Australia’s central bank sees the drag from tight financial conditions easing, helping the economy to stay near full employment with inflation returning to target, according to Assistant Governor Christopher Kent https://t.co/rTqPsnK8TD ...

Economic Activity - U.S economic activity was little changed [1] - Consumer spending edged down [1] Employment & Wages - Employment remained stable [1] - Labor demand softened [1] - Wages rose modestly across districts [1] Prices & Costs - Prices continued to climb [1] - Higher import costs contributed to price increases [1] - Increased service spending contributed to price increases [1] - Tariffs contributed to price increases [1]

Core Insights - The government shutdown is delaying the release of key economic reports, complicating the Federal Reserve's ability to assess the economy amid persistent inflation and a slowdown in hiring [2] - The Labor Department's monthly inflation data, originally scheduled for release on October 3, has been postponed to October 24 due to the shutdown, affecting the calculation of cost-of-living adjustments for benefit programs [2] - Federal Reserve Chair Jerome Powell indicated that the Fed is currently relying on private sector data and anecdotal reports to gauge economic conditions, but the lack of timely government data could pose challenges [2] Economic Impact - Inflation remains above the Fed's target of 2%, with the latest figures showing a year-over-year increase of 2.9% [2] - The unemployment rate has increased slightly to 4.3% in August from 4.2% in July, indicating a weakening in hiring [2] - The Fed faces a dilemma between raising interest rates to combat inflation and cutting rates to support employment, as both policy goals are in conflict [2]

[Music] Hello and welcome to Market Domination. I'm Josh Lipton live from our NYC headquarters. Stocks recovered early losses after US China trade tensions reescalated. Plus, Federal Reserve Chair Jay Powell's remarks are impacting markets, too. We're going to dig into those stories in just a moment. But first, there's just an hour to go until the closing bell. Let's take a look now at stocks at the major averages. They're mixed here. The Dow is up about 410 points. Your broad gauge, the S&P 500 is up about ...

Core Insights - The Federal Reserve's balance sheet plays a crucial role in monetary policy, especially during economic crises, as demonstrated during the COVID-19 pandemic [4][10][37] - The Fed's balance sheet totaled $6.5 trillion as of October 8, with significant components being Federal Reserve notes, reserves, and the Treasury General Account [6][8] - The Fed's asset purchases during the pandemic amounted to $4.6 trillion, aimed at stabilizing financial markets and supporting economic recovery [17][12][15] Balance Sheet Overview - The liability side of the Fed's balance sheet includes $2.4 trillion in physical currency, $3 trillion in reserves, and approximately $800 billion in the Treasury General Account [6][8] - The asset side consists mainly of $4.2 trillion in U.S. Treasury securities and $2.1 trillion in government-backed mortgage securities [9][30] - The Fed's balance sheet serves as a policy tool when the policy rate is constrained, allowing for large-scale asset purchases to support credit flow [10][12][37] Economic Response to COVID-19 - In response to the pandemic, the Fed established emergency liquidity facilities, providing over $200 billion in loans to restore market confidence [11][10] - Large-scale purchases of Treasury and agency securities were implemented to address market dysfunction, with purchases peaking at $120 billion per month by June 2020 [12][14][15] - The Fed maintained asset purchases until substantial progress was made towards employment and price stability goals, concluding purchases by March 2022 [15][16] Current Economic Outlook - The economic outlook indicates that employment and inflation conditions have not significantly changed since the last meeting, with a firm trajectory in economic activity [39][40] - Core PCE inflation was reported at 2.9% in August, with rising inflation expectations and potential risks to employment [41][42] - The Fed is closely monitoring indicators to inform decisions on the balance sheet and monetary policy, with a cautious approach to avoid market strains [28][29] Future Considerations - The Fed's ample reserves regime has proven effective in controlling policy rates and promoting financial stability, with plans to normalize the balance sheet gradually [25][27] - The composition of the Fed's securities portfolio will be discussed, aiming for a long-term focus on Treasury securities [30][31] - The Fed's ability to conduct monetary policy remains intact despite recent negative net income, as interest income from Treasury securities typically covers interest paid on reserves [32][34]

Steve Leeman of course has that for us. Steve. >> Hey Scott.Yeah. Boston Fed President Susan Collins, a voter this year making some doish comments saying it's prudent to normalize policy a bit further. She's also uh saying that uh even if they uh cut a little bit more that the uh Fed will still be mildly restrictive.I'm just looking for these uh these notes here. Uh Scott, she goes on to say that she believes that inflation is a uh uh is is really a matter of tariffs and she sees growth remaining solid desp ...

Alternative Data Analysis - The private data serves as a supplement to governmental data, which is considered the gold standard [1] - The private data is more effective as a supplement rather than a replacement for primary data sources [1] - The effectiveness of private data varies across sectors, with better substitutes in the employment space compared to inflation and economic activity [1] - Different private data providers employ varying universes and levels of rigor in their data analysis [1] Economic Outlook and Data Concerns - The September employment report is considered a very important report for decision-making [2] - The September CPI and PPI reports are expected to be available [2] - Potential data collection disruptions could pose challenges, particularly concerning October data [2]

Monetary Policy and Labor Market - The current economic situation requires a careful balance between monetary policy responses to inflation and employment, with a shift from a tight to a more neutral stance as conditions stabilize [1][2][3] - Recent data indicates a significant softening in the labor market, suggesting that risks related to inflation and employment are becoming more balanced [3][6] - The break-even employment growth rate has decreased considerably, with estimates potentially falling below zero, indicating challenges in the labor market [4][5][6] Economic Indicators and Data Monitoring - The Federal Reserve is closely monitoring various labor market indicators, including state-level unemployment claims and private sector employment data, to gauge economic conditions [15][16] - The absence of timely government data could complicate the assessment of economic activity and labor market conditions, particularly for upcoming reports [17][20] - The Fed acknowledges the importance of alternative data sources but emphasizes that they should supplement, not replace, government data [16][17] Impact of AI and Technological Changes - The Federal Reserve is actively researching the implications of generative AI on productivity, labor markets, and economic stability, recognizing the early stages of understanding its full impact [21][23][24] - There are concerns about potential job losses and the need for greater education and skills to adapt to technological advancements, which the Fed cannot directly address [26][27] Interest Rates and Monetary Conditions - Current monetary conditions indicate abundant reserves, although there are signs of tightening in money market conditions, particularly in repo rates [29][30] - The Fed is committed to monitoring these conditions closely to ensure effective monetary policy implementation [29][30] Independence and Policy Decision-Making - The Federal Reserve emphasizes its commitment to maintaining independence in monetary policy decisions, focusing on data-driven approaches to serve the public interest [32][33] - Healthy debates within the FOMC are seen as essential for making informed decisions, especially in complex economic situations [36][39]

I'm a little bit more concerned about the direction of inflation to be honest with you than I am employment. The Fed's got a much more difficult degree of landing because believe it or not, the Fed gets a weekly update of the ADP estimate. Most people don't understand that.So, the Fed's not flying blind when it comes to the labor market, right. Inflation's a little bit more difficult. They're probably going to be talking to the MIT Harvard billion uh prices project.and to get an idea of what's going on. The ...

Summary of Key Points from the Conference Call Industry Overview - The discussion primarily revolves around the U.S. economic outlook and Federal Reserve monetary policy, particularly focusing on interest rate adjustments and their implications for the economy. Core Insights and Arguments 1. **Divergent Views Among Fed Officials**: There is a notable division among Federal Reserve officials regarding the economic outlook and the appropriate monetary policy, with some advocating for significant rate cuts while others express concerns about inflation risks [1][5][6]. 2. **Rate Cut Proposals**: A group of 10 Fed officials supports cutting rates by 75 basis points or more, aligning with Chair Powell's view on employment risks. Conversely, 9 officials favor smaller cuts, citing inflation concerns [1][5]. 3. **Powell's Evolving Stance**: Fed Chair Powell's perspective has shifted towards a more dovish approach, recognizing downside risks to employment and suggesting that further rate cuts are necessary to achieve a neutral policy stance [5][6]. 4. **Miran's Dovish Position**: Stephen Miran argues for a more aggressive rate cut of 150 basis points, suggesting that current policy rates are overly restrictive and should be lowered to around the mid-2 percent range [2][7]. 5. **Targeting Repo Rates**: There is a discussion about potentially shifting the Fed's target from the effective federal funds rate to a more representative repo rate, with no immediate urgency for this change [3][23][24]. 6. **Factors Influencing Neutral Rate**: Miran identifies several factors that could lower the neutral interest rate (r*), including slower population growth, reduced deficits due to new tax policies, and increased credit supply from loan guarantees [8][10]. 7. **Output Gap and Inflation**: Miran's analysis suggests that deregulation and tax policy changes could widen the output gap, while slower shelter inflation could lead to a significant reduction in overall inflation rates [11][12]. Additional Important Points 1. **Cautious Fed Officials**: Some Fed officials, including Barkin and Goolsbee, express caution regarding further rate cuts, highlighting the need for more data on inflation trends before making decisions [15][18][21]. 2. **Market Expectations**: The market is pricing in a series of rate cuts, with expectations for the policy range to decrease over the next year [27][30]. 3. **Long-Term Considerations**: The potential transition to targeting repo rates is expected to take time, with discussions likely extending over a year before any changes are implemented [24][25]. This summary encapsulates the key discussions and insights from the conference call, focusing on the U.S. economic outlook and the Federal Reserve's monetary policy strategies.