MNI Market News FedSpeak Podcasts

U.S. inflation expectations are not contained despite officials assurances to the contrary, which means inflation could quickly resume rising and climb above 4% before the end of the year, says Berkeley economist and SF Fed adviser Yuriy Gorodnichenko, who recently presented a paper at the Fed Board's 2nd Thomas Laubach conference. This will put a Fed in a bind that not only prevents them from cutting interest rates but my even force them to hike, he told MNI.

Former Richmond Fed President Jeffrey Lacker discusses the outlook for interest rate policy and the economy amid the challenge of volatile trade wars, as well as his concerns about the expansion of the Fed's powers in conducting credit policy over time.

ECB economist explains why China might reroute trade to Europe in a higher degree than during the trade tensions in 2018

Ex-Dallas Fed Adviser Danielle DiMartino Booth thinks the U.S. economy was already in recession even before Trump's tariffs hit. Now, she believes the Fed is making a mistake by keeping interest rates steady. She is also concerned about threats to the dollar's safe-have status.

Former Ontario forecasting manager and Oxford Economics Canada analyst Tony Stillo says prior cuts to neutral and concern about tariff inflation will keep the Bank of Canada on hold.

Seth Carpenter, former deputy director the Fed board's division of monetary affairs, thinks the central bank will barely be able to squeeze in another rate cut this year if at all before tariffs boost inflation for a while, leaving policymakers on hold until well into 2026.

Nobel Laureate and MIT economist Simon Johnson said he's worried about the growth- and institution-damaging actions of the Trump administration, but relieved he seems willing to leave monetary policy to the Federal Reserve. 

The Federal Reserve is likely to keep interest rates on hold through much of this year as it seeks clarity on the economic impact of Donald Trump's policies.

The more the central bankers stress uncertainty of the of the outlook the more likely they are to enact easier monetary policy, Bank of France senior economist Klodiana Istrefi told MNI. In her paper 'Interest rate uncertainty and firm decisions' Istrefi and co-authors defined "interest rate uncertainty" as the difference between predictions made in surveys by professional forecasters and actual outcomes.

SEC Economist Samim Ghamami says the neutral rate of interest has risen because of higher U.S. budget deficits, meaning the Fed is likely to cut rates less than otherwise in this cycle.

Investor Ed Devlin says Canada's weak economy needs a quick end to tight monetary policy, and a weaker dollar is no deterrent to central bank officials.

Former Fed board economist Joseph Gagnon thinks President-Elect Donald Trump's tariff and immigration policies will push up inflation again, forcing the Fed to halt rate cuts.

The inflation expectations of eurozone consumers are surprisingly in line with macroeconomic developments and can provide a useful reality check to professional forecasts, European Central Bank economist Omiros Kouvavas told MNI. “Consumer expectations feed into consumers' actions,” Kouvavas told an MNI podcast, adding that he expected them to continue to track the macroeconomic situation with a lag. The link to the ECB's Article: https://www.ecb.europa.eu/press/economic-bulletin/html/eb202407.en.html#toc19

 The inflationary impact on the eurozone from potential Middle East oil disruptions would have “half the firepower” of the 2022 gas crisis, in the absence of a “catastrophic scenario” involving the closure of the Strait of Hormuz, a senior European Commission energy analyst told MNI. 

Bob Dugan, chief economist of Canada Mortgage and Housing Corp., discusses the industry's capacity limits and falling interest rates.

The Federal Reserve can't sustain 50 basis point rate cuts if the economy and the labor market remain strong and inflation pressures linger, ex-NY Fed executive Ricks Roberts told MNI. 

Ricardo Reis, an LSE professor who advises the Richmond Fed, the Bank of England and the Riksbank, tells MNI the Fed is likely to take an incremental approach to rate cuts. 

Former Fed board governor Jeremy Stein tells MNI he thinks inflation will be sticky around 2.5%, forcing the Fed to be gradual about the pace of rate cuts barring some serious deterioration in the labor market. 

Tony Stillo, Canadian economist at Oxford Economics and a former Ontario forecasting official, says the Bank of Canada will space out rate cuts given lingering wage and price inflation.

Former Chicago Fed President Charles Evans talks to MNI about the outlook for U.S. monetary policy, arguing that the Fed is justified in waiting to see if inflation is heading back sustainably to its 2% goal.

In a wide-ranging interview, former FDIC Chair Sheila Bair talks to MNI about Federal Reserve policy, financial stability and the outlook for banking regulation. 

Former St. Louis Fed policy adviser David Andolfatto is worried that fiscal largesse will prevent the Federal Reserve from reaching its 2% inflation goal anytime soon.

Devlin Capital founder Ed Devlin discusses the outlook for Bank of Canada interest-rate cuts this year and how officials will manage sticky inflation and a weakening economy.

The euro area economy and inflationary dynamics are “still far away from a normal post-pandemic situation,” as supply-side shocks still resonate, the European Central Bank's Director General for Economics at the Oscar Arce told MNI. “We are still seeing the persistent effects of the chain of shocks. It is not only the pandemic but it is the pandemic plus the energy crisis the geopolitical uncertainty created by the war in Ukraine but also by the Middle East,” Arce told an MNI podcast, in which he discussed an ECB Occasional Paper on post-pandemic inflation.

The U.S. Treasury market is still vulnerable to bouts of illiquidity and volatility although reforms like central clearing should help, says Samim Ghamami, an economist who is working on the issue at the Securities and Exchange Commission.

Financial market-based measures and surveys proved more reliable than macroeconomic models at estimating the neutral real rate of interest during the abrupt economic fluctuations of the pandemic, European Central Bank economists told MNI, adding that r-star is now at similar levels to pre-Covid times.

Former Fed board governor Kevin Warsh thinks the Fed's signaling of rate cuts this year prematurely loosened financial conditions, making its own job of bringing inflation back to 2% harder.

​Former Ontario forecaster and Canada Director at Oxford Economics Tony Stillo says the central bank will want to avoid public backlash against any misstep towards lower interest rates, and says that will delay a rate cut until June and keep it well above neutral all year.

Federal Reserve officials will probably wait until midyear before lowering interest rates despite market hopes for cuts as early as March, as inflation data stay choppy in coming months before resuming a downward trend, former Fed board economist Seth Carpenter told MNI

The eurozone economy is likely to avoid recession, but inflation should slow sufficiently for the European Central Bank to reduce its benchmark deposit rate by around 150 basis points this year, former ECB economist Riccardo Trezzi told MNI. Markets are moving rapidly to price in cuts, noted Trezzi, who said that while January's Governing Council meeting should produce little change the possibility of downward surprises to inflation meant that cuts could begin to be considered by as early as March. “When markets understand that something has changed, in this case for the good, they always go ahead of the curve and try to anticipate because it's the way you make money,” said Trezzi, who worked on the Federal Reserve Board's inflation desk before taking on a similar role at the ECB.

The Fed's next move is likely a cut but won't come until later in 2024 because policymakers must be totally sure inflation is not going to plateau around 3% or even reverse recent declines, former St. Louis Fed President James Bullard tells MNI.

Stanford Graduate School of Business professor Darrell Duffie cheers the SEC's expansion of mandated central clearing in U.S. Treasury trades, saying the landmark new rule will ultimately lead to a significant improvement in market liquidity.

Export Development Canada Chief Economist Stuart Bergman discusses how sentiment about the global economy has weakened and why companies still face difficulties with inflation.

The Federal Reserve will remain reluctant to cut interest rates too soon or too quickly lest it allow recent progress on inflation to reverse, Priya Misra of JP Morgan Asset Management tells MNI. 

The Federal Reserve is likely done raising interest rates as inflation continues a steady decline and policymakers worry about the lagged effects of past hikes, former Kansas City Fed President Esther George tells MNI.

The European Central Bank hopes to publish a new series of questions about firms' expectations for consumer price inflation as part of its Survey on the Access to Finance of Enterprises next year, and to increase the frequency of SAFE to quarterly from twice a year, ECB senior lead economist Annalisa Ferrando told MNI. A quarterly SAFE will better coordinate it with the ECB's Bank Lending Survey, Ferrando said in an MNI podcast together with fellow senior lead economist Petra Kohler-Ulbrich.

The Federal Reserve could be done raising interest rates but only if the economy slows and inflation keeps cooperating, former New York Fed economist Matthew Raskin tells MNI. There's a good chance this will not happen in coming months, forcing the Fed to raise rates further, potentially to 6% or higher.

Ahead of Canada's fall fiscal update, Institute of Fiscal Studies and Democracy President Page sees limited fiscal room even as Canada's finances outshine G7 peers. The government has shown little inclination to set genuine fiscal targets but appears on track for limited moves to tackle voter anger over a housing squeeze, the former parliamentary budget officer says.

The Fed has already raised interest rates too far but could even hike them further given misplaced concerns about inflation persistence, ex-Boston Fed research director Jeff Fuhrer tells MNI. We also discuss his new book, "The Myth That Made Us."]

The Federal Reserve's desire to pause rate hikes is driven by a belief that recent disinflation would proceed unabated, and could "turn on a dime" if progress appears to stall as it did in the August CPI report, former Fed board economist Steven Kamin tells MNI.

Tyler Meredith says housing squeeze "has become a real metaphor issue of middle-class success” and Justin Trudeau's Liberal government needs a large-scale solution to regain political support lost to the Conservatives. Public anger also radiates towards the Bank of Canada but the central bank isn't being singled out, he says.

Elliot Hughes at Summa Strategies discusses Canadian Prime Minister Justin Trudeau's efforts to convince voters upset over the surge in housing costs, saying his recent comments suggest a potential expansion of more direct federal involvement in homebuilding.

Robert Asselin, adviser to the Business Council of Canada and previously to the prime minister and finance minister, says the central bank likely needs high-for-long interest rates that will further crimp badly needed investment. He also says a recent cabinet shuffle put communication ahead of strong policy as Justin Trudeau girds for the next election.

The Federal Reserve is likely to keep tightening monetary policy despite an economy that is already effectively in a downturn, which is being masked by rising consumer borrowing and strong fiscal policy, former Dallas Fed advisor Danielle DiMartino Booth told MNI.

Money market funds are buying Treasuries again, leaving enough liquidity in the banking system for QT to continue for at least two more years, ​former New York Fed trader Joseph Wang tells FedSpeak.

Joseph Tracy, former senior adviser to Fed presidents Robert Kaplan and Bill Dudley, says it will most likely take a mild recession to rein in inflation.

Royal LePage Real Estate Services COO Karen Yolevski says many younger Canadian buyers feel the pressure to buy amid a lack of supply before prices become completely out of reach, even as they also feel the pinch of higher interest rates.

Robert Kaplan, former Dallas Fed President, worries the ripples from robust fiscal policy are making the Fed's job harder, and could yet force it to hike rates up to 6%.

Ex-IMF chief economist Simon Johnson says inflation is coming down quickly enough for the Fed to remain patient as it ponders possible additional rate hikes. We also talked about his new book, 'Power and Progress,' which takes a skeptical look at the idea that technological advances automatically make everyone better off.