NY Fed Williams Expects US Jobless Rate to Rise from 3.7% to 4.5-5.0%

The New York Fed president John Williams, who is a voting member of the FOMC was speaking at a virtual speech to the Economics Club of New York continued with a hawkish tilt on inflation saying, “There is still more work to do,” he is less the hawk with jobs. On inflation he expects it to cool to 5.0-5.5% by year end and 3.0-3.5% by late 2023, which is comparable to the range of 2.6-3.5% in the Fed’s SEP. Williams ahead of Fridays nonfarm payroll report for November which has a median estimate of 200k is expecting unemployment to rise.

Inflation using the Fed’s preferred gauge, the personal-consumption-expenditures price index (PCE), rose 6.2% in the 12-months ended September. Mr. Williams said he expects the inflation rate to slow to between 5% and 5.5% by the end of this year, and to between 3% and 3.5% next year.

Discussion Highlights

  • “We are already seeing some of the effects of tighter monetary policy,”
  • “As this continues, I expect real [gross domestic product] to increase only modestly this year and in 2023.”
  • “But further tightening of monetary policy should help restore balance between demand and supply and bring inflation back to 2% over the next few years,”
  • “There is still more work to do” (on inflation)
  • “Labor market has proved more resilient than expected”

Today’s comments were in line with comments that Fed officials are focused on reducing inflation without wrecking the economy.

Bullard added a hawkish twist

The hawk himself, St. Louis Fed President (2022 FOMC voter) Bullard was also talking today. He repeated that the Fed “has a ways to go to get to restrictive rates.” On jobs he said ” 200K jobs created in Nov would still be well-above historical trend”. He added rates won’t come down as much as markets would like.  Bullard is indicating that the Fed may be more aggressive and pursue rate hikes into 2023.

The hawkish talk came as the stock market was already selling off on news of fresh lockdown measures in China, which invited protests in the country’s capital city and other municipalities.

US Stock market closes today:

  • Dow 33888.09 -462.56 (-1.35%)
  • Nasdaq 10998.36 -167.85 (-1.50%)
  • SP 500 3966.90 -59.34 (-1.47%)

Fed Chair Powell speaks on Wednesday and worries that economic data releases this week could reflect a need to mark down earnings even further. The data lineup includes the November Consumer Confidence, October Personal Income and Spending, November ISM Manufacturing Index, and November Employment Situation reports.

The inversion along the yield curve deepened slightly today, reflecting the market’s ongoing growth concerns, but the movement was modest in size. The 10-yr Treasury note yield rose one basis point to 3.70% and the 2-yr note yield fell 2 basis points to 4.46%.

New inflation data will be released this, along with jobs data week.

Source: Reuters

From The TradersCommunity US News Desk