Economic news

Speaking in an interview following the G-20 summit in New Delhi, Treasury Secretary Janet Yellen said she is optimistic that the United States will be able to tame inflation without dipping the economy into recession.

More than half of 526 respondents to a Markets Live Pulse survey said that personal consumption — the most important driver of economic growth — will shrink in early 2024, which would be the first quarterly decline since the onset of the pandemic.

Federal Reserve Chair Jerome Powell said inflation relief from the housing sector is "in the pipeline" but some say strong underlying demand and an inadequate housing supply could disrupt future rate pauses or cuts.

The Federal Reserve has been reducing its liabilities steadily since last March, and those effects are starting to be felt. But how low it should ultimately go — and how long it can stay low — is a tricky question.

The reserve bank formally kicked off its search to replace former President James Bullard, who held a doctorate in economics and was lauded for his communication skills.

In his highly anticipated speech in Jackson Hole, the Federal Reserve chair acknowledged the progress made in cooling down inflation, but said the central bank would not hesitate to raise rates further if needed.

Federal Reserve chair Jerome Powell is expected to tout the economy's brightening prospects while communicating to markets that the central bank's fight against inflation is not yet over in his address at an economic summit in Jackson Hole, Wyo. on Friday.

As consumers' cushion shrinks, they are becoming more dependent on their paychecks to maintain their standard of living. Economists are split on whether wage growth is strong enough to fill the gap.

Key data points have shown price and wage pressures continue to dissipate, which should bolster the case for an end to rate increases, but strong labor-market activity may keep policymakers uneasy.

Tighter credit standards and lower demand for business loans could make it harder for the Fed to achieve the soft landing it's seeking. Still, bankers are cautiously optimistic, noting that some businesses are using their savings to invest at a time when borrowing costs are high.

Community bankers anticipate that interest rates could soon level off and the broader economy may avert a downturn as a result. If that forecast proves true, lenders could minimize credit losses and enjoy stronger loan demand than they had expected earlier in the year.

The central bank might be able to avoid a recession, but must not sacrifice the economic well-being of communities harmed the most by high interest rates.

Moody's said higher funding costs, a potential decline in bank capital and growing risk in the commercial real-estate industry prompted many of the downgrades.

Federal Reserve Bank of Richmond President Thomas Barkin said the greater-than-expected easing in inflation in June may be an indication that the U.S. economy can have a "soft landing," returning to price stability without a damaging recession.

"I haven't made up my mind for what should happen in September," Goolsbee said.

Stock markets have shot up as investors grow hopeful that the United States will avoid a recession. But nearly 3 in 4 community bankers are less optimistic that the Fed will achieve its mission of reducing inflation without causing a downturn, a survey from IntraFi found.

They're wary of deteriorating economic conditions and the bite higher interest rates could take out of profits, according to the latest index of small-bank executives' sentiments by the Conference of State Bank Supervisors. The index fell to its lowest level since it was created in 2019.

After holding at its last meeting, the Federal Open Market Committee may decide to raise rates again in July.

The American Bankers Association's credit conditions index remained near historic lows despite a slight uptick in the most recent quarter. Pessimism pervaded the outlook for both business and consumer lending.

In a speech, the Federal Reserve Board governor said tighter monetary policy is not to blame for the volatility seen in the banking system this spring.