Fed’s Williams Says Rates Are High Enough to Cool Inflation to Goal Need policy to stay restrictive for ‘some time,’ Williams says
(…) “I expect that we will need to maintain a restrictive stance of policy for some time to fully achieve our goals, and it will only be appropriate to dial back the degree of policy restraint when we are confident that inflation is moving toward 2% on a sustained basis,” he said.
The New York Fed chief said it would be natural for interest rates to decline as inflation falls — a sentiment expressed by several other policymakers in recent weeks — but the timing and speed of any cuts would be dependent on the path of inflation and the economy.
“As inflation comes down over time” and the economy and labor market re-balances, Williams said, “my expectation is interest rates will also come down over time.” (…)
The tone of Williams’ comments differed from those he made on Dec. 15, when he said the near-term question for Fed officials was whether policy was “sufficiently restrictive” to ensure inflation comes back to 2%. At the time, he also added that officials “aren’t really talking about rate cuts.” (…)
“I’m not worried about inflation kind of getting stuck at too high a level — like 3 or 4% — right now,” he said. “Things are moving in the right direction.” (…)
Wage Growth Tracker Was 5.2 Percent in December
The Atlanta Fed’s Wage Growth Tracker was 5.2 percent in December, the same as for November. For people who changed jobs, the Tracker in December was 5.7 percent, the same as for November. For those not changing jobs, the Tracker was 4.9 percent, up from 4.6 percent in November.
This 3-m m.a. series has been stuck at 5.2% for 4 consecutive months.
Same data for job switchers, presumably “the market rate”, has hooked up to 5.7%. The correlation with overall hourly wages is 78%.
FYI, the correlation between hourly wages and core CPI is 79%.
Manhattan Renters Get No Relief in a Still-Competitive Market
The median rent on new leases signed in December was $4,050 — virtually unchanged from a year earlier and up 1.3% from November, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate reported Thursday. It was the first month-over-month increase since July, in a season when rents typically are expected to decline.
Leasing surged for the second month in a row, with deals jumping 14% from December 2022, a sign of continued high demand that has kept the market competitive.
While rents have slipped from their record highs reached last summer, and the supply of apartments has been climbing, it hasn’t been enough to bring New Yorkers the relief that would generally come in the winter months. A period without sharp rent increases may be the best they’ll see for some time, according to Jonathan Miller, president of Miller Samuel. (…)
Manhattan’s vacancy rate reached 3.42% last month, the highest level since July 2021, the firms reported. Listing inventory was up 33% from a year earlier to 7,621 units.
However, that’s still historically low, according to Miller, who said the share of leases with bidding wars held steady last month at around 15%.
“We wouldn’t be having bidding wars if supply was adequate,” he said. (…)
Outer boroughs are also seeing robust demand. New leases more than doubled from a year earlier in Brooklyn, where the median rent increased annually for the 24th time, to $3,469. In northwest Queens — the neighborhoods closest to Manhattan — leasing rose from a year earlier at the highest rate in 21 months. The median rent there was $3,485, up 24% from the prior December.
Axios Vibes: America’s unhappiest people
Republicans, rural residents, renters, women and singles disproportionately feel like they’re in a big fat funk financially, our debut Axios Vibes survey by The Harris Poll reveals.
It’s not what voters see — the economy’s improving with rising wages and low unemployment. It’s how they feel that could tank President Biden in November. (…)
Harris’ research also suggests that many Americans are “consuming in denial” — continuing to spend and run up credit card bills even though they’re short on cash — and that “they’re looking to deflect some of the blame” to leaders in government, said John Gerzema, CEO of The Harris Poll.
“There’s a sense of entitlement, that Americans feel like, ‘We’re worth it, so I might change my vote but I’m not going to change my lifestyle,'” Gerzema said. (…)
37% of Americans rate their financial situation as poor. That climbs to 42% for Republicans, 43% for women, 46% for rural residents, 47% for singles and 57% for renters. (…)
- 25% of Americans say they’re falling behind financially, compared with 30% of women and Republicans, 33% of rural residents and 36% of renters.
- 41% of Americans say their finances are worse today than they’d have predicted if they’d been asked, pre-COVID, to imagine the future. That surged to 51% for renters, 53% for rural residents and 55% for Republicans. (…)
76% of respondents — and 82% of Republican and Hispanic respondents —agree with this statement: “Economists may say things are getting better, but we’re not feeling it where I live.” (…)
Despite widespread concern over the economy and the promise of a turbulent election year, many Americans did express optimism about 2024.
Two-thirds say they feel 2024 will be better than 2023.
Importers Face Surging Shipping Costs, Delays as Red Sea Diversions Pile Up Average costs to ship containers have nearly doubled since late November
(…) The increases have also accelerated in the past two weeks on routes that traditionally use the Suez. The spot-market price to move containers between China and Rotterdam in the Netherlands reached $3,577 in the week ending Jan. 4, a 115% increase from the week before. (…)
The Suez is used by about one-third of global container cargo and about 30% of freight bound for U.S. East Coast ports, according to Everstream Analytics, a supply-chain risk-management company. (…)
The higher costs are hitting even importers that negotiate longer-term contract rates, industry experts say, because operators are imposing surcharges ranging from hundreds of dollars to more than $1,000 per box to cover rising costs as a result of the Red Sea diversions. Some shippers’ woes are being compounded by restrictions at the Panama Canal where a drought is limiting the number of vessels that can transit the waterway.
The shift to longer shipping routes around Africa is raising fuel and insurance costs and reducing containership availability, said Lars Jensen, chief executive of Denmark-based consulting firm Vespucci Maritime. (…)
Low unemployment isn’t just a U.S. story
The unemployment rate in the eurozone fell to 6.4% in November, matching an all-time low, the Eurostat statistics agency said. That coincided with inflation of only 2.4% for the 12 months ended that month.
Price pressures have diminished on both sides of the Atlantic without workers bearing the brunt, contrary to traditional economic models. (…)
There are exceptions to the low-unemployment conditions that apply in the U.S. and eurozone. The jobless rate has moved up significantly over the last year in the United Kingdom and Canada, for example.
The experience of the last year in both the U.S. and Europe could trigger acknowledgement that higher unemployment isn’t always the medicine needed to relieve price pressures. (Axios)
China Developer Sino-Ocean Said to Seek Yuan Bond Extensions It proposes to extend four yuan bonds by up to 30 months
The state-backed developer’s extension plan is a reminder that China’s unprecedented real estate debt crisis is far from over, despite emerging signs of relief in the credit market after two major developers said they plan to repay some maturing debt. Sino-Ocean’s discussions also intimate the debt risk spreading beyond the private sector. (…)
Sino-Ocean offers to repay the notes via six installments every three months starting from the 15th month, they added.
The builder told creditors that housing sales continue to slump and there’s no improvement in liquidity, the people said. (…)
SENTIMENT WATCH
The latest batch of indicators are all consistent with our “immaculate disinflation” economic scenario, which is bullish for stocks. The only question is whether the market has discounted all the good news for now. Sentiment indicators remain very bullish, which is bearish from a contrarian perspective. (Ed Yardeni)
TECHNICALS WATCH
S&P 500 Large Cap Index – 13/34–Week EMA Trend (CMGWealth)
SEC Approves Bitcoin ETFs for Everyday Investors The exchange-traded funds will allow investors to buy bitcoin as easily as stocks or mutual funds.