Musalem, Bowman: 2024 Community Banking Research Conference

Private sector employment increased by 143,000 jobs in September and annual pay was up 4.7 percent year-over-year, according to the September ADP® National Employment ReportTM ...

post: FED'S BARKIN: HALF-PERCENTAGE-POINT RATE CUT IN SEPTEMBER WARRANTED BECAUSE RATES WERE 'OUT OF SYNC' WITH DECLINE IN INFLATION AND THE UNEMPLOYMENT RATE NEAR ITS SUSTAINABLE LEVEL post: BARKIN: FED CAN'T DECLARE INFLATION BATTLE OVER, SAYS HE EXPECTS LITTLE FURTHER DROP IN CORE PERSONAL CONSUMPTION EXPENDITURES PRICE INDEX UNTIL NEXT YEAR post: BARKIN: HALF PERCENTAGE POINT OF CUTS SHOWN AS THE MEDIAN FED POLICYMAKER PROJECTION FOR THE REST OF THIS YEAR WOULD ALSO TAKE 'A LITTLE BIT OF THE EDGE OFF' RATES post: BARKIN: RECENT LABOR ACTION, GEOPOLITICAL CONFLICT ALSO AMONG INFLATION RISKSBarkin: Why Not Declare Victory? Thank you for that kind introduction. I thought today I might talk about how I see the economy and where it may be headed. I’ll then turn it over to you, and I look forward to your questions and comments. I should caution that these are my thoughts alone and not necessarily those of anyone else on the Federal Open Market Committee (FOMC) or in the Federal Reserve System. As you’ve likely seen, the FOMC cut the fed funds rate 50 basis points at our September meeting. This cut came largely because of the progress we’ve made on inflation. Twelve-month headline PCE inflation is now 2.2 percent, well down from its peak of 7.1 percent in June 2022. Core is at 2.7 percent. Near-term inflation expectations are back in line with our 2 percent target. If we look at the most recent data, the inflation picture is even better: Three-month core inflation is only slightly above target at 2.1 percent. Importantly, the decline in inflation appears to be broad-based, not just limited to goods as we had seen previously. Consumers are driving this drop. Frustrated by high prices, they have become increasingly price conscious. They’re still spending, but they’re choosing: trading down from beef to chicken, from sit-down restaurants to fast casual, from brand names to private label. They’re waiting for promotions: opting for the $5 value meal at McDonald’s or jumping on discounts at Target. This is how it is supposed to work! The old saying is that the solution to high prices is high prices. And that’s what we are finally seeing. Their choices are pressuring price-setters to finally moderate price increases. At times, in the past, the FOMC has made such a significant rate cut in response to a troubled economy. Happily, that is not the case today. As inflation has moderated, economic activity has remained robust. GDP came in at 3 percent in the second quarter, a more than healthy growth rate. Consumer spending, which accounts for