The Daily Update: Fedspeak

After Friday's better than expected Non-Farm Payroll (NFP) numbers we had a couple of Fed members giving their opinions on the path forward for the central bank. The 943k jobs added was the largest gain in NFP since August 2020. In the June Dot Plots, 7 FOMC members saw the first hike coming in 2022 while the median was 2023. However, if just 3 of the members were to move forward their timing from 2023 to 2022, then the median becomes 2022. The new Dot Plots guidance will come at the September 21-22 meeting.

Overnight we had the Fed’s Bostic saying they needed to ensure they were beyond the crisis before any hike rates and must also ensure the US doesn’t have a ‘price crisis’. In a Q&A, he said he is in the 2022 camp for rate hike start, adding that they may be at the target now of 5-yr core inflation at 2%. With regards to tapering, he said he is in favour of going ‘relatively fast’, and his goal would be met if they get 1-2 more months of July like jobs growth. He did warn that if the delta variant proved challenging it could push any taper back and that he sees the risk of people adjusting to higher inflation.

The Fed’s Barkin also stated demand had not yet been impacted by the delta variant, however, pressure on wages is ‘intense’ among lower income levels. He added inflation expectations have been impressively stable, and it is ‘fair to say that the economy has made progress towards its goals’. He said that there is still more room to run in the labour market, and sees progress on goals met regarding prices, but not labour.