Fed Latest: Ueda Says Below-Target Inflation Backs Easing Plan

Bank of Japan Governor Kazuo Ueda said price growth remains slower than the central bank’s goal, explaining why officials are continuing with their current monetary-policy strategy.

(Bloomberg) — Bank of Japan Governor Kazuo Ueda said price growth remains slower than the central bank’s goal, explaining why officials are continuing with their current monetary-policy strategy. 

Policymakers from around the world have traveled to the resort town of Jackson Hole, Wyoming for a two-day economic symposium hosted by the Kansas City Fed. In a speech to the gathering on Friday, Federal Reserve Chair Jerome Powell said the US central bank is prepared to raise interest rates further should the economy and inflation fail to cool.

In her first major speech since officials raised interest rates on July 27, President Christine Lagarde said the European Central Bank will set borrowing costs as high as needed and leave them there for as long as it takes to bring inflation back to its goal.  


(All times are NY)  

Ueda Says Below-Target Inflation Backs Easing Plan (2:08 p.m. NY)

Bank of Japan Governor Kazuo Ueda said price growth remains slower than the central bank’s goal, explaining why officials are continuing with their current monetary-policy strategy. 

“We think underlying inflation is still a bit below our target of 2%,” Ueda told the conference. “This is why we are sticking to our current monetary easing framework.”

Toward the end of a roughly 20-minute talk, Ueda also called China’s recent economic slowdown a “disappointment.” He cited relative strength in the US economy as providing “some offset” to Japan.

Okonjo-Iweala Says WTO Data Mirror Paper Showing No Deglobalization (2:08 p.m. NY)

The chief of the World Trade Organization said its data support the findings of a conference paper that showed China remains embedded in US supply chains even as American firms have taken steps to reduce direct imports from the Asian country.

The Geneva-based organization is seeing reallocation of world trade rather and little deglobalization, Director-General Ngozi Okonja-Iweala said after Harvard Business School Laura Alfaro presented a paper she co-authored with Davin Chor of Dartmouth College’s Tuck School of Business.

The paper documented a decrease in the share of US imports from China and a corresponding increase in the share of US imports from Vietnam and Mexico between 2017 and 2022.

Eichengreen, Arslanalp Depress Jackson Crowd With Debt Report (2:08 p.m. NY)

A paper by top economists that concluded swollen government indebtedness is here to stay was labeled “thoroughly depressing” by the head of a key US budget watchdog.

“This is a thoroughly depressing paper — you’ve systematically destroyed all hope” for deficit reduction, Committee for a Responsible Federal Budget President Maya MacGuineas said after University of California, Berkeley professor Barry Eichengreen presented the paper he authored with International Monetary Fund economist Serkan Arslanalp. 

Their work examines a variety of ways indebtedness could be reduced and finds them unlikely to occur. Divided governments will find it difficult to cut spending and boost taxes, especially at a time of slow economic growth. Inflating away the debt won’t work, unless the increase in inflation is a surprise and is substantial. And interest rates, if anything, are more likely to trend higher, than lower.

“I’m going to have to spend the weekend watching comedies to get over this paper,” said Nela Richardson, the chief economist of ADP Research Institute.  

BOE’s Broadbent Sees UK Rates Higher for Longer (12:52 p.m. NY) 

The Bank of England will have to keep interest rates high for longer because inflation is unlikely to fade as quickly as it emerged, despite sharp falls in gas and producer prices, Deputy Governor Ben Broadbent said.

“It’s unlikely that these second-round effects will unwind as rapidly as they emerged,” Broadbent told the gathering. “As such, monetary policy may well have to remain in restrictive territory for some time yet.”

Bloated Government Debt Is Here to Stay, Paper Finds (11:07 a.m. NY)

Swollen government indebtedness — and the upward pressure that puts on interest rates — is here to stay, according to a paper presented at the conference.

“High public debts are not going to decline significantly for the foreseeable future,” International Monetary Fund economist Serkan Arslanalp and University of California, Berkeley professor Barry Eichengreen wrote in the paper. “Countries are going to have to live with this new reality as a semi-permanent state.” 

China Remains Embedded in US Supply Chains, Paper Finds (10 a.m. NY)

China remains embedded in US supply chains even as American firms have taken steps to reduce direct imports from the Asian country, according to a paper presented at the conference Saturday.

The paper’s authors, Laura Alfaro of Harvard Business School and Davin Chor of Dartmouth College’s Tuck School of Business, documented a decrease in the share of US imports from China and a corresponding increase in the share of US imports from Vietnam and Mexico between 2017 and 2022. 

Bernstein Sees US Maintaining Pay Gains, Easing CPI (Aug. 25, 5:22 p.m. NY)

The chair of President Joe Biden’s Council of Economic Advisers, Jared Bernstein, said the US can see price growth slow while holding on to strong consumer spending and increases in wages. 

“The fact that the job market has remained so tight that the unemployment rate has been below 4% for over a year and a half is an integral part of a virtuous cycle,” he said in an interview on BTV. “We can continue to maintain strong consumer spending, real wage gains, a tight labor market and continue to ease off on inflation. That’s certainly been the pattern over over the last few quarters and it’s been a very important one.” 

A trio of legislation championed by Biden – stepped-up infrastructure spending, increased investment in a green economy and a build-up in semiconductor manufacturing – helped galvanize demand in the second quarter and is likely to have a bigger impact going forward. 

In the first presidential debate of the 2024 race earlier this week, Republican candidates attacked Biden’s stewardship of the US economy, with the entire field agreed that Bidenomics was a mistake.

Asked about Republican opposition to Biden’s economic policy, Bernstein said “what I certainly don’t understand is why they would want to consider repealing a level of investment that the private sector is clearly highly enthusiastic about, not to mention direct cost cuts in the area of health care, lower costs for health coverage, lower cost per prescription drugs, lower costs for insulin.”

Lagarde Steers Clear of September Rate-Plan Debate (4:32 p.m. NY)

President Christine Lagarde stayed out of the debate over whether the ECB should lift interest rates for a 10th straight time next month — even as her colleagues began to reveal which way they’re leaning.

In a speech and to Bloomberg Television on Friday, Lagarde didn’t add to her earlier guidance that the Sept. 14 decision could be a hike or a pause.

“It’s critically important that inflation expectations remain anchored at 2%,” said said in the BTV interview.

George Says Time Needed to Declare Inflation Victory (4:40 p.m. NY) 

Former Federal Reserve Bank of Kansas City President Esther George said central banks have to wait and see whether they have done enough to curb inflation and that they can’t yet declare victory. 

Until policymakers see their target in sight, “you can’t declare victory on this,” she said in an interview on BTV. “So whether that takes more, whether it takes more patience, I think we’re going to have to wait and see.”

The former Kansas City Fed chief,  who retired from her role in January, said she is “a little hesitant” to say that the central bank has achieved a soft landing of cooling price growth without triggering a recession and that this will be the case for the next year. 

George is now the treasurer on the board overseeing Kansas City area’s preparedness to be one of the hosts in the 2026 FIFA World Cup of football being jointly hosted by Canada, the US and Mexico. 

“I’ve joined with a number of Kansas Citians there to make sure that the city is ready to be on the world stage for that and I’m enjoying that,” she said, adding she will be a referee in one of the games. 

ECB’s Kazaks Says Would Err on Side of Raising Interest Rates (3:20 p.m. NY)

European Central Bank Governing Council member Martins Kazaks said it’s better to err on the side of tighter monetary policy than allow the risk of reaccelerating inflation.

“The risks are now really on both sides — doing too little or doing too much, but I would still err on the side of raising rates,” Kazaks said on BTV. “We can always cut. If, however, we stopped too early, then of course later on it may require much larger interventions.” 

He added that even if the central bank paused, it wouldn’t mean they couldn’t raise rates in the future. Kazaks cited strong core inflation and a healthy labor market with increasing wage gains that still risk pressuring up euro-area inflation.

Lagarde Says ECB to Set Rates as High as Needed (3:06 p.m. NY)

President Christine Lagarde said the European Central Bank will set borrowing costs as high as needed and leave them there for as long as it takes to bring inflation back to its goal. 

Describing an “era of uncertainty,” Lagarde said it’s important that central banks provide an anchor for the economy and ensure price stability in line with their respective mandates.

“In the current environment, this means — for the ECB — setting interest rates at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target,” Lagarde said in her speech at Jackson Hole.

Mester Sees Under-Tightening as a Worse Mistake (2:33 p.m. NY) 

Cleveland Fed President Loretta Mester said not raising interest rates sufficiently to curb inflation would be “a worse mistake” than raising them too much. 

“Under-tightening would be a worse mistake than over tightening a little bit because we can course-correct that,” she said in an interview on BTV. 

The Cleveland Fed chief said policy actions have brought the Federal Open Market Committee “into restrictive territory” and that its job now is “calibrating that to make sure that we’re on a sustainable and timely downward path to 2%” annual inflation. 

“We’re going to stay the course in terms of our monetary policy making sure that we are restrictive enough so that inflation comes back down,” she said. “We’ll also be evaluating how long to stay restricted as inflation comes down. The real interest rate, — nominal rates, adjusted for inflation — that will actually be tightening, so we’re going to be having to watch that as we go forward.”

Goolsbee Says FOMC Is on a Path to a Soft Landing (2:10 p.m. NY)

Chicago Fed President Austan Goolsbee said the central bank is part of the way down the road to a soft landing, where it can get inflation to its target without a big recession. 

“It’s not normally an option for central banks, that you could get inflation down without a big recession,” he said in an interview on BTV. “That’d be a major triumph for the Fed or anybody. It’d be virtually without precedent. But we’re part of the way down that road and we’ve been getting good news. We just have to keep getting good news.” 

Holzmann Tells Die Presse He Expects Somewhat Higher ECB Rates (1:15 p.m. NY)

European Central Bank Governing Council member Robert Holzmann said interest rates will probably have to rise somewhat higher to get euro-area inflation back to target, according to Austria’s Die Presse. 

“There’s still no great all-clear” on consumer prices, Holzmann, who also heads the Austrian central bank, told the newspaper in an interview published Friday. “My guess is that a little more should be added. But the data will decide.”

Summers Says Fed Probably Needs at Least One More Rate Increase (12:54 p.m. NY)

Former Treasury Secretary Lawrence Summers said the Federal Reserve probably needs to raise interest rates at least once more, and cautioned that insufficient attention is being paid to the effects of US fiscal deficits.

“My best guess would be that we’re going to need more interest-rate increasing” by the Fed, Summers said on Bloomberg Television’s Wall Street Week with David Westin. There’s not much economic slowing “in the pipeline” at this point, with some estimates suggesting a growth rate in excess of 5% this quarter, he said.

Goolsbee Sees Path to Lower Inflation Without Recession (12:45 p.m. NY)

Chicago Fed President Austan Goolsbee said he sees a “golden path” to getting US inflation down without triggering a big recession. 

“We still need more information coming in, but nothing’s happened in the last two months that makes me think that the golden path is impossible,” he said in an interview with CNBC. 

Asked whether the Fed should change its inflation target from 2% given that annual price growth has slowed, Goolsbee said: “I think not — inflation’s not fully down to 3%.” 

“The inflation is too high, so I’m uncomfortable with declaring victory when it’s clearly not victory. We stated before we got into this what the target was going to be. I just don’t feel like you can change your inflation target until you’ve hit it.”

Gross: ‘Higher for Longer’ Is the Muted Message from Jackson Hole  (11:46 a.m. NY)

Bill Gross, the one-time bond king, believes it is likely for 10-year Treasuries to rise to 4.5% in the future and for short-term rates to remain relatively stable, he says in a post on X following Powell’s speech. 

Gross said “higher for longer” was the “somewhat muted message” he took away from Jackson Hole.

Mester Says More Work to Do, Core Inflation Too High (12:03 p.m. NY)

Federal Reserve Bank of Cleveland President Loretta Mester said core inflation is still running too high and policymakers have to be “diligent” as they work to steadily bring it down to 2%.

“We probably have some more work to do,” Mester said during an interview with CNBC. “What I think is very important is that we be diligent now. We have to be very careful. We don’t want to overtighten. We don’t want to undershoot.”

Mester said not much has changed in her outlook since June, when she penciled in two more rate increases for this year  — one of which was rolled out in July — and did not anticipate any rate cuts next year.

“We are in a restrictive policy stance and then it’s a question of ‘do we need to move higher’ and then the second question is ‘how long do we need to have restrictive policy before we’re sure that inflation is moving back down to our 2% goal,’” Mester said.

Big Deficits Risk Mounting Treasuries Stress, Paper Finds (11:55 a.m. NY)

Escalating federal borrowing needs may worsen structural deficiencies in the market for US Treasuries that were already on stark display during the 2020 Covid crisis, according to a paper presented to the symposium.

Darrell Duffie, a Stanford University professor who’s been closely involved for years in efforts to address liquidity concerns in the world’s largest debt market, warned in the paper of risks including financial instability if current weaknesses aren’t resolved.

“The quantity of Treasury securities that investors may wish to liquidate in a crisis is growing far more rapidly than the size of dealer balance sheets,” Duffie warned. Risks stemming from dealers’ limited intermediation capacity include “losses of market efficiency, higher costs for financing US deficits, potential losses of financial stability, and reduced save-haven services to investors,” he wrote.

Kganyago Says Job ‘Not Yet Done’ to Defeat Inflation (11:20 a.m. NY)

South Africa’s central bank governor warned that there are still risks to inflation, even as he acknowledged that the rate has come down significantly.

“We are focused on the outlook for the South African economy for both growth and inflation. The job is not yet done,” Lesetja Kganyago said on BTV. “The decline in inflation is welcome. But we’ve just had two good prints of inflation. That does not mean that the inflation monster has been conquered. There are still risks on the horizon and we will watch that very closely.”

His comments come two days after data showed South African inflation eased to a two-year low of 4.7% in July from 5.4% the month before.

Harker Favors Holdings Rates Until Next Year at Earliest (11:16 a.m. NY)

Federal Reserve Bank of Philadelphia President Patrick Harker signaled he favored holding interest rates at current levels to allow the effects of cumulative tightening to work through the system.  

“At this point, we really need to see inflation moving down, and we’re seeing early signs” that it is starting to happen, he said in an interview with BTV in Jackson Hole. “But I want to keep rates where they are right now and then we’ll decide later what we do.”  

“We are at a restrictive stance in my view, and we’re putting pressure on the economy to slow inflation,” he said. 

Asked when rates cuts would start, the Philadelphia Fed chief said “clearly not until next year at the earliest, and when next year? Again, the data will have to dictate that.”

Paper Finds Rate Hikes Crimp Innovation, Economic Output (10:23 a.m. NY)

Central bank interest-rate increases have a substantial impact on innovation, which in turn can impact the productive capacity of an economy, according to a paper presented at the symposium.

Monetary-policy tightening both reduces firms’ incentive to innovate by decreasing overall demand, and curtails financial investment through less optimal financial conditions and reduced appetite for risk taking, economists Yueran Ma and Kaspar Zimmermann found. 

“The results suggest that monetary policy could have a persistent influence on the productive capacity of the economy, in addition to the well-recognized near-term effects on economic outcomes,” wrote the University of Chicago’s Ma and Zimmermann, from the Leibniz Institute for Financial Research SAFE in Frankfurt.

Powell Signals Further Hikes Will Come If Needed (10:05 a.m. NY) 

Powell signaled the US central bank is prepared to raise interest rates further if needed and keep borrowing costs high until inflation is on a convincing path toward the Fed’s 2% target.

“Although inflation has moved down from its peak — a welcome development — it remains too high,” he  said in the text of his speech at the conference. “We are prepared to raise rates further if appropriate, and intend to hold policy at a restrictive level until we are confident that inflation is moving sustainably down toward our objective.”

The Fed chief welcomed the slower price gains the US economy has achieved thanks to tighter monetary policy and further loosening of supply constraints after the pandemic. However, he cautioned that the process “still has a long way to go, even with the more favorable recent readings.”

IMF Chief Sees Monetary Policy Divergence After Inflation Fight (Aug. 25, 8:45 a.m. NY)

International Monetary Fund Managing Director Kristalina Georgieva expects global monetary policies to diverge after most major central bankers have spent the last year tightening credit conditions to slow price gains.  

“We’re going to see after a period of convergence in monetary policy action — tightening rates, fighting inflation — some divergence” as, for instance, the US economy grows faster than the European Union, Georgieva said in an interview with BTV on Friday. 

“Central bankers will have to recognize that some specificity in how they approach the fight against inflation — and how they link this to their role in supporting growth and employment — how they approach that is going to be a matter of thorough assessment of national data.”

ECB’s Vujcic Says More Data Needed to Call Rate Peak (Aug. 24, 8:45 p.m. NY)

European Central Bank Governing Council member Boris Vujcic said officials need more data about the trajectory of inflation to judge whether interest rates have risen far enough.

“We are now certainly in the restrictive territory,” the head of Croatia’s central bank told Bloomberg TV. “Whether we are in a restrictive-enough territory remains to be seen. And this is something that you will only see from the inflation data that will come in the next prints.” 

While the data suggest that economic activity is cooling, “we don’t see that much of it in the inflation rates,” Vujcic said. The question for the coming months will be whether services inflation eases sufficiently and “whether we will feel the consequences of the slowdown in the labor market.” 

Vujcic said he thinks the euro-zone economy can avoid a “real recession” and that a soft landing is still achievable.

Thailand Needs Tighter Fiscal Stance, Central Banker Says (7:40 p.m. NY)

Thailand’s central bank wants the new government led by Srettha Thavisin to pursue fiscal consolidation in tandem with monetary policy to avoid fueling inflation in the economy.

That’s part of Bank of Thailand Governor Sethaput Suthiwartnarueput’s wish-list as he seeks to mitigate the impact of tighter US interest rates on Southeast Asia’s second-largest economy. The BOT is already near where it wants to be rate-wise to support economic growth and check prices after delivering 175 basis points of moves, he said.

“The important thing on policy front, both on monetary and fiscal sides is to try to normalize the policies and get some more consolidation,” he said in an interview with BTV’s Haslinda Amin. 

ECB’s Nagel Says Too Early to Consider Rate Pause (6:30 p.m. NY)

European Central Bank Governing Council member Joachim Nagel said that he’s not convinced inflation is under control enough for a halt in interest rate hikes, with his decision hinging on additional data in the coming weeks. 

“It’s for me much too early to think about a pause,” the Bundesbank chief told Bloomberg TV at Jackson Hole Thursday, adding that he’ll wait for additional figures before making a decision. “We shouldn’t forget inflation is still around 5%. So this is much too high. Our target is 2%. So there’s some way to go.”

While economic activity is slowing, core inflation remains sticky and the labor market is “really pretty good,” he said. 

Nagel said he doesn’t expect Europe’s biggest economy to fall into a recession, citing a better outlook for next year despite a weak third quarter. 

“I hear a lot of talk about Germany, the sick man of Europe. This is definitely not the case,” Nagel said, citing stable private consumption and higher wages for workers. “I’m still pretty optimistic that we will have a soft landing.” 

Collins Says Rate Peak Near (11:34 a.m. NY)

Federal Reserve Bank of Boston President Susan Collins said the US central bank may need to raise its benchmark interest rate further and that she wasn’t prepared to signal the peak point.

“We may need additional increments, and we may be very near a place where we can hold for a substantial amount of time,” she said in an interview with Yahoo! Finance from Jackson Hole. 

“I do think it’s extremely likely that we will need to hold for a substantial amount of time but exactly where the peak is, I would not signal right at this point,” she said. “We may be near but we made we may need to increase a little bit further,” said Collins, who doesn’t vote on policy this year. 

ECB’s Centeno Says Downside Risks Materializing (11:27 a.m. NY)

ECB Governing Council member Mario Centeno said officials should be cautious in deciding on the next steps as risks for the economy that have previously been identified are now becoming reality.

The transmission of the ECB’s monetary tightening campaign is “up and running” and inflation’s retreat has been faster than its rise, the Bank of Portugal governor told BTV in Jackson Hole. 

“We have to be cautious this time around because downside risks that we identified in June in our forecast have materialized,” said Centeno, who also heads Portugal’s central bank. “This is an inversion of what happened throughout the pandemic recovery because usually we have been surprised on the upside.”

Harker Sees Rate Hikes on Hold (10:17 a.m. NY)

Federal Reserve Bank of Philadelphia President Patrick Harker said he sees interest rates on hold for the rest of this year, and that policymakers have likely undertaken sufficient tightening. 

“Right now, I think that we’ve probably done enough because we have two things going on,” he said in an interview with CNBC. “The Fed funds rate increases — they are at a restrictive level, so let’s keep them there for a while. And also we are continuing to shrink our balance sheet that is also removing accommodation.”

“I see us staying steady throughout the rest of this year,” he said, adding that policymakers will watch how data evolve after that. 

If the rate of inflation comes down quicker than expected, “we might cut sooner rather than later, but I think we have to let that play out,” he said.

Bullard Sees Strong Economy Altering Fed Plan (8:20 a.m. NY)

Former Federal Reserve Bank of St. Louis President James Bullard said a pickup in economic activity this summer could delay plans for the central bank to wrap up interest-rate increases. 

“This reacceleration could put upward pressure on inflation, stem the disinflation that we’re seeing and instead delay plans for the Fed to change policy,” Bullard said Thursday during an interview with BTV ahead of the symposium.

Bullard, who resigned last month to become dean of Purdue University’s business school, was an influential voice at the Fed who called for aggressive interest-rate hikes to fight the recent inflation surge. 


–With assistance from Kate Davidson, Catarina Saraiva, Laura Curtis, Monique Vanek, Jonathan Ferro, Lisa Abramowicz, Tom Keene, Rich Miller, Caitlin Fichtel, Ramsey Al-Rikabi, Alexander Weber, Michael McKee, Matthew Boesler, Jana Randow, Jonnelle Marte, Steve Matthews and Ana Monteiro.

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