Fed’s Bowman
Fed’s Michelle Bowman is speaking and says:
- U.S. Central Bank should pursue a cautious approach on monetary policy.
- Fed may be closer to neutral policy than policymakers currently think; inflation remains a concern.
- Her estimate of neutral policy rate is much higher than before COVID pandemic.
- Says she agreed to support November Fed rate cut as it aligns with her preference to lower rates gradually.
- Says she is pleased that November Fed policy statement provided optionality in deciding future policy adjustments.
- Progress in lowering inflation appears to have stalled.
- Says she sees greater risks to price stability mandate, though deterioration in labor conditions is possible.
- Economy is strong, labor market is near full employment, inflation is elevated.
- Sideways move in core personal consumption expenditures inflation since May reflects increased demand for affordable housing, inelastic housing supply.
- Unemployment rate is below her own estimate of full employment; rise this year reflects weaker hiring.
- October payrolls likely rose at recent average pace after accounting for hurricane, Boeing strike, low response rate.
Comments from Bowman are on the hawkish side (or certainly less dovish than some).
US stocks are moving back down again with the NASDAQ index down 126 points or -0.66%. The S&P index is down -30.53 points or -0.52%.
Two year yield 4.305%, +3.4 basis points. 10 year yield 4.400%, +2.1 basis points.
At 1 PM, the US treasury will auction off 20 year bonds. It will be interesting to see the demand.
For December, the chance of a 25 basis point cut is down to around 56% versus 45% for no cut:
The December 2025 target Fed Funds is putting the “odds on favorite” rate at 3.75% to 4.00% from the current 4.50% to 4.75% or 3 cuts between now and the end of the year.