Fed’s Barkin cautions that economic data around the turn of the year can deceive

  • The data is remarkable but
  • Says he won’t be taking a signal from one month
  • There are big seasonal adjustments around the turn of the year
  • We have some time to be patient
  • There is a model where you toggle rates down this year
  • It’s certainly possible that the neutral rate is higher but the standard deviation on neutral rate forecasts is about 200 bps, so it could be 0.50% or it could be 4.50%.
  • I think you have to acknowledge how good the inflation data has been for the past seven months
  • We will get a ‘few’ more months on inflation and I would very much like to see that continue and broaden
  • Goods deflation has been masking sticking services inflation
  • I’m looking for these numbers on inflation to be sustained and broadened
  • I take a lot of a signal from just how historically strong employment has been
  • I’m hearing there isn’t as much hiring but not as much firing either
  • To the extent that I’m hearing of job cuts, it’s on the professional side. It’s overhead not front-line
  • I hope and expect that banks have enough capital to weather commercial real estate losses

I find it’s interesting that he said they will have a ‘few’ more meetings to look at inflation. That sounds more like he’s looking at June cuts rather than May, and Barkin is a bit of a dove.

This article was written by Adam Button at www.forexlive.com. Source