Monetary policy

Signs of excess risk taking in financial markets show it’s time for the U.S. central bank to start debating a reduction in its massive bond purchases, said the president of the Dallas Federal Reserve, breaking ranks with Chair Jerome Powell.

The key benchmark that the Federal Reserve targets to control monetary policy dropped for the first time this month, dragged down as growing imbalances in the Treasury-bill market weigh on short-term dollar rates.

The Federal Reserve will likely taper off its bond purchases before considering raising interest rates, Chairman Jerome Powell said.

Federal Reserve Vice Chair Richard Clarida said policy makers will await evidence on whether they’re reaching their goals on price stability and employment before adjusting monetary policy.

Federal Reserve Bank of San Francisco President Mary Daly said she’s “bullish” on the rebound of the U.S. economy, but there is still a long way before the recovery is complete and will wait for the data to show it.

Jack Janasiewicz, senior vice president, portfolio manager and portfolio strategist at Natixis Investment Managers Solutions, discusses inflation and why there is disagreement on whether it will become an issue this year. He talks about how stimulus money and the employment situation factor in. Gary Siegel hosts. (Taped March 9 / 30 minutes).

Federal Reserve Chairman Jerome Powell said prices would rise this year as the pandemic recedes and Americans are able to go out and spend, but he played down the risk that this would spur unwanted inflation.

Dallas Federal Reserve President Robert Kaplan said he is among policy makers estimating that the central bank will have to raise interest rates next year.

The economy seems to be gathering steam, though it is still far from fully recovering from the damage wrought by the pandemic, Federal Reserve Chairman Jerome Powell said.

“Our guidance suggests we would be raising rates were inflation to spike past our targets,” Barkin said.

The Fed remains dovish, although it raised inflation projections and lowered expected unemployment rates, but most participants still see rates at the zero lower bound in 2023.

She has repeatedly rejected concerns that Biden’s stimulus is excessive given the economy’s signs of recovery, and that run-away inflation could damage the economy.

Refinitiv Lipper reported $600 million of outflows from municipal bond mutual funds as the market correction caught up. High-yield funds lost a massive $722 million after $330 million a week prior.

The Beige Book suggests the economy is recovering, with optimism for 6-12 months ahead, while economists don't envision inflation rising enough for the Fed to take action any time soon.

Federal Reserve Governor Lael Brainard said it will take “some time” to meet the conditions laid out by the U.S. central bank for reducing the pace of its massive bond purchases, while noting recent bond market volatility.

Federal Reserve Bank of Richmond President Thomas Barkin played down recent Treasury market volatility, in remarks that reinforce the message that the U.S. central bank is not yet troubled by the increase in yields.

While U.S. growth is recovering quicker than expected amid the COVID-19 pandemic, the Federal Reserve is focused on supporting the labor market that is still in crisis after losing 10 million jobs, Atlanta Fed President Raphael Bostic said.

U.S. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell appear wary of signs of froth in financial markets, even as they press ahead with economic stimulus measures that are elevating the euphoria.

Rising Treasury yields are a sign of optimism in the economic recovery, said a senior Federal Reserve official Friday, signaling no inclination from the central bank to take steps to halt the shift.

Federal Reserve actions will continue to bolster the U.S. economy as it battles the COVID-19 pandemic, the central bank said Friday in its twice-yearly update to Congress.