Collins and Williams Cautious on Timing of Rate Cuts; Fed's Preferred Inflation Gauge Is Out Today By James Christie

Good day. Federal Reserve Bank of Boston President Susan Collins suggested she is willing to hold off on interest-rate cuts until she sees more evidence inflation is being tamed, echoing Fed officials who have indicated they are likely to hold interest rates steady at their meeting next month. Meanwhile, John Williams, head of the New York Fed, in a speech said the U.S. economy has a ways to go until inflation is sustainably at the central bank's 2% target. Williams, Collins and their Fed colleagues today will gain more insight into where inflation stands with the release of the central bank's preferred inflation gauge, the personal consumption expenditures price index, for January.

Now on to today's news and analysis.

Top News Fed's Collins: Central Bank Can Be 'Methodical and Cautious' on Cuts

Federal Reserve Bank of Boston President Susan Collins said she expected the Fed would be able to reduce interest rates later this year but signaled in an interview Wednesday that she wasn't in a hurry to do so.

"There are things that could cause me to want to move sooner-if the labor market were to look a bit more fragile, that would make a difference, if some of the inflation numbers really came together," she said. "Letting a little bit more time come together will be helpful from that standpoint."

Fed's Williams Says He's 'Very Focused' on Bringing Inflation to Target

Like a lunar rocket, inflation has shot up and come back down but has yet to land safely, Federal Reserve Bank of New York President John Williams said Wednesday, MarketWatch reported . "While we've seen great progress toward achieving our goals, the journey is not yet over, and I am very focused on making sure we complete this mission successfully," Williams said in a speech at an aviation museum on Long Island. "We still have a ways to go on the journey to sustained 2% inflation," he added, noting there are likely to be "bumps" along the way. Still, Williams said he expects the Fed's favorite inflation measure, the personal consumption expenditure price index, will fall to a range of 2%-2.25% this year, a slight improvement from December when he forecast a 2.25% inflation rate this year. Williams said he sees PCE inflation at 2% in 2025. (MarketWatch)

U.S. Economy Lawmakers Reach Deal to Avert Partial Government Shutdown

Congressional leaders unveiled a deal to keep the federal government fully operating beyond Friday , when funding is scheduled to lapse for some agencies, and said they will hold votes next month on full-year spending bills.

Four Ways to Lock In Yields Above 5%

To get ahead of Federal Reserve interest-rate cuts whenever they may come, investment managers are looking to lock in yields for anywhere from one to five years to preserve today's higher income.

Key Developments Around the World Bank of Mexico Lowers 2024 Economic Growth Forecast

In its quarterly economic report, Mexico's central bank estimated gross domestic product will expand 2.8% this year , down from its previous forecast of 3%. For 2025, the central bank left its forecast at 1.5%.

BOJ Board Member Calls for Monetary Easing Exit Discussion

Bank of Japan policy board member Hajime Takata said the central bank should start discussing details of a possible exit from its ultra-easy monetary policy . "Achievement of our price goal is finally coming into sight," he said.

BOE Names OECD's Lombardelli as Deputy Governor

The Bank of England said Clare Lombardelli will succeed Ben Broadbent in the key role of deputy governor for monetary policy from July. She was previously the top economic official at the U.K. Treasury and chief economist at the OECD.

Financial Regulation Roundup SEC Investigating Whether OpenAI Investors Were Misled

The Securities and Exchange Commission is scrutinizing internal communications by OpenAI Chief Executive Sam Altman as part of an investigation into whether the company's investors were misled.

Sam Bankman-Fried Calls for Shorter Prison Sentence, Citing Autism

Attorneys for Sam Bankman-Fried suggested a sentence of five to six years in prison, sharply lower than the roughly 100 years that he faces for stealing billions of dollars from FTX customers.

China Says It Will Step Up Oversight on Direct Market Access Strategy

Chinese regulators will increase oversight of direct market access-a popular strategy in quantitative trading that is usually highly leveraged- to stabilize the market after a media report said they wanted the strategy phased out.

China's Economy Looks Weak, But Money Is Pouring Into Its Stock Market

Forward Guidance Thursday (all times ET)

8:30 a.m.: U.S. weekly jobless claims; U.S. personal income and outlays, and personal consumption expenditures (PCE) price index for January; Canada gross domestic product for December

9:45 a.m.: Chicago Business Barometer

10 a.m.: U.S. pending home sales index for January

10:50 a.m.: Atlanta Fed's Bostic in fireside chat at Atlanta Fed Banking Outlook Conference

11 a.m.: Chicago Fed's Goolsbee speaks at Princeton University Bendheim Center for Finance

1:15 p.m.: Cleveland Fed's Mester speaks at Columbia University School of International and Public Affairs and Bank Policy Institute's 2024 Bank Regulation Research Conference

8:10 p.m.: New York Fed's Williams in moderated discussion at Citizens Budget Commission 92nd Annual Gala


4 a.m.: Eurozone manufacturing PMI for February

4:30 a.m.: S&P Global UK Manufacturing PMI

5 a.m.: Eurozone flash inflation estimate for February

8:30 a.m.: Richmond Fed's Barkin to appear on CNBC "Squawk Box"

9 a.m.: Bank of England's Pill speaks at Cardiff University Business School

10 a.m.: University of Michigan consumer survey, final for February; ISM Report on Business Manufacturing PMI; U.S. construction spending for January

10:15 a.m.: Dallas Fed's Logan in panel discussion at 2024 U.S. Monetary Policy Forum of University of Chicago Booth School of Business

1:30 p.m.: San Francisco Fed's Daly in panel discussion on "AI & the Labor Market" at 2024 U.S. Monetary Policy Forum

3:30 p.m.: Fed's Kugler speaks at 2024 Stanford Institute for Economic Policy Research Economic Summit, Stanford, Calif.

Research RBNZ Rate Decision Could Set Stage for Dovish Bank of Canada Turn

New Zealand's central bank surprised somewhat with a less hawkish tone in its policy decision, keeping its main interest rate unchanged at 5.5%. Spectra Markets suggests that based on the Reserve Bank of New Zealand's balanced tone, the Bank of Canada could surprise markets and turn dovish at its decision next week. Based on real rates, Canada's monetary policy is far more restrictive than New Zealand's, the forex-research firm says in a note to clients. "This basic measure suggests on the surface that if the RBNZ can be dovish, so can the BOC," Spectra says.

-Paul Vieira

Eurozone's Bitter Mood Points to Stagnation, or Worse

Gloomy sentiment across the eurozone economy makes it ever clearer that the bloc is close to recession, says Andrew Kenningham, chief Europe economist at Capital Economics. Survey data on Wednesday showed sentiment slipping in February, confounding hopes for a modest improvement and marking a reading consistent with stagnation, Kenningham says in a note. While price pressures are easing, they still remain too strong for the European Central Bank to consider cutting interest rates imminently, a move that could bring some needed impetus to the bloc's economy, Kenningham says.

-Joshua Kirby

Commentary How Discover's Network Helps Capital One Take On Banking Giants

Capital One Financial's planned purchase of Discover Financial Services could help the giant lender to better compete with the likes of American Express, or even banking titans such as JPMorgan Chase, writes Telios Demos.

Basis Points U.S. mortgage applications dipped in the latest week as mortgage rates stayed over 7%, with the Mortgage Bankers Association's overall market composite index down 5.6% to 171.5 for the week ending Feb. 23 from the prior week. A year ago, the index stood at 187.6. (MarketWatch) The growth rate of the U.S. economy in the fourth quarter was revised lower to a 3.2% annual pace from a 3.3% rate. The latest forecasts suggest the economy is expanding at a rate of over 3% in the first quarter. (MarketWatch) The U.S. trade deficit in goods widened 2.6% to $90.2 billion in January, according to the Commerce Department's advance estimate released Wednesday. (MarketWatch) U.S. crude oil inventories rose more than expected last week in a fifth consecutive build , while gasoline and distillate fuel stocks decreased, according to the U.S. Energy Information Administration. Commercial crude-oil stocks-excluding the Strategic Petroleum Reserve-rose by 4.2 million barrels, to 447.2 million barrels, in the week ended Feb. 23 and were about 1% below the five-year average for the time of year, the EIA said. Feedback Loop

This newsletter is compiled by James Christie in San Francisco.

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James Christie , Perry Cleveland-Peck [], Nihad Ahmed , Michael Maloney

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

02-29-24 0715ET