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Powell Q&A: It’s clear we’re on a path to a very strong labor market

  
  Analysis

Comments to reporters

Comments to reporters
  • If we look 1-2 years out, we’ll be looking at “a very, very strong employment market”
  • There are very large amounts of job openings and lots of people looking for work and the process of filling those vacancies is slower than anticipated. “It may just take longer”
  • Notes that vaccinations should diminish the reluctance of people to return to work along with restart of daycare
  • Unemployment insurance for around 15m people will end by the September
  • I would expect that we would see strong job creation building up over the summer
  • We have to be humble about our ability to understand the data
  • Inflation has come in above expectations in the coming months but prices driving that are items that are directly affected by the reopening
  • You can see this meeting as the ‘talking about talking about’ meeting
  • We did not have a discussion of whether liftoff is appropriate in any particular year
This is the end of the ‘outcome-based Fed’. Powell is making all kinds projections about the coming months with an unusual amount of confidence that goes against what he’s been saying for months.
It’s almost like they saw something in the numbers and projections that spooked them. All that talk about letting inflation run hot and waiting to see numbers to ensure a ‘broad and inclusive’ recovery is dead.

The FOMCs central tendencies and dot plot for the June 2021 meeting

  
  Analysis

une 2021 FOMC meeting

Dot Plot:

The dot plot for the June FOMC meeting shows:
  • 7 fed officials see hikes in 2022
  • 13 fed official see hikes in 2023.
dot 2021

Below is the dot plot from the March meeting. At the time, 4 Fed officials expecting hikes in 2022 and 7 Fed officials in 2023.

dot plotCentral Tendencies June 2021:
Central tendencies

Central Tendencies for 2021:

  • GDP 6.8% to 7.3% vs.5.8% to 6.6% in March. GDP HIGHER
  • Unemployment 4.4% to 4.8% vs 4.2% to 4.7% in March.  Unemployment rate marginally higher.
  • PCE 3.1% to 3.5% vs 2.2% to 2.4% in March. Inflation much higher.
  • Core PCE 2.9% vs 3.1% vs 2.0% to 2.3% in March. Core inflation much higher.
Central Tendencies for 2022:
  • GDP 2.8% to 3.8% to 3.0% to 3.8% in March.  Growth near unchanged.
  • Unemployment 3.5% to4.0% vs 3.6% to 4.0% in March.  Employment near unchanged
  • PCE 1.9% to 2.3% vs 1.8% to 2.1% in March. Inflation marginally higher.
  • Core PCE 1.9% to 2.3% vs. 1.9% to 2.1% in March.   Core unchanged.
Highlights:
  • More Fed officials say higher rates in 2022 (from 4 to 7)
  • GDP much higher in 2021
  • Headline inflation and core inflation also much higher in 2021
  • 2022 central tendencies are near unchanged from March estimates

The full FOMC statement for June 2021 meeting

  
  Analysis

For release at 2:00 p.m. EDT

 

The Federal Reserve is committed to using its full range of tools to support the U.S. economy in this challenging time, thereby promoting its maximum employment and price stability goals.

Progress on vaccinations has reduced the spread of COVID-19 in the United States. Amid this progress and strong policy support, indicators of economic activity and employment have strengthened. The sectors most adversely affected by the pandemic remain weak but have shown improvement. Inflation has risen, largely reflecting transitory factors. Overall financial conditions remain accommodative, in part reflecting policy measures to support the economy and the flow of credit to U.S. households and businesses.

The path of the economy will depend significantly on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. With inflation having run persistently below this longer-run goal, the Committee will aim to achieve inflation moderately above 2 percent for some time so that inflation averages 2 percent over time and longer‑term inflation expectations remain well anchored at 2 percent. The Committee expects to maintain an accommodative stance of monetary policy until these outcomes are achieved. The Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and expects it will be appropriate to maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, the Federal Reserve will continue to increase its holdings of Treasury securities by at least $80 billion per month and of agency mortgage‑backed securities by at least $40 billion per month until substantial further progress has been made toward the Committee’s maximum employment and price stability goals. These asset purchases help foster smooth market functioning and accommodative financial conditions, thereby supporting the flow of credit to households and businesses.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals. The Committee’s assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Raphael W. Bostic; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Mary C. Daly; Charles L. Evans; Randal K. Quarles; and Christopher J. Waller.

Implementation Note issued June 16, 2021

More Putin: US to blame for all of the worsenings of relations

  
Analysis, Politics

The superpowers remain foes

More from Putin on meeting with Biden:
  • Each side understands red lines
  • Conditions not right for a meeting in Moscow or Washington
  • Biden is a very constructive, balanced person.
  • US to blame for all of the worsening in relations
  • We didn’t feel any pressure from US side in talks
  • Talks were fruitful
  • He saw glimpse of hope about mutual trust
  • On sanctions, says it’s hard to say if pro-Russia or anti-Russia policies and US will prevail
Let’s face it, Russia and US will remain adversaries.

Putin says Russian and US envoys will be returned

  
  Analysis

Good sign from talks

  • Foreign departments to start talks on diplomatic track
  • Ukraine was discussed but there’s nothing to discuss on Ukraine’s entry to NATO
  • Putin said trade, arctic and strategic nuclear capability were discussed
This was billed as a set of talks aimed at starting deeper talks and this certainly looks like a successful step. Ambassadors will be returned to national capitals.
The ruble is threatening a two-day high.

Modest changes in the European major indices today

  
Analysis, Global Indices, US Market

Mixed closes for the major European indices

The major European indices are closing mixed with modest changes. The snapshot of provisional closes shows:

  • German DAX, -0.1%
  • France’s CAC, +0.2%
  • UK’s FTSE 100, +0.3%
  • Spain’s Ibex, -0.2%
  • Italy’s FTSE MIB, +0.2%
In the European debt market, the benchmark 10 year yields are all down around  -1 to -1.6 basis points.
Mixed closes for the major European indices_In other markets as London/European traders look to exit:
  • Spot gold is trading down $0.56 or -0.03% at $1858.46.
  • Spot silver is up nine cents or 0.36% $27.76
  • WTI crude oil futures are up $0.77 or 1.07% at $72.89. The price reached a new cycle high of $72.99
  • Bitcon is trading down -$1158 or -2.9% at $38,797
in the US stock market, the major indices remain mixed:
  • S&P index -1.5 points or -0.04% of 4245.20
  • NASDAQ index +12.3 points or 0.09% at 14085.20
  • Dow -26.02 points or -0.07% at 34274.61

FX option expiries for 16 June 10am New York cut

  
Analysis, Forex

A look at what is on the board for today

FX

Just a couple of ones to take note of, as highlighted in bold.
The chunk in EUR/USD around 1.2115-30 is likely to keep price action rangebound before they roll off, adding to the lull ahead of the FOMC meeting later in the day.
Besides that, there is some attraction for USD/JPY closer towards 110.00 in the days ahead with the expiries today likely to support things going into North American trading.
Elsewhere, there is also still some decent expiries seen for AUD/USD around 0.7700 and 0.7750 so that could keep price action more sticky in the days ahead as well.
That said, a lot depends on the reaction to the Fed so there’s that to consider.
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