The Federal Reserve needs to be cautious about cutting interest rates too far as it could undermine its goal of price stability. Vice Chair Philip Jefferson has warned that excessive easing can lead to a stalling or reversal in progress towards restoring price stability.
There is evidence of cooling labor demand such as a decline in job openings from March 2022, but the market remains tight.
The US economy is expected to continue growing in 2023, driven by strong consumer spending.
The US economy is expected to continue growing in 2023, driven by strong consumer spending. However, the Federal Reserve needs to be cautious about cutting interest rates too far as it could undermine its goal of price stability. Vice Chair Philip Jefferson has warned that excessive easing can lead to a stalling or reversal in progress towards restoring price stability. The imbalance between labor demand and labor supply has narrowed, with job openings declining from their peak but the market remaining tight with job openings about 20% above pre-pandemic levels. Jefferson also noted that there is evidence of cooling labor demand such as a decline in job openings from March 2022, but the market remains tight. The Federal Reserve has been on guard against cutting interest rates too far in response to falling inflation lest it undermine its ultimate goal of price stability.
Aggregate Economic Activity: Growth in real GDP in 2023 came in much higher than expected by most professional forecasters, buoyed by strength in consumer spending.
Consumer Spending: Continuing strength in spending is an important upside risk to my forecast due to habit formation as described by Robert Pollak (1970) and an optimistic view of future income prospects. Another possibility is socially motivated consumption or 'keeping up with the Joneses' which could cause individuals to consume more than what is predicted by models that only consider household wealth and income.
Labor Market: The imbalance between labor demand and labor supply has narrowed, as labor demand has cooled while labor supply has improved. There is evidence of cooling labor demand such as a decline in job openings from their peak in March 2022 but the market remains tight with job openings about 20% above pre-pandemic levels.
Accuracy
No Contradictions at Time
Of
Publication
Deception
(30%)
The article contains several examples of deceptive practices. Firstly, the author uses a statement from Robert Pollak (1970) to explain continuing strength in spending as an important upside risk to their forecast without providing any evidence or context for this claim. This is misleading and could be seen as manipulative by readers who may not have access to the original research. Secondly, the author uses a statement from James Duesenberry (1949) 75 years ago and later developed in the context of modern macroeconomics by Jordi Gali (1994) without providing any evidence or context for this claim either. This is also misleading as it implies that these statements are current and relevant when they may not be. Lastly, the author uses a statement from Adam to introduce their speech which could be seen as an attempt to gain credibility by associating themselves with someone else's reputation.
The author uses a statement from Robert Pollak (1970) without providing any evidence or context for this claim. This is misleading and could be seen as manipulative by readers who may not have access to the original research.
Fallacies
(75%)
The article contains several informal fallacies. The author uses an appeal to authority by citing the work of Robert Pollak and James Duesenberry without providing any evidence or context for their relevance to the topic at hand. Additionally, the author makes a dichotomous depiction of consumer spending as either resilient or weak, which oversimplifies a complex issue. The article also contains an inflammatory rhetorical device by using phrases such as 'keeping up with the Joneses' and 'socially motivated consumption'.
The author cites Robert Pollak (1970) without providing any evidence or context for his relevance to the topic at hand.
The article makes a dichotomous depiction of consumer spending as either resilient or weak, which oversimplifies a complex issue.
Bias
(75%)
The author of the article is Vice Chair Jefferson from the Federal Reserve. The author's outlook on consumer spending and its resilience in spite of weakening household balance sheets could be seen as a positive bias towards economic growth. Additionally, the mention of social motivated consumption or 'keeping up with the Joneses' theory also supports this viewpoint.
I see continuing strength in spending as an important upside risk to my forecast
Socially motivated consumption or 'keeping up with the Joneses' theory also supports this viewpoint.
Toward the end of 2023, however, household balance sheets began to weaken
. The Federal Reserve needs to be on guard against cutting interest rates too far in response to falling inflation lest it undermine the achievement of its ultimate goal of price stability.
Vice Chair Philip Jefferson said that excessive easing can lead to a stalling or reversal in progress in restoring price stability.
Accuracy
Aggregate Economic Activity: Growth in real GDP in 2023 came in much higher than expected by most professional forecasters, buoyed by strength in consumer spending. Toward the end of 2023, however, household balance sheets began to weaken.
Deception
(50%)
The article is deceptive in that it implies the Federal Reserve needs to be on guard against cutting interest rates too far when they are already at a low level. The author also uses vague language such as 'lest' and 'stalling or reversal', which could imply any number of outcomes, making their statement misleading.
The Federal Reserve needs to be on guard against cutting interest rates too far in response to falling inflation lest it undermine the achievement of its ultimate goal of price stability,
Fallacies
(85%)
The article contains an appeal to authority fallacy. The author quotes Vice Chair Philip Jefferson without providing any context or evidence for his statements.
Bias
(75%)
The author uses language that implies a danger of easing too much in response to improvements in the inflation picture. This could be seen as an example of monetary bias.
> We always need to keep in mind the danger of easing too much <br> In response to improvements in the inflation picture,<br> Excessive easing can lead to a stalling or reversal in progress <br> restoring price stability.
Site
Conflicts
Of
Interest (100%)
None Found At Time Of
Publication
Author
Conflicts
Of
Interest (50%)
Rich Miller has a conflict of interest on the topics of Federal Reserve, interest rates, inflation and price stability as he is an author for Bloomberg News.
, If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back our policy restraint later this year.
The imbalance between labor demand and labor supply has narrowed, as labor demand has cooled while labor supply has improved.
Accuracy
Federal Reserve vice chair Philip Jefferson said that he is still eyeing rate cuts later this year despite new readings on inflation that were hotter than expected.
<br>If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back our policy restraint later this year.
Philip Jefferson is the latest Fed official to caution that rate cuts won't likely happen until <b>later this year</b>
Boston Fed President Susan Collins and Cleveland Fed President Loretta Mester have also used the phrase <i>later this year</i>
Deception
(50%)
The article is deceptive in several ways. Firstly, the author quotes Philip Jefferson saying that he expects consumer spending to slow but there is a risk that it could be even more resilient which could cause progress on inflation to stall. However, this statement contradicts what was stated earlier in the article where Jefferson said if the economy evolves broadly as expected then it will likely be appropriate to begin dialing back policy restraint later this year. This is a lie by omission because the author failed to mention that Jefferson also mentioned consumer spending slowing which would lead to progress on inflation. Secondly, when discussing rate cuts, Jefferson says if there are no shocks to the economy then they could opt for holding rates longer than expected at current levels or ease sooner depending on how inflation evolves. However, this statement is misleading because it implies that the Fed has control over whether or not there will be shocks to the economy which is not true. This is a lie by omission because Jefferson failed to mention that rate cuts are dependent on various factors such as economic growth and global events.
Fallacies
(85%)
The article contains an appeal to authority fallacy by citing the opinions of multiple Fed officials without providing any evidence or reasoning for their beliefs. The author also uses inflammatory rhetoric when describing the potential consequences of rate cuts and inflation.
> Philip Jefferson said Thursday that he is still eyeing rate cuts
Bias
(100%)
None Found At Time Of
Publication
Site
Conflicts
Of
Interest (50%)
Jennifer Schonberger has a conflict of interest on the topics of Federal Reserve and rate cuts as she is an author for Yahoo Finance which may have financial ties with companies or industries they are reporting on.
Author
Conflicts
Of
Interest (0%)
Jennifer Schonberger has conflicts of interest on the topics of Federal Reserve, Philip Jefferson, rate cuts and inflation. She also has professional affiliations with Boston Fed President Susan Collins and Cleveland Fed President Loretta Mester.
Fed officials continued to worry that inflation could stay stubbornly high during their policy meeting last month, minutes released Wednesday showed.
The first measure of inflation for 2024, the Consumer Price Index (CPI), showed that prices rose by 3.1% for the 12 months ended in January, according to Bureau of Labor Statistics data.
Accuracy
The Fed in January opted to hold rates steady for the fourth consecutive meeting and officials acknowledged that inflation has slowed considerably from its four-decade peak in the summer of 2022.
Fed Chair Jerome Powell pushed back on the market's expectation that the first rate cut could come in the spring, saying that it's way too soon to declare victory.
Stocks ended lower last week, breaking a five-week streak of gains as hot inflation gauges raised fears among investors that the central bank may cut rates later and less aggressively than previously expected.
Fed officials frequently say they want to see data stretching over several months before they make interest rate decisions.
Whether or not inflation continues to slow down in the next few months remains to be seen and red-hot economic growth could complicate that.
The Fed typically cuts interest rates if the economy deteriorates sharply, pushing up unemployment, or if it's clear that inflation is under control, no longer requiring rates to remain elevated.
By keeping rates high as inflation slows the Fed could put an unnecessary stranglehold on the economy.
A few weeks ago, investors were convinced that the Fed would cut rates this year twice as many times as officials themselves projected in December. Now Wall Street's expectations are more in line with what Fed policymakers have been signaling.
San Francisco Fed President Mary Daly said last week at a National Association for Business Economics conference that 'we will need to resist the temptation to act quickly when patience is needed and be prepared to respond agilely as the economy evolves.' She added that three rate cuts this year is a 'reasonable baseline' expectation.
Atlanta Fed President Raphael Bostic said recently that he could see three rate cuts in 2024.
Investors now expect the first rate cut to come around the middle of year, according to futures.
Fed officials look at the US economy broadly when setting policy, including economic growth, the state of the job market and consumption.
The Atlanta Fed is currently projecting first-quarter gross domestic product (GDP) to register at a robust 2.9% annualized rate.
Deception
(30%)
The article is deceptive in several ways. Firstly, the author claims that inflation has slowed considerably from its peak in the summer of 2022 when it was actually at a four-decade high. Secondly, the Fed Chair Jerome Powell pushed back on market expectations for an interest rate cut and said it's too soon to declare victory over inflation, which is not true as inflation has been consistently above target levels. Thirdly, the article states that stocks ended lower last week due to hot inflation gauges raising fears among investors about a potential rate cut later and less aggressively than expected. However, this statement is misleading because it implies that the stock market performance was solely based on inflation concerns when in fact there were other factors at play as well.
The author claims that inflation has slowed considerably from its peak in the summer of 2022 when it was actually at a four-decade high. This is deceptive because it implies that inflation has been consistently below target levels, which is not true.
Fallacies
(70%)
The article contains several logical fallacies. The author uses an appeal to authority by citing the Federal Reserve's minutes and statements from Fed officials without providing any evidence or context for their opinions. Additionally, the author commits a false dilemma by presenting only two options: either inflation will continue to be high or it will decrease rapidly, ignoring other possibilities such as moderate inflation rates. The article also contains an example of inflammatory rhetoric when the author describes hot inflation gauges raising fears among investors and suggests that this could lead to a rate cut later and less aggressively than expected.
Fed officials continued to worry that inflation could stay stubbornly high during their policy meeting last month, minutes released Wednesday showed.
Bias
(70%)
The article discusses the Federal Reserve's concerns about inflation and their decision to hold interest rates. The author uses language that implies a bias towards the Fed's position on this issue. For example, he describes the Fed as 'worried', which suggests they are concerned about something negative happening with inflation. Additionally, there is an emphasis on how long it has been since the last rate cut and what impact it could have on borrowing costs for Americans. This language creates a sense of urgency around the issue and may be seen as biased towards those who believe that interest rates should be lowered to help consumers. The article also mentions hot inflation gauges raising fears among investors, which suggests there is concern about the potential impact of higher inflation on the economy. However, it's important to note that this language does not necessarily indicate bias and could simply reflect a neutral reporting of events.
Federal Reserve officials continued to worry that inflation could stay stubbornly high during their policy meeting last month, minutes released Wednesday showed.
The Fed in January opted to hold rates steady for the fourth consecutive meeting
Site
Conflicts
Of
Interest (50%)
There are multiple examples of conflicts of interest in this article. The author has a financial stake in LPL Financial which is mentioned as having provided data for the Consumer Price Index (CPI). Additionally, San Francisco Fed President Mary Daly and Atlanta Fed President Raphael Bostic are also cited as sources, both of whom have professional affiliations with the Federal Reserve.
The article mentions that LPL Financial provided data for the CPI. This creates a conflict of interest because LPL Financial has a financial stake in the performance of the economy and may benefit from certain policy decisions made by Fed officials.
Author
Conflicts
Of
Interest (50%)
The author has a conflict of interest on the topic of inflation as they are affiliated with LPL Financial which may have an interest in how inflation affects their business.
