Regional Fed Chiefs Discuss Economic Outlook, Inflation; PCE Price Index Out Today; Eurozone Inflation Falls More Than Expected

Regional Fed Chiefs Discuss Economic Outlook, Inflation; PCE Price Index Out Today; Eurozone Inflation Falls More Than Expected By James Christie

Good day. Atlanta Fed President Raphael Bostic said he is more confident in his forecast of a soft landing for the U.S. economy, adding that he thinks inflation will keep falling. He also cautioned that there are dangers from prices falling too much. Also yesterday, Richmond Fed President Tom Barkin said he still needs to be persuaded inflation is on track to fall toward the Fed's 2% target, and Cleveland Fed President Loretta Mester said Fed policy is in a good place to respond to economic developments. Today, the Commerce Department releases its report on personal spending, income and inflation for October. Economists estimate consumer spending rose 0.2% in October, down from a 0.7% rise in September. They also expect the core personal-consumption expenditures price index to be up 3.5% from a year earlier, compared with a 3.7% gain in September. In the eurozone, inflation fell more than expected in November, raising the possibility that interest-rate cuts could come sooner than previously expected.

Now on to today's news and analysis.

Top News Bostic Doesn't Want Prices to Fall and Thinks You Shouldn't Either

The head of the Federal Reserve Bank of Atlanta, Raphael Bostic, is optimistic about the path of inflation-but he doesn't want you to ask for prices to fall outright. "Deflation might sound appealing. After all, who wouldn't want to pay less for groceries next week? But it can be economically destructive," Bostic said during a video speech . Deflation could lead to consumers delaying purchases, cutting spending and instigating a downturn, he added.

Bostic also said businesses in the Atlanta Fed's district think the economy will slow "but not dramatically enough to portend a destructive economic downturn," MarketWatch reported .

Barkin Not Willing to Take Another Rate Increase Off the Table

Richmond Fed President Tom Barkin on Wednesday was cautious about the outlook for inflation and said he wasn't ready to say the Fed was finished raising interest rates, MarketWatch reported . During a talk at a CNBC event, Barkin was asked if he wasn't willing to take an interest-rate increase off the table. "That's right," he answered. Barkin also said he was skeptical inflation was on a smooth track back to the central bank's 2% target, noting that "it'd be great if it did come down. But I'm still in the looking-to-be-convinced category rather than the convinced."

Mester Says Interest-Rate Policy in a 'Good Place'

The Federal Reserve's interest-rate policy is in a "good place" and can move in either direction based on how the U.S. economy evolves, Cleveland Fed President Loretta Mester said Wednesday, MarketWatch reported . The economy could move in unexpected ways, Mester said in a speech at Loyola University Chicago, and if it does, "monetary policy will need to be nimble and respond appropriately to the evolving outlook and to the risks to achieving both parts of our dual mandate." She added, "I believe the current level of the funds rate positions us well to do that."

Eurozone Inflation Falls, Putting ECB Rate Cuts Into View

The eurozone's consumer-price index rose 2.4% on year , slowing from 2.9% the previous month. It was the lowest rate since July 2021. Economists polled by The Wall Street Journal had expected prices to rise 2.8% on year.

U.S. Economy Fed's Beige Book Finds Economy and Inflation Have Slowed

The U.S. economy slowed in November while inflation also tapered off, according to the Federal Reserve survey report known as the Beige Book, suggesting the central bank could be finished raising interest rates if those trends continue, MarketWatch reported . The Beige Book found six of the 12 Fed regional banks reported slight declines in economic activity. "Demand for labor continued to ease, as most districts reported flat to modest increases in overall employment," the Beige Book said. Wages also grew a bit more slowly. Price increases "largely moderated" across the U.S., the Beige Book also found, and "most districts expect moderate price increases to continue into next year."

CFOs See Ongoing Pain From Foreign Exchange Oscillations

Finance chiefs are anticipating more pain from foreign exchange rates after the U.S. dollar strengthened again this summer and fall, following a historic tear last year.

UAW Launches Organizing Drive, Targets Tesla and Toyota

The United Auto Workers formally launched one of the largest organizing drives in its history with campaigns at 13 automakers , in an effort to leverage record gains from its recent labor deals in Detroit.

Biden to Limit Chinese Role in U.S. EV Market

The Biden administration is expected to release tax-credit rules on Friday that could shape the American market for electric vehicles, after the U.S. last year revamped a $7,500 tax subsidy for people who buy new EVs.

Key Developments Around the World Bank of Korea Keeps Rate Unchanged But Raises Inflation Forecasts

The Bank of Korea on Thursday kept the benchmark seven-day repurchase rate unchanged at 3.50% for this year's final rate decision, having stood pat throughout 2023, and cautioned against any quick policy easing.

Bank of Mexico Lifts Economic Growth Forecasts

The Bank of Mexico raised its forecasts for economic growth this year and next , citing resilience in demand for Mexican exports, robust domestic consumption and plans for increased government spending in 2024.

China's Economy Faces a Sour End to the Year

A brief rebound in China's struggling economy showed worrying new signs of flickering out, heaping pressure on Beijing to take bolder steps to rev up growth.

OPEC+ Mulls New Oil Production Cuts Amid Middle East Conflict

OPEC and its Russia-led allies are considering new oil production cuts of as much as 1 million barrels a day , delegates said Wednesday, despite tensions in oil markets amid the conflict in the Middle East.

Financial Regulation Roundup Supreme Court Looks Poised to Curb SEC Enforcement Powers

The Supreme Court appeared ready Wednesday to scale back the SEC's power to enforce securities laws through administrative hearings rather than jury trials, in a case that could threaten similar executive-branch procedures.

FDIC Faces More Demands for Evidence of Toxic Culture at Regulator

Pressure on the Federal Deposit Insurance Corp. over allegations of a toxic work environment mounted this week, as its watchdog launched an inquiry and a senator requested records related to settlements and nondisclosure agreements.

Forward Guidance Thursday (all times ET)

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

9 a.m.: Bank of England monthly Decision Maker Panel Survey

9:45 a.m.: Chicago Business Barometer

10 a.m.: U.S. pending home sales for October

11 a.m.: Bank of England's Greene speaks at University of Leeds

Friday

3 a.m.: Fed's Barr speaks at Fifth ECB Forum on Banking Supervision, Frankfurt am Main, Germany

4 a.m.: Eurozone manufacturing PMI for November

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

8:30 a.m.: Canada labor force survey for November

10 a.m.: Chicago Fed's Goolsbee in fireside chat at bank's 37th Annual Economic Outlook Symposium; ISM Report on Business Manufacturing PMI; U.S. construction spending for October

11 a.m.: Fed's Powell in Fireside Chat at Spelman College

Research ECB and BOE Could Start Cutting Rates in Mid-2024

Europe and the U.K. are expected to remain fragile economically in 2024, and against this backdrop, it is plausible for central banks to cut interest rates from mid-2024 and into 2025, Morningstar Wealth says in its outlook for next year. "The European Central Bank and the Bank of England are walking a tight-rope between reducing inflation and strangling a struggling economy," Morningstar says, adding there are a range of potential outcomes around the base case. "While everyone talks about 'higher for longer' rates, inflation is gradually falling back to central bank targets," it says, adding that this is a potential positive but is by no means certain.

-Emese Bartha

Canadians Skeptical About a Digital Currency

Canadians are skeptical about any prospect of the country introducing a digital dollar and continue to place value on holding cash, polling by the Bank of Canada shows. The central bank said Canada's financial industry generally wants more concrete details about how a digital Canadian dollar would work to better understand the potential impact on business models and overall financial stability. Respondents to a public questionnaire, meanwhile, were largely opposed to a digital dollar and to the Bank of Canada researching it, raising concerns about the impacts a digital currency might have on their rights. The bank said focus group participants on the whole accepted the need for a digital dollar in the future but wanted more information on how exactly it would work, while civil society groups supported a cybercurrency if it is designed to remove existing barriers to financial inclusion. The responses come from discussions, focus groups and an online public questionnaire gathered by the Bank of Canada since 2020.

-Robb Stewart

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11-30-23 0715ET