Federal Reserve Chair Jerome Powell said on Tuesday the latest U.S. employment report showed the process for getting inflation back near the central bank’s 2 per cent target will take “quite a bit of time” even though there are indications cost pressures are ebbing, at least for goods.
The nonfarm payrolls report for January, which was published on Friday, was “certainly stronger than anyone I know expected,” Powell said during a question-and-answer session at the Economic Club of Washington.
“We didn’t expect it to be this strong,” Powell said, but it “shows why we think this will be a process that takes quite a bit of time.”
At the same time, Powell declined to equate the surprising strength in the job market shown in the January employment report with an expectation that interest rates would need to be higher than Fed officials estimated late last year.
…
“I think it surprised all of us,” Minneapolis Fed President Neel Kashkari said in an interview broadcast on CNBC earlier on Tuesday, referring to the blowout jobs report last Friday in which the U.S. government reported a gain of more than half a million jobs for January.
…
The numbers were far out of line with the looser labour market the Fed has expected and feels will be needed to ensure that wage growth also slows and inflation, which is still running at more than double the central bank target, continues to fall.Kashkari, who has been more aggressive than almost all his colleagues in his assessment of how high interest rates need to go, had said a month ago that he forecast the central bank’s policy rate should rise to 5.4 per cent. The jobs report consolidated that view.
“It tells me that so far, we’re not seeing much of an imprint … on the labour market,” Kashkari said. “It’s pretty muted so far, so I haven’t seen anything yet to lower my rate path.”
…
On Monday, Atlanta Fed President Raphael Bostic was one of those who said the central bank may need to lift borrowing costs higher than previously anticipated given the job gains. He noted that while a half-percentage-point rate hike was not his base case for the next policy meeting in March, it could be considered.“It’ll probably mean we have to do a little more work,” Bostic told Bloomberg News. “And I would expect that that would translate into us raising interest rates more than I have projected right now.” Bostic had previously forecast that the federal funds rate would top out in the 5.00 per cent-5.25 per cent range, like almost all his colleagues.
Macklem also gave a speech:
Bank of Canada Governor Tiff Macklem said on Tuesday that he does not expect to continue raising interest rates, reinforcing that the central bank has entered a new phase in its year-long battle with inflation.
…
“If new evidence begins to accumulate that inflation is not declining in line with our forecast, we are prepared to raise our policy rate further,” Mr. Macklem told a Quebec City audience on Tuesday, according to the English text of the speech. “But if new data are broadly in line with our forecast and inflation comes down as predicted, then we won’t need to raise rates further.”
…
“Our preferred measures of core inflation have been stuck at about 5 per cent. But timelier three-month rates have come down below 5 per cent. That suggests core inflation will start to decline in the months ahead,” Mr. Macklem said.The bank’s latest forecast shows the annual rate of inflation slowing to around 3 per cent by the middle of the year, and reaching 2.5 per cent by the fourth quarter.
The IMF published an excellent opinion piece, by which I mean I agree with it:
Decision-making procedures are also crucial to fostering individual accountability and mitigating the risk of groupthink. In the past, the phrase decision-making by consensus had largely positive connotations. However, modern organizational management recognizes that such practices tend to discourage innovative thinking and marginalize anyone with a different viewpoint (outside the consensus). Consequently, every MPC policy decision should be subject to a vote, and all MPC members should be held accountable for their own individual views.
In analyzing the inflationary episodes of the 1970s, one key lesson learned was that monetary policy decisions need to be insulated from political interference. Indeed, that lesson led to the strengthening of the central bank’s statutory independence in many jurisdictions—most notably, regulations ensuring that central bank officials cannot be terminated except for malfeasance. Such independence is enhanced by staggering the terms of MPC members, appointing each member to a single nonrenewable term, and ensuring that the appointment process is systematic and transparent rather than relying on the discretion of any single government official (Archer and Levin 2019).
MPC members should not be constrained to speak with one voice in their public communications; rather, they should be accountable for conveying their own individual views regarding complex judgments on which reasonable experts may disagree. To avoid cacophony, the MPC should follow the standard practice in the judicial system, where a panel of judges conveys each decision by issuing the ruling of the majority together with concurring opinions and dissenting views. Such an approach has a long track record of providing clarity about the rationale for the majority’s decision as well as the reasoning behind alternative views. Likewise, this mode of communicating monetary policy decisions can strengthen public confidence that decisions are being made by a diverse team of experts.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2237 % | 2,571.7 |
| FixedFloater | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.2237 % | 4,932.6 |
| Floater | 8.76 % | 8.92 % | 55,792 | 10.41 | 2 | -0.2237 % | 2,842.7 |
| OpRet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1436 % | 3,421.6 |
| SplitShare | 4.91 % | 6.49 % | 54,805 | 2.78 | 7 | -0.1436 % | 4,086.1 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.1436 % | 3,188.2 |
| Perpetual-Premium | 0.00 % | 0.00 % | 0 | 0.00 | 0 | -0.4631 % | 2,858.5 |
| Perpetual-Discount | 5.96 % | 6.05 % | 79,011 | 13.82 | 37 | -0.4631 % | 3,117.0 |
| FixedReset Disc | 5.33 % | 7.24 % | 88,835 | 12.47 | 59 | 0.5337 % | 2,286.4 |
| Insurance Straight | 5.82 % | 5.93 % | 92,978 | 13.97 | 20 | -0.0424 % | 3,083.7 |
| FloatingReset | 9.72 % | 10.24 % | 38,897 | 9.30 | 2 | 1.4395 % | 2,573.8 |
| FixedReset Prem | 6.33 % | 6.22 % | 196,251 | 4.05 | 2 | 0.1970 % | 2,398.0 |
| FixedReset Bank Non | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.5337 % | 2,337.2 |
| FixedReset Ins Non | 5.37 % | 7.19 % | 52,478 | 12.45 | 14 | 0.2173 % | 2,402.4 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| CU.PR.D | Perpetual-Discount | -4.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 20.19 Evaluated at bid price : 20.19 Bid-YTW : 6.09 % |
| GWO.PR.S | Insurance Straight | -2.71 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 21.50 Evaluated at bid price : 21.50 Bid-YTW : 6.20 % |
| PWF.PR.L | Perpetual-Discount | -2.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 21.05 Evaluated at bid price : 21.05 Bid-YTW : 6.11 % |
| IFC.PR.G | FixedReset Ins Non | -2.01 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 20.50 Evaluated at bid price : 20.50 Bid-YTW : 7.11 % |
| PWF.PR.Z | Perpetual-Discount | -1.70 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 21.43 Evaluated at bid price : 21.43 Bid-YTW : 6.06 % |
| CIU.PR.A | Perpetual-Discount | -1.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 19.52 Evaluated at bid price : 19.52 Bid-YTW : 5.91 % |
| PWF.PR.F | Perpetual-Discount | -1.45 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 21.55 Evaluated at bid price : 21.81 Bid-YTW : 6.06 % |
| PWF.PR.S | Perpetual-Discount | -1.37 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 20.18 Evaluated at bid price : 20.18 Bid-YTW : 6.00 % |
| PWF.PR.E | Perpetual-Discount | -1.04 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 22.60 Evaluated at bid price : 22.85 Bid-YTW : 6.06 % |
| BN.PF.B | FixedReset Disc | 1.03 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 17.73 Evaluated at bid price : 17.73 Bid-YTW : 8.21 % |
| MFC.PR.J | FixedReset Ins Non | 1.07 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 21.38 Evaluated at bid price : 21.65 Bid-YTW : 6.82 % |
| BN.PR.R | FixedReset Disc | 1.08 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 15.03 Evaluated at bid price : 15.03 Bid-YTW : 8.35 % |
| BN.PR.T | FixedReset Disc | 1.11 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 15.55 Evaluated at bid price : 15.55 Bid-YTW : 8.21 % |
| BIP.PR.B | FixedReset Disc | 1.28 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2025-12-31 Maturity Price : 25.00 Evaluated at bid price : 23.75 Bid-YTW : 7.73 % |
| BMO.PR.S | FixedReset Disc | 1.29 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 18.84 Evaluated at bid price : 18.84 Bid-YTW : 7.20 % |
| NA.PR.G | FixedReset Disc | 1.32 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 21.83 Evaluated at bid price : 22.32 Bid-YTW : 6.66 % |
| BN.PR.X | FixedReset Disc | 1.36 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 16.44 Evaluated at bid price : 16.44 Bid-YTW : 7.56 % |
| CU.PR.C | FixedReset Disc | 1.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 20.46 Evaluated at bid price : 20.46 Bid-YTW : 6.73 % |
| MFC.PR.M | FixedReset Ins Non | 1.54 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 17.80 Evaluated at bid price : 17.80 Bid-YTW : 7.63 % |
| BMO.PR.Y | FixedReset Disc | 1.56 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 19.50 Evaluated at bid price : 19.50 Bid-YTW : 7.00 % |
| MFC.PR.K | FixedReset Ins Non | 1.58 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 19.30 Evaluated at bid price : 19.30 Bid-YTW : 7.11 % |
| BN.PR.Z | FixedReset Disc | 1.84 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 21.75 Evaluated at bid price : 22.15 Bid-YTW : 7.03 % |
| BIP.PR.F | FixedReset Disc | 1.92 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 21.20 Evaluated at bid price : 21.20 Bid-YTW : 7.27 % |
| CM.PR.O | FixedReset Disc | 2.15 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 18.55 Evaluated at bid price : 18.55 Bid-YTW : 7.24 % |
| TRP.PR.F | FloatingReset | 3.22 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 16.05 Evaluated at bid price : 16.05 Bid-YTW : 10.24 % |
| NA.PR.S | FixedReset Disc | 3.31 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 18.70 Evaluated at bid price : 18.70 Bid-YTW : 7.37 % |
| MFC.PR.C | Insurance Straight | 3.34 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 20.10 Evaluated at bid price : 20.10 Bid-YTW : 5.69 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.N | FixedReset Ins Non | 150,100 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 17.43 Evaluated at bid price : 17.43 Bid-YTW : 7.64 % |
| GWO.PR.N | FixedReset Ins Non | 100,200 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 12.46 Evaluated at bid price : 12.46 Bid-YTW : 7.99 % |
| RY.PR.J | FixedReset Disc | 41,103 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 19.13 Evaluated at bid price : 19.13 Bid-YTW : 7.26 % |
| MFC.PR.Q | FixedReset Ins Non | 40,200 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 20.33 Evaluated at bid price : 20.33 Bid-YTW : 7.19 % |
| MFC.PR.J | FixedReset Ins Non | 33,500 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 21.38 Evaluated at bid price : 21.65 Bid-YTW : 6.82 % |
| PWF.PR.Z | Perpetual-Discount | 30,525 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2053-02-07 Maturity Price : 21.43 Evaluated at bid price : 21.43 Bid-YTW : 6.06 % |
| There were 9 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| CM.PR.Q | FixedReset Disc | Quote: 19.67 – 23.70 Spot Rate : 4.0300 Average : 2.3514 YTW SCENARIO |
| GWO.PR.T | Insurance Straight | Quote: 21.58 – 22.99 Spot Rate : 1.4100 Average : 0.8675 YTW SCENARIO |
| IFC.PR.G | FixedReset Ins Non | Quote: 20.50 – 21.49 Spot Rate : 0.9900 Average : 0.6337 YTW SCENARIO |
| CU.PR.D | Perpetual-Discount | Quote: 20.19 – 21.20 Spot Rate : 1.0100 Average : 0.6657 YTW SCENARIO |
| GWO.PR.S | Insurance Straight | Quote: 21.50 – 22.27 Spot Rate : 0.7700 Average : 0.4795 YTW SCENARIO |
| MFC.PR.B | Insurance Straight | Quote: 20.52 – 21.25 Spot Rate : 0.7300 Average : 0.4406 YTW SCENARIO |