Susan Collins, head of the Boston Fed, and Tom Barkin, head of the Richmond Fed, spoke on the situation in the US economy, the banking crisis and monetary policy. In the first reaction, the dollar index USDIDX weakened.
Fed Barkin
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Create account Try a demo Download mobile app Download mobile app- I have reason to believe it will take some time to fight inflation. The impact of the run on banks on the Fed's rate path is difficult to determine now;
- Monitoring credit card spending helps determine whether demand has stabilized. US households still have plenty of money to spend;
- The Fed will have to be quick to assess the effects of bank stress with upcoming inflation data. It's too early to determine the effect of bank stress on credit and inflation;
- Not every bank failure becomes Lehman Brothers. Deposit flows among U.S. banks are relatively stable, we see some evidence of resilience.
Fed Collins
- A reduction in inflation in 2023 will make it likely that the Fed will not cut rates this year. However bigger banking sector turmoil could have an impact on policy changes;
- The Fed will use all available tools to combat stress in financial markets. The current crisis has eased some of the Fed's pressure to raise interest rates;
- I'm paying more attention to issues related to the banking sector. I estimate that inflation will reach 2% by 2025.
- Labor market data may be a lagging indicator. Wage pressures are key to inflation as the labor market remains strong;
- The economy doesn't need a recession to reduce inflation but it's difficult to fight with it without an increase in unemployment;
- The impact of the run on banks on the Fed's rate path is difficult to determine. Recent data indicate that the economy is doing better than expected;
- The economy is likely already feeling the effects of the Fed's restrictive policies. Labor market strength is expected to moderate more. After another hike, the Fed is likely to keep interest rates stable until the end of the year.
- The banking sector is strong and resilient, but credit is likely to be curtailed which will affect the economy. The Fed's forecast of one more hike in 2023 seems reasonable. Inflation is still too high.
USDIDX chart, D1 interval. The dollar's strength is clearly weakening and a test of the psychological support near 100 points is still possbile The SMA100 and SMA200 moving averages formed a bearish death cross formation, and the price failed to stay above the 38.2 and 23.6 Fibonacci retracement of the upward wave that began in the beginning of 2021. Source: xStation5
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