects on both headline and core inflation. In comparison, oil supply shocks mostly impact headline inflation immediately. As the global economy becomes more metals-intensive, central banks need to be aware that the effect of metals price shocks on inflation could be less visible initially but more persistent.
Consumer inflation accelerated in October 2024. However, the odds of a Federal Reserve interest rate cut on December 18 are still high. October year-on-year total Consumer Price Index inflation accelerated to 2.6% from 2.4%, while total Personal Consumption Expenditures inflation accelerated to 2.3% from 2.1%, and core PCE inflation accelerated to 2.8% from 2.7%. Core CPI was unchanged in October, but it was sticky and more elevated at 3.3%. Despite elevated consumer inflation rates, the chance of a 0.25% Fed rate cut on December 18 was 66% on November 30.
On Friday’s “PBS NewsHour,” Washington Post Associate Editor and MSNBC host Jonathan Capehart stated that “among many things that I found troubling about the 2024 election” was the fact that voters decided “Gas is too high, grocery store prices are too high. And so, yeah, we’re just going to go with” President-Elect Donald Trump, “leave aside all sorts of other things he said, such as mass deportations.” And charges against him where they hadn’t seen all the evidence.
The euro is showing little movement on Friday. In the European session, EUR/USD is trading at 1.0564, up 0.09%. There are no US events today and US markets will close early for the Thanksgiving holiday weekend.
President-elect Donald Trump’s threat to slap huge new tariffs on all imports from Canada and Mexico will likely cause gas prices to rise in the United States.
Forty-four percent of Americans hosting Thanksgiving are concerned about the cost of the event as they continue to face inflation in the Biden-Harris era, according to Deloitte survey data.