Yesterday Courtenay Brown and I spoke with
@newyorkfed president John Williams. We covered the prospect for rate cuts, the Fed balance sheet, AI, the 'zero-interest rate phenomenon,' and more. My takeaways here, with a link to the full transcript. axios.com/2024/02/23/fed…

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Fed vice-chair Jefferson signals leadership is attuned to the runup in long-term yields. Along with Lorie Logan's more detailed speech earlier, a clear signal to markets that they're paying attention and factoring higher long-term rates into their outlook and policy settings.

Excellent speech from Dallas Fed's Lorie Logan on the rise in long-term yields and policy implications.

It works as a great explainer of the distinction between a rise in what policy rates markets envision vs. term premium, and implications thereof.

dallasfed.org/news/speeches/…

Average hourly earnings up 0.2%, +4.2% year-over-year. Lowest 12 month print since June 2021. Sure doesn't look like a wage-price spiral.

+336k on payrolls. Yowzas.

30-year yields at 4.95% — in the last 30 years we’ve only really had Fed Funds more than a smidge above 5% in 1995, 2000, and the past few months. 30 years is a long time.

This is great. It’s the fiscal algebra everybody should know (or at least get the basic intuition) in thinking about how deficits, debt, interest rates, and growth intersect.

Next stop, 5%

The 5 year real yield now at 2.52%. In the 20 year history of TIPS, it has only been higher briefly in summer 2007 and during the liquidity freeze-up in the 2008 crisis. New territory, we are in.

Over the last 3 months, core PCE inflation has been an annualized 2.16%, which is, you know, pretty much on target.

(Energy price increases in that span mean headline inflation is hotter, 3.14% annualized).

Core PCE comes in at +0.1% in August, vs. 0.2% forecast. Best inflation number in quite a long time.

Another day, another 10bp added to the real cost of long-term borrowing--up from 0% immediately prior to the pandemic.

Mike Pyle tells Hope King that the “G20 Summit offered a really good snapshot” of global unity around economic goals.

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Fed gov Miki Bowman suggests she has the most hawkish policy outlook on the FOMC. Noting the plural 'hikes':

'I continue to expect that further rate hikes will likely be needed to return inflation to 2 percent in a timely way.'

federalreserve.gov/newsevents/spe…

Really good speech by Lisa Cook on the economics of AI here. An accessible, even-handed overview of some really important questions.

federalreserve.gov/newsevents/spe…

Two-year is up again too, also to a new cycle high. Markets are buying the Fed's higher-for-longer message.