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next rate hikes coulD be substantial
Fed official suggests substantial rate hikes may be needed
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Christopher Rugaber – The Associated Press
The Federal Reserve may have to raise its benchmark interest rate much higher than it has previously projected to get inflation under control, James Bullard, president of the Federal Reserve Bank of St. Louis, said
Thursday.
Bullard’s comments raised the prospect that the Fed’s rate hikes will make borrowing by consumers and businesses even costlier and further heighten the risk of recession. Wall Street traders registered their concern by sending stock market futures further into the red early Thursday. The Dow Jones
Industrial Average fell about 180 points, or 0.5%, in morning trading.
James Bullard, president of the St. Louis Federal Reserve Bank. >AP Photo/Steve Helber, File
Esther George, president of the Kansas City Fed
Bullard’s remarks followed speeches by other Fed officials in recent days that suggested they see only limited progress, at most, in their use of steadily higher rates to fight inflation. Bullard’s views have added significance because he is a voting member of the Fed’s rate-setting committee this year. The Fed’s key short-term interest rate “has not yet reached a level that could be justified as sufficiently restrictive,” Bullard said. “To attain a sufficiently restrictive level, the policy rate will need to be increased further.”
The Fed is seeking to raise borrowing rates to a level that restrains economic growth and hiring in order to cool inflation.
The central bank has rapidly raised its benchmark rate by an aggressive three-quarters of a point at each of its last four meetings — the fastest series of hikes since the early 1980s. The cumulative effect has been to make many consumer and business loans costlier and to raise the risk of a recession. Those increases have boosted the Fed’s shortterm rate to a range of 3.75% to 4%, up from nearly zero as recently as last March, to the highest level in nearly 15 years.
Bullard suggested that the rate may have to rise to a level between 5% and 7% in order to quash inflation, which is near a four-decade high. He added, though, that that level could decline if inflation were to cool in the coming months. Loretta Mester, president of the Cleveland Fed, echoed some of Bullard’s remarks in her own speech Thursday, when she said the Fed is “just beginning to move into restrictive territory.” That suggests Mester, one of the more hawkish policymakers, also expects rates will have to move much higher. In Fed parlance, hawks tend to focus more on lifting rates to combat inflation, while doves typically prefer lower rates to support growth and hiring. By contrast, Fed Vice Chair Lael Brainard, a more dovish official, suggested several times Monday that the Fed has already gotten rates to a level that restrains growth, though she added the central bank would need to move “further into restrictive” territory. And on Wednesday, Esther George, president of the Kansas City Fed, said in an interview with the Wall Street Journal that a recession was likely given how rapidly the Fed has tightened credit.
In fact, “I have not in my 40 years with the Fed seen a time of this kind of tightening that you didn’t get some painful The Fed is seeking outcomes,” she said. to raise borrowing Fed officials, including Chair rates to a level that Jerome Powell, have clearly restrains economic signaled that they will likely growth and hiring lift rates by a half-percentage in order to cool point at their next meeting in inflation. December, a step down from their previous increases. Yet at the same time, they have taken pains to emphasize that the smaller hikes — most analysts expect quarter-point increases at the February and March meetings — don’t mean the Fed is necessarily nearing an end to its increases, as the financial markets have often assumed. “Pausing is off the table right now — it’s not even part of the discussion,” San Francisco Federal Reserve president Mary Daly said in a Wednesday interview on CNBC.
In fact,
Rising food costs take a bite out of Thanksgiving dinner
Dee-Ann Durbin – The Associated Press
In early November, Hays Culbreth’s mother sent a poll to a few family members. She said she could only afford to make two sides for their group of 15 this Thanksgiving and asked them each to vote for their favorites.
Culbreth guesses green beans and macaroni and cheese will make the cut, but his favorite — sweet potato casserole with a brown sugar crust — will not.
“Talk about Thanksgiving being ruined,” joked
Culbreth, 27, a financial planner from Knoxville, Tennessee.
Americans are bracing for a costly Thanksgiving this year, with double-digit percent increases in the price of turkey, potatoes, stuffing, canned pumpkin and other staples. The U.S. government estimates food prices will be up 9.5% to 10.5% this year; historically, they’ve risen only 2% annually.
Lower production and higher costs for labor, transportation and items are part of the reason; disease, rough weather and the war in Ukraine are also contributors.
“This really isn’t a shortage thing. This is tighter supplies with some pretty good reasons for it,” said David Anderson, a professor and agricultural economist at Texas A&M.
Wholesale turkey prices are at record highs after a difficult year for U.S. flocks. A particularly deadly strain of avian flu — first reported in February on an Indiana turkey farm — has wiped out 49 million turkeys and other poultry in 46 states this year, according to the U.S. Centers for Disease Control.
As a result, U.S. turkey supplies per capita are at their lowest level since 1986, said Mark Jordan, the executive director of Jonesboro, Arkansasbased Leap Market Analytics. Jordan predicts the
wholesale price of a frozen, 8-16 pound turkey hen — the type typically purchased for Thanksgiving — will hit $1.77 per pound in November, up 28% from the same month last year.
Still, there will be plenty of whole birds for Thanksgiving tables, Jordan said. Companies have been shifting a higher percentage of birds into the whole turkey market for the last few years to take advantage of the consistent holiday demand. And not every producer was equally affected. Butterball — which supplies around one-third of Thanksgiving turkeys — said avian flu impacted only about 1% of its production because of security measures it put in place after the last big bout of flu in 2015. But it could be harder for shoppers to find turkey breasts or other cuts, Jordan said. And higher ham prices are giving cooks fewer cheap alternatives, he said. Avian flu also pushed egg prices into record territory, Anderson said. In the second week of November, a dozen Grade A eggs were selling for an average of $2.28, more than double the price from the prior year, according to the U.S. Department of Agriculture.
Egg prices would have been higher even without the flu, Anderson said, because of the rising cost of the corn and soybean meal used for chicken feed. Ukraine is normally a major exporter of corn, and the loss of that supply has caused global prices to soar.
Add that to rising prices for canned pumpkin — a 30-ounce can is up 17% from last year, according to market researcher Datasembly — and it’s clear Thanksgiving dessert will be costlier too. Nestleowned Libby — which produces 85% of the world’s canned pumpkin — said pumpkin harvests were in line with previous years, but it had to compensate for higher labor, transportation, fuel and energy costs.
The good news? Not every item on holiday shopping lists is significantly more expensive. Cranberries had a good harvest and prices were up less than 5% between the end of September and the beginning of November, said Paul Mitchell, an agricultural economist and professor at the University of Wisconsin. Green beans cost just 2 cents more per pound in the second week of November, according to the USDA.
