Skip to main content

Fed Expected to Announce Rate Increase Today As New Inflation Numbers Show Moderation; CU Economists Respond

12/13/2022 CUToday

WASHINGTON–With the Federal Reserve expected to announce another rate increase today, new data show consumer prices rose last month at the slowest 12-month pace since December 2021, credit union economists are saying.

Kabede

Dr. Dawit Kebede

According to the Labor Department, the consumer price index climbed 7.1% in November over one year earlier, down significantly from 7.7% in October and down even further from the June 2022 peak of 9.1%.

Core CPI, which excludes volatile energy and food prices was up just over 6% from a year ago, slightly better than the 6.3% gain in October.

The Federal Reserve’s Open Market Committee (FOMC) is wrapping up two days of meeting today with most analysts expecting a 50-basis-point bump in rates as the central bank continues its attempts to tame inflation. A half-point increase would bring rates to a range between 4.25% and 4.5%, the highest level since December 2007.

CUNA: ‘Going in Right Direction’

“Inflation slowed down in November as the price of gasoline, used cars, medical care, and air travel declined. Increases in food and housing prices slightly offset these decreases resulting in monthly price bump of one-tenth of a percentage point,” said CUNA Senior Economist Dawit Kebede. “The headline inflation declined in November to 7.1% from 7.7% in October over a 12-month period.  

“Most of the monthly increase in the consumer price index (CPI) comes from housing which is a lagged indicator. It takes over a year for the CPI to reflect current market trends,” Kebede continued. “Tight monetary policy which recently pushed mortgage rates very high led to home price declines in several places. However, it takes time for this current market trend to show up in the CPI. 

“The Federal Reserve is expected to increase the fed funds rate by 50 basis points…moving away from the aggressive consecutive increases in the last four meetings.  This CPI report shows that price trends are going in the right direction although inflation is still very high above target.” 

NAFCU: Should be a ‘Healthy Holidays’

"According to data released by the Bureau of Labor Statistics (BLS), headline inflation and core inflation moderated for a second consecutive month while remaining elevated above historic levels,” said NAFCU Economist Noah Yasif. “Headline CPI increased by 0.15 m/m in a marked deceleration from October’s reading, while also beating consensus estimates of 0.35 m/m. This decline was principally driven by lower energy prices, which contracted by 1.65 m/m, but offset by increased shelter and food costs, which increased by 0.65 m/m and 0.55 m/m respectively. Used vehicle prices, a major contributor to the initial inflation surge this year, also declined by 2.95 m/m.

“Against the backdrop of another, and final, FOMC meeting for 2022, November’s readings make these disinflationary trends harder to dismiss and provide grounding for the dovish faction of the FOMC to argue for a pause to rate hikes early next year,” Yasif continued. “These numbers also compliment recent readings of consumer sentiment, which are improving and which reflect less anxiety over inflation. Markets jumped on the news, and credit unions should anticipate a healthy holiday shopping season as households absorb the combination of a still-strong labor market, moderating inflation, rising investment values, and stable or falling borrowing rates."

Comments

Post a Comment

Please no profanity or political comments.

Popular posts from this blog

'Tis the season for fraud! Teller questions if member fraud is suspected.

  When a credit union employee suspects a member may be subject to fraud, they should initiate a careful conversation focusing on the nature of the transaction and external influences. The goal is to help the member identify red flags without the employee asking for sensitive personal information that the credit union should already have on file.  Initial Verification Questions    .pdf Before discussing the specifics of the suspicious activity, the employee should confirm the member's identity in accordance with established internal protocols.  Questions About the Transaction/Activity If the member confirms they are conducting a suspicious transaction (e.g., a large wire transfer or purchase of gift cards ), the employee should ask questions to help the member pause and think critically:  "What is the purpose of this transaction?" "Do you personally know the person or business you are sending money to?" "Have you ever met the...
Post a Comment
Read Complete Article HERE>»

Have a Safe and Happy Thanksgiving!

    Thanksgiving, is a day when we pause to give thanks for what we have! www. NCOFCU .org   Have a Safe a...
Post a Comment
Read Complete Article HERE>»

Fed cuts interest rates for the second time this year

The Federal Reserve on Wednesday lowered interest rates for the second time this year in a continued bid to prevent unemployment from surging. Fed officials voted for another quarter-point rate cut, lowering their benchmark lending rate to a range between 3.75% and 4%, the lowest in three years. It is the first time since the Fed’s rate-setting committee was established in the 1930s that officials have set monetary policy while lacking an entire month of crucial government employment data due to a government shutdown. ____________________________________ Check out NCOFCU's additional features: First Responder Credit Union Academy Podcasts YouTube Mini's Blog Job Board
Post a Comment
Read Complete Article HERE>»

Loan Growth Part 3

MADISON, Wis.–Credit union loan balances rose 1.1% in February, faster than the 0.2% reported in February 2021, even as membership growth slowed significantly during the first two months of 2022, according to data released as part of CUNA Mutual’s April Trends Report. The Report, which is based on data through February, showed overall loan growth was 9.6% during the last 12 months. What is actually happening below the surface? According to the Trends Report, consistent with the trend line the analysis shows large credit unions reported significantly faster loan growth in 2021 as compared to smaller credit unions. Credit unions with assets greater than $1 billion reported loan growth of 8.4% compared to credit unions with assets less than $20 million, reporting loan growth of 0.9%. Here's a look at how credit unions performed by category, according to the newest Trends Report” ...
Post a Comment
Read Complete Article HERE>»

Two Members of FOMC Indicate December Rate Cut Not a Sure Thing

  WASHINGTON–Two members of the Fed’s Open Market Committee have indicated they are in no hurry to further cut rates, despite market expectations. “I’m not decided going into the December meeting” and “my threshold for cutting is a little bit higher than it was at the last two meetings,” Federal Reserve Bank of Chicago President Austan Goolsbee said in a Yahoo Finance interview. “I am nervous about the inflation side of the ledger, where you’ve seen inflation above the target for four and a half years, and it’s trending the wrong way.” Goolsbee was interviewed after last week’s Federal Open Market Committee meeting that saw policymakers cut their interest rate target by a quarter percentage point, to between 3.75% and 4%, as officials sought to offset rising risks to the job market while still keeping interest rates in a position where they’ll help lower inflation pressures, noted Yahoo Finance. As the report also noted, Fed Chair Jerome Powell cautioned last week that “a further r...
Post a Comment
Read Complete Article HERE>»

Hybrid? Work from Home? Office? The Debate Over The Ideal Work Environment Continues in CUs

 The Still-to-be-Answered Question About Work By Ray Birch MADISON, Wis.—With several years’ experience now under their belts, what has turned out to be the most productive work structure for credit unions in the wake of the pandemic—return to office, work from home, hybrid? It’s a challenging question, one compounded by the fact many CUs lack objective metrics for measurement, according to one person. “As we all know, credit unions first jumped to remote work and then things came back a bit as they tried to create a work environment that as closely as possible reflected ‘normal,’” explained Lesley Sears, VP of consulting services at CUES. Sears pointed out when credit unions shut down at the b...
Post a Comment
Read Complete Article HERE>»

Not Your Mother’s Credit Union

“Stablecoins aren’t a speculative play. They’re the next evolution of payments — and a chance for credit unions to lead, not lag. It starts with connecting members to DLT rails - the digital wallet. Without that, nothing else can happen. It’s just a new payment rail - embrace it or lose the relationship. It’s that simple.” While ‘ stablecoins ’ were the prevailing buzzword across Money20/20 this year, the credit union industry had a significant presence. Small financial institutions have staked a place in the future of payments. Credit unions  received a significant boost this summer with the enactment of the stablecoin bill into law. The Guiding and Establishing National Innovation for U.S. Stablecoins Act authorizes subsidiaries of federally insured credit unions, such as credit union service organizations, to become issuers. Not Your Mother’s Credit Union A Money20/20  fireside chat  with the regulator for credit unions that I moderated focused on the rulemaking task a...
Post a Comment
Read Complete Article HERE>»

Banking During and After COVID-19

Before COVID-19, the banking industry was experiencing an unprecedented period of growth and prosperity. Despite increasing consumer expectations and increased competition from non-traditional financial institutions, most banks and credit unions were stronger than at any period since the financial crisis of 2008. In a matter of only a few weeks, the world of banking has experienced a level of disruption that will change everything that had been the norm in financial services. There has not only been a major change in the way financial institutions conduct business but in the way, employees do their work and the way consumers manage their finances. Banks and credit unions must use this time of disruption to consider reinventing themselves from the inside out. It is a time when we need to better understand the way consumers expect their financial institution to support their financial needs. This includes the way banks and credit unions use data, AI, technology and human resources t...
Post a Comment
Read Complete Article HERE>»

Are You Holding Your Credit Union Back? A Directors’ Guide to Stepping Up Your Game & Staying Relevant

These are harder questions ...     May Blog - Asking Some Harder Questions ...
Post a Comment
Read Complete Article HERE>»

Zelle Says It Will Allow Users to Make International Payments Using Stablecoins

SCOTTSDALE, Ariz .–   Zelle  has announced plans to allow users to start making international payments using stablecoins. The move by Early Warning Services, which operates the P2P payments network Zelle and which is owned by a consortium of large banks, comes in the wake of the passage of the GENIUS Act, which is designed to usher stablecoins into the regulated financial system. Stablecoins are a digital currency that is pegged to a fiat currency such as the U.S. dollar. As the CU Daily reported  here , credit unions were strongly urged during an event last week to not just start paying attention to stablecoins but to begin taking action as interchange income is threatened. Similarly, analysts said the move by Zelle to help users move money across borders is a defensive move in response to what is expected to be the growing use of stablecoins by consumers and businesses. Early Warning Services did not indicate how it would work or when it would launch, according to sever...
Post a Comment
Read Complete Article HERE>»