November 13th Financial News

Daily News

Summary:

Lagarde says the ECB will raise rates again if needed; Powell says the Fed is 'not confident' it has done enough to bring inflation down; U.S. 30-year mortgage rate retreats to 7.5%...

[Quick Facts]

1. Fed's Daly: Fed may hike rates again if growth and inflation persist.

2. Fed's Bostic: Fed doesn't need to keep raising rates.

3. Lagarde: ECB will raise rates again if needed.

4. Powell: Fed is 'not confident' it has done enough to bring inflation down.

5. U.S. consumer confidence index falls for the 4th consecutive month

6. U.S. 30-year mortgage rate retreats to 7.5%.

[News Details]

Fed's Daly: Fed may hike rates again if growth and inflation persist

The Fed may need to raise interest rates again if the economy grows strongly while inflation progress stagnates, said San Francisco Fed President Mary Daly in an interview on November 10 local time. Interest rates have been restricted enough to guide inflation back to the Fed's target level, but it remains full of uncertainty. Fed officials must stay flexible as they watch upcoming economic data releases to inform future interest rate decisions. Optionality has to be the metric of the day, Daly said.

Fed's Bostic: Fed doesn't need to keep raising rates

The Fed can reach the 2% inflation goal without more hikes, said Atlanta Fed President Raphael Bostic in a speech last Friday, November 10. Interest rates have been raised into restrictive territory, but the full impact of tightening has yet to be seen, so the Fed would be wise to wait a while.

Lagarde: ECB will raise rates again if needed

European Central Bank (ECB) President Christine Lagarde said on Friday that keeping the deposit rate at 4% should be enough to curb inflation. "If major shocks come up, depending on the nature of the shocks, we'll have to revisit that," she said. It is expected that inflation in the euro area could rebound from its two-year low it recently hit, especially if it suffers another energy supply shock. It is unlikely that interest rates will be cut in the next few quarters.

Powell: Fed is 'not confident' it has done enough to bring inflation down

Federal Reserve Chairman Jerome Powell said on November 10, local time, that he expected a long way to go in bringing inflation down to 2% on a sustained basis. The labor market remains tight, although the improving labor supply and gradually easing demand continue to bring it into better balance. GDP growth was quite strong in the third quarter, but like most forecasters, we expect growth to slow in the coming quarters.

We have noted the risk that stronger growth could undermine further progress in restoring balance to the labor market and lowering inflation, which may require a monetary policy response.

The Fed is not confident that it has done enough to bring inflation down to 2%. If it becomes appropriate to tighten policy further, we will not hesitate to do so.

We will continue to move carefully, allowing us to address both the risk of being misled by a few good months of data and the risk of overtightening.

The U.S. labor market recently has shown signs of a lack of momentum, but officials remain cautious about having raised interest rates enough to the restrictive level. The Federal Reserve "is not sure" whether interest rates have reached a critical point.

U.S. consumer confidence index falls for the 4th consecutive month

The University of Michigan consumer sentiment index for the U.S. continued to decline to 60.4 in November, being the fourth consecutive month of decline. While both current and expected personal finances improved slightly during the month, the long-term economic outlook slipped by 12%, in part due to growing concerns about the negative impact of high interest rates. The ongoing conflicts in Gaza and Ukraine also put pressure on many consumers. Overall, the confidence of low-income and younger consumers dropped the most.

U.S. 30-year mortgage rate retreats to 7.5%

Mortgage rates retreated, according to Freddie Mac's Primary Mortgage Market Survey (PMMS) released last Friday. 30-year fixed mortgage rates averaged 7.5%; they were 7.76% a week ago and 7.08% a year ago. 15-year fixed mortgage rates averaged 6.81%, compared to 7.03% a week ago and 6.38% a year ago.

With Treasury yields moving lower, 30-year mortgage rates fell by 0.25 percentage points, the largest one-week drop since last November. The new data shows that household debt continues to climb. The housing market will remain stagnant unless mortgage rates fall sharply.

[Focus of the Day]

UTC+8 16:15 ECB Vice President Luis de Guindos Speaks

UTC+8 00:05 Next Day: Bank of England MPC Member Mann Speaks

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