Monetary policy

Federal Reserve Bank of San Francisco President Mary Daly said the central bank could raise interest rates as early as March to fight high inflation, but she cautioned against overreacting and tightening policy too fast.

Bostic stuck to his prediction that three quarter-point increases starting in March is the most likely scenario, though stubbornly high consumer prices may justify a more robust rate rise.

The two biggest U.S. banks raised their forecasts of how quickly the Federal Reserve will raise interest rates this year, with Bank of America Corp. predicting a move at every meeting to tackle the highest inflation in four decades.

The statement offered no surprises, but Fed Chair jerome Powell's refusal to denounce more hawkish scenarios hurt market sentiment.

Why are markets so sanguine about the interest rate outlook? The answer lies in the Fed’s balance sheet, and in particular the level of excess reserves placed there by commercial banks.

Newly released transcripts of Federal Reserve policy meetings in 2016 show then-Governors Jerome Powell and Lael Brainard were quick to pivot away from planned interest-rate hikes in the face of risks posed by a stumbling Chinese economy.

Federal Reserve Bank of Cleveland President Loretta Mester said the central bank should shrink its balance sheet as fast as it can without disrupting financial markets and repeated her backing to a March interest-rate increase.

Coming off last week's $19.5 million influx of weekly new issues, supply this week is lower as the market watches the Federal Open Market Committee meeting.

ICI reported $1.43 billion of inflows into municipal bond mutual funds in the week ending Nov. 17, down from $1.61 billion in the previous week.

Former U.S. Treasury Secretary Lawrence Summers said Federal Reserve policy makers are signaling a “new era” in which they recognize the U.S. economy is overheating as inflation runs at its fastest in three decades.

Federal Reserve Bank of St. Louis President James Bullard said the central bank should speed up its reduction of monetary stimulus in response to a surge in U.S. inflation.

San Francisco Federal Reserve Bank President Mary Daly was considered by the Biden administration for a seat on the U.S. central bank’s board and she declined, according to two people familiar with the matter.

As the Federal Open Market Committee meets to discuss monetary policy, Gary Pzegeo, head of fixed income at CIBC Private Wealth will discuss his thoughts about what will come from the meeting.

Friday’s data suggested inflation remains a problem, as the voices calling for Federal Reserve action increase.

Another round of inflows was reported from the Investment Company Institute — the 31st consecutive week — but they came in at $308 million for the week ending Oct. 6, the lowest since outflows in March.

CB President Christine Lagarde said Wednesday that inflation “is largely attributable to the reopening of the economy.”

Bond investors may not wait long to start pushing back against Federal Reserve Chair Jerome Powell’s efforts to delink the start of asset-purchase tapering from the countdown to eventual policy-rate hikes.

The members of Congress, in asking that Biden find some other, unspecified, nominee, are going against the preference of Treasury Secretary Janet Yellen, who has told Biden advisers that she wants to see Powell renominated.

Federal Reserve Chair Jerome Powell risks inflation getting out of control and his assurance that the central bank can keep it in check neglects to mention this would require traumatic surgery, said former Richmond Fed President Jeffrey Lacker.

U.S. Treasury Secretary Janet Yellen has told senior White House advisers that she supports reappointing Jerome Powell as Federal Reserve chair, according to people familiar with the matter, a move that greatly increases his chance for a second term.