Recent Economic and Financial Developments by Sylvain Leduc
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Sylvain Leduc shares his views on inflation and the economy during a prepared presentation and answers questions from the audience.
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Recent Economic and Financial Developments by Sylvain Leduc
- 1. Recent Economic and Financial Developments Sylvain Leduc Executive Vice President & Director of Research Views expressed are those of the presenter and not necessarily those of the Federal Reserve Bank of San Francisco or the Federal Reserve System Conference on Teaching and Research in Economic Education (CTREE) Portland, Oregon May 31, 2023
- 2. Federal Reserve Bank of San Francisco Please scan the QR code slido.com #2486 013 Join the Presentation Survey 2
- 3. The Fed has two mandates Maximum Employment Price Stability Everyone who wants a job has a job Dollar holds its value Federal Reserve Bank of San Francisco 3
- 4. Despite cooling signs, inflation remains much too high Headline personal consumption expenditures (PCE) inflation Federal Reserve Bank of San Francisco 4
- 5. Inflation remains much too high Core and headline personal consumption expenditures (PCE) inflation Federal Reserve Bank of San Francisco 5
- 6. Examining channels of inflation INFLATION Expectation s Federal Reserve Bank of San Francisco 6 Sectoral Factors Demand Factors
- 7. Federal Reserve Bank of San Francisco 7 Sectoral Factors
- 8. Spending patterns are normalizing Inflation-adjusted PCE for goods and services (trillions of chained 2012 U.S. dollars) Federal Reserve Bank of San Francisco 8
- 9. Federal Reserve Bank of San Francisco 9 Supply delivery times are getting shorter Seasonally adjusted, 50+ = slower
- 10. Federal Reserve Bank of San Francisco 10 Shipping costs back to pre-pandemic levels Freight cost indices (2019 = 100)
- 11. Goods price inflation is rapidly falling PCE goods price inflation Federal Reserve Bank of San Francisco 11 PCE durable goods price inflation
- 12. Inflation in the services sector still rising PCE services price inflation Federal Reserve Bank of San Francisco 12
- 13. Watching core nonhousing services inflation Contribution to headline PCE inflation Federal Reserve Bank of San Francisco 13
- 14. Housing market is rapidly cooling 12-month percent change in house prices and rents Federal Reserve Bank of San Francisco 14
- 15. Federal Reserve Bank of San Francisco 15 Demand Factors
- 16. Households still have “excess savings” Accumulated and drawn excess savings relative to pre-pandemic trend Federal Reserve Bank of San Francisco 16
- 17. Job gains are moderating, but remain strong Nonfarm payroll employment (thousands) Federal Reserve Bank of San Francisco 17
- 18. Fewer vacancies and workers quitting JOLTS: Quits and jobs openings rates Federal Reserve Bank of San Francisco 18
- 19. Federal Reserve Bank of San Francisco 19 Fewer quits should lower wage growth Median wage growth for job stayers and job switchers
- 20. Federal Reserve Bank of San Francisco 20 Expectations
- 21. Federal Reserve Bank of San Francisco 21 Households & firms expect higher inflation Household and business inflation expectations 1-year-ahead
- 22. Federal Reserve Bank of San Francisco 22 Households expect low inflation in the long run Expected inflation rates from Michigan Survey of Consumers
- 23. Federal Reserve Bank of San Francisco 23 Outlook & Monetary Policy
- 24. Policymakers see higher rates than markets expect Forward nominal funds rate and SEP median Federal Reserve Bank of San Francisco 24
- 25. Federal Reserve Bank of San Francisco 25 It will take some time for inflation to fall to 2% Unemployment and personal consumption expenditures inflation 2022 2023 2024 2025 Unemployment Rate 3.6 4.0 4.3 4.3 Headline PCE Inflation 5.7 3.4 2.9 2.2 Core PCE Inflation 4.8 4.0 2.9 2.2 Note: Values shown are Q4/Q4 percent; FRBSF forecasts are in bold.
- 26. Federal Reserve Bank of San Francisco 26 Risks
- 27. Federal Reserve Bank of San Francisco 27 1. Credit contraction
- 28. Federal Reserve Bank of San Francisco 28 Banks are tightening lending standards Net percentage of banks reporting tightening or easing
- 29. Bank lending on slowing trend Total and C&I bank lending Federal Reserve Bank of San Francisco 29
- 30. Federal Reserve Bank of San Francisco 30 2. Recession risk
- 31. Yield curve inversion highlighting recession risk 10Y-1Y Treasury bond yield curve Federal Reserve Bank of San Francisco 31
- 32. Despite tech layoffs, jobless claims remain low Initial unemployment insurance claims, millions (monthly) Federal Reserve Bank of San Francisco 32