Unless there’s a change in the economy, Federal Reserve Bank of Minnesota President Neel Kashkari expects the fed funds rate target will remain on hold “for a while.”
Although risks remain, he’s “really happy with the way the [Federal Open Market] Committee has moved in the past year, changing from expecting rate hikes to making three rate cuts” since he believes monetary policy was “too tight through the recovery.”
“I think the cost of cutting unnecessarily is much lower than the cost of not cutting if we in fact need to,” Kashkari said in an interview on CNBC. “I’m comfortable with where the committee is.”
When asked if more cuts were in the works, he replied, “I just don’t know. As of right now the data looks pretty good. If the economy continues to perform as we expect, I would expect that we’re done for a while.” Monetary policy is “pretty close to neutral,” he said, or “slightly accommodative.”
The Fed should provide forward guidance by committing to not raising rates until inflation is at its 2% target, he said. “Inflation expectations have been drifting lower, and that’s concerning.”
Factory orders
Factory orders fell 0.6% in September, after a 0.1% dip in August, the Commerce Department reported Monday.
Economists polled by IFR Markets expected a 0.5% decline.
Year-over-year orders were off 0.3%.
The trade war with China, which shows signs of easing as negotiators are reportedly close to a first phase of an agreement, has caused business investment to wane and manufacturing to sag.
New York manufacturing
Manufacturing in the New York City region continued contracting in October, while the current conditions improved to 47.7 from 42.8 (a 40-month low) in September, according to the Institute for Supply Management New York.
The six month outlook climbed to 53.6 in October from September’s 45.2 (a 10 ½-year low).
The current revenues index climbed to 53.6 from 38.1, while the expected revenues gauge advanced to 57.1 from 45.2, and prices paid slid to 65.5 from 71.4 in September.
Business sentiment
“The U.S. economy continues to show its resiliency, powered by consumers who continue to ignore the increasing geopolitical noise as they head into the traditional holiday shopping season,” said Tony Bedikian, head of global markets for Citizens Commercial Banking.
Economic signs stayed positive and revenue growth prevailed in the third quarter, according to the Citizens Business Conditions Index, which posted a 60.2 reading in the third quarter, down from 61.2 in the prior three months. The reading, which stayed “well above 50,” indicates “continued confidence.”
Continued trade issues were cited for the decline, “but even that was not enough to make much of a dent in the indicators overall. While there seems to be growing concern about next year, it also seems as if economists have been saying that every year for at least the last several years,” Bedikian said.
Employment trends
The Conference Board Employment Trends Index (ETI) slipped to 110.11 in October, from 110.87 in September. The index is down 0.4% year-over-year.
“The Employment Trends Index declined in October, with negative contributions from seven of its eight components,” said Gad Levanon, head of The Conference Board Labor Market Institute. “The index suggests that job growth may slow down a little in the coming months. Leading indicators of employment are sending a slightly gloomier message than Friday’s stronger-than-expected jobs report. Still, with solid growth in consumer and government spending, and housing, the economy is likely to continue generating new jobs at a healthy rate, despite low business confidence.”
