Minutes Show Fed Favored Slowing Pace of Rate Rises; Two More Candidates for Fed Vice Chair

Minutes Show Fed Favored Slowing Pace of Rate Rises; Two More Candidates for Fed Vice Chair By James Christie

Good day. Minutes of the Federal Reserve's Jan. 31-Feb.1 meeting released Wednesday showed almost all participants agreed it was appropriate to raise interest rates by a quarter point, or 25 basis points. Additionally, Fed officials "observed that a further slowing in the pace of rate increases would better allow them to assess the economy's progress... as they determine the extent of future policy tightening." But the minutes also revealed some officials were concerned about halting or slowing their inflation-fighting campaign too soon. Meanwhile, the White House is considering two economists who worked in the Obama administration-Janice Eberly and Karen Dynan-as candidates to become the Fed's vice chair, succeeding Lael Brainard, who left to become the White House National Economic Council director this week. Chicago Fed President Austan Goolsbee is also in the running, but has faced resistance from some Democrats who would prefer a woman or a person of color for the job, as well as from some Republicans who consider him too partisan for the vice chair role.

Now on to today's news and analysis.

Top News Fed Minutes Show Most Officials Backed Quarter-Point Rate Rise

Federal Reserve officials are signaling a resilient U.S. economy could lead them to raise interest rates somewhat higher than they had anticipated to conquer high inflation.

At their meeting earlier this month, officials agreed to slow rate increases by lifting their benchmark federal-funds rate by a quarter-percentage point, following larger moves of a half point in December and 0.75 point in November.

Minutes from that meeting , released Wednesday, showed most thought a slower pace provided the best way to manage the risks of raising rates too much or too little. But the minutes also revealed some officials were concerned about stopping or slowing their inflation-fighting campaign too soon.

White House Considers Two Economists for Fed Vice Chair

Janice Eberly, at left, a finance professor at Northwestern University, and Karen Dynan, an economist at Harvard University, served as assistant Treasury secretary for economic policy in the Obama administration .

Fed's Bullard: Markets Have Overpriced a Recession

Federal Reserve Bank of St. Louis President James Bullard on Wednesday said he thinks the U.S. economy is more resilient than many investors do. "I think markets have overpriced a recession in the second half of 2022 and overpriced a recession in the first half of 2023 and maybe they are overpricing the chances of a recession in the second half of 2023," Mr. Bullard said in an interview on CNBC. "We have a good shot at beating inflation in 2023," he said, with the Fed focused on inflation and Congress focused on deficit reduction. (MarketWatch)

U.S. Economy U.S. Aims to Create Manufacturing Clusters With Chips Act Funds

The U.S. will target funds from the $53 billion Chips Act to create at least two semiconductor manufacturing clusters by 2030, according to Commerce Secretary Gina Raimondo, in a bid to bring more chip manufacturing back to the U.S.

Gas Prices Poised to Rise Again as Sanctions on Russia Take Effect

Gasoline prices in the U.S. are down significantly from last June, when they were above $5 a gallon, but they are still up some 40% from two years ago and analysts are betting that they could soon jump higher .

Natural-Gas Prices Plunge, and Drillers Dial Back

Natural-gas prices have dropped more than 65% since mid-December and this week hit their lowest level since 2020's pandemic lockdown, leading producers to throttle back drilling in a dramatic turn.

Biden to Cut Mortgage Insurance Costs for Lower-Income Buyers

The Biden administration will trim costs under a mortgage program for first-time and lower-income buyers, a bid to boost affordability while median home prices remain near record highs, the White House said Wednesday.

Glynn's Take: Australia May Still Have a Weapon in Its War on Inflation By James Glynn

Australia's soft wage-growth data this week has kept alive the idea that the resource-rich economy may yet be different from the rest of the world in its ability to fight roaring inflation.

If wages remain contained, it could mean interest rates won't have to be raised as high as those in other major economies. Australia's secret weapon in the war on inflation is the degree to which wage increases are negotiated under collective agreements. Read more [https://www.wsj.com/articles/glynns-take-australia-may-still-have-a-weapon-in-its-war-on-inflation-659aa743#::text=SYDNEY%E2%80%94Australia's%20soft%20wage%2Dgrowth, ability%20to%20fight%20roaring%20inflation.].

Key Developments Around the World Turkey Cuts Rates Despite Risk of Stoking Post-Earthquake Inflation

Turkey's central bank lowered its key, one-week repo rate to 8.5% from 9%, in an attempt to cushion its struggling economy following deadly earthquakes that killed tens of thousands and caused billions of dollars in damage.

Bank of Korea Stands Pat, Keeps Alive Further Rate-Increase Option

South Korea's central bank stood pat after raising interest rates at seven consecutive meetings to fight inflation, as it trimmed its 2023 growth forecast and kept alive the possibility of a further rate hike down the road.

ECB Makes a $1.7 Billion Operating Loss as Rates Rise

The ECB reported a $1.7 billion operating loss [https://www.wsj.com/livecoverage/stock-market-news-today-02-23-2023/card/ecb-makes-a-1-7-billion-operating-loss-as-rates-rise-zTCr3QDb1dJcwAZiH2UE?mod=djemCentralBanksPro&tpl=cb#::text=The%20European%20Central%20Bank%20reported, for%20their%20aggressive%20stimulus%20policies.] for 2022, its first in 18 years. It is an early taste of the large losses that central banks around the world are expected to bear over the coming years as payback for their aggressive stimulus policies.

China to Shake Up Financial System as Xi Installs Key Associates

Chinese leader Xi Jinping is preparing to shake up the leadership of the financial system, installing key associates to run the central bank and reviving a Communist Party body to tighten political control over financial affairs.

Russian Oil Is Still Flowing, and That Is What the West Wants

Early data on Russian energy exports and pricing suggests the price cap on the sale of Russian petroleum products and the EU ban on most oil imports are keeping the oil flowing and global prices stable, while pinching Moscow's coffers.

Venezuela's Oil Industry, Reopening to Investors, Is Major Polluter

Venezuela's neglect and mismanagement of its oil resources reflect the challenges before the Western energy companies and investors looking to return to the country, which sits atop some of the world's largest oil and gas reserves.

Financial Regulation Roundup Prosecutors Seek to Encourage Corporate Confessions

Top New York federal prosecutors unveiled a new effort to encourage companies to voluntarily disclose wrongdoing to U.S. attorneys to receive more lenient treatment than if authorities discover misconduct.

DOE Officials Hold Stocks Related to Agency's Work Despite Warnings

U.S. ethics officials in recent years have warned one-third of the Energy Department's senior officials that they or their families owned stocks related to the agency's work, reminding them not to violate federal conflict-of-interest rules.

Bankman-Fried's Public Defense Shuns Traditional Legal Strategies

When facing criminal charges, most defendants all but glue their mouths shut before trial at the insistence of their lawyers. FTX founder Sam Bankman-Fried has chosen the opposite approach with a prominent public presence .

The Latest on the Crypto Crisis Forward Guidance Thursday (all times ET)

8:30 a.m.: U.S. gross domestic product for fourth quarter, second estimate; U.S. weekly jobless claims

10:30 a.m.: Atlanta Fed's Bostic in conversation with Kansas City Fed's George at 2023 Banking Outlook Conference

2 p.m.: San Francisco Fed's Daly in fireside chat hosted by Handshake

Friday

Time N/A: European Central Bank's Lagarde and Panetta at G20 Finance Ministers and Central Bank Governors meeting

8:30 a.m.: U.S. personal income and spending for January

10 a.m.: U.S. new home sales for January; University of Michigan final consumer survey for U.S. for February

10:15 a.m.: Fed's Jefferson and Cleveland Fed's Mester on panel at 2023 U.S. Monetary Policy Forum

11:30 a.m.: St. Louis Fed's Bullard discusses inflation at 'Credibility of Government Policies' conference

1:30 p.m.: Fed's Waller and Boston Fed's Collins on panel at 2023 U.S. Monetary Policy Forum

Research Inflation in U.S. Expected to Decline at Slower Pace

A slowing U.S. economy and easing wage pressures should keep inflation trending down, although recent data implies a slower decline than previously expected, UBS economists write in a report. They have revised their core PCE projection for the four quarters of 2023 from 2.1% to 2.5% and headline CPI to be 2.4% in the fourth quarter, compared with 1.9% a year earlier. They add that core goods inflation "should be held down by falling supplier delivery times, the rapid decline in freight costs, import prices that are trending down, and gradually rising vehicle inventories." For Friday's PCE data, the economists write that they anticipate "a very strong increase," followed by a slowdown on CPI inflation due in mid-March.

-Paulo Trevisani

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02-23-23 0718ET