2024-01-11 21:22

Jan 11 (Reuters) - Chicago Federal Reserve President Austan Goolsbee on Thursday called 2023 a "hall-of-fame" year for falling inflation, which has paved the way for a few U.S. interest rate cuts in 2024 as long as that trend continues. At the same time, Goolsbee said, he needs to see more data confirming the recent easing in price pressures to judge how soon or how fast those cuts in borrowing costs should take place. "I still think that the primary determinant of when and how much rates should be cut will be driven off what's happening to the inflation data, and are we meeting the mandate goals," Goolsbee told Reuters in an interview. "When we have weeks or months of data to come, I don't like tying our hands ... We don't make decisions about March, June and whatever, in January." The Fed's rate-setting committee last month voted to keep the U.S. central bank's policy rate in the 5.25%-5.50% range, where it has been since last July, and signaled rate cuts this year, with the median of policymakers' individual projections pointing to a 4.6% policy rate by the end of 2024. One policymaker forecast a below-4% policy rate by the end of this year. "I wasn't the lowest," Goolsbee said in the interview. "I was closer to the median." 'GOLDEN PATH' Data published earlier on Thursday showed the consumer price index (CPI) rose 3.4% in December from a year earlier. Goolsbee said that reading was "pretty close" to expectations, though he added that services inflation was cooler than he had expected and housing inflation came in a bit hotter. Still, he said, the latter may have limited implications for the Fed's 2% inflation target, which is measured by a different gauge - the personal consumption expenditures price index - within which shelter inflation is given less weight. Other data suggests rents are coming down, which should eventually factor in to overall inflation readings, he said. Goolsbee has frequently said he believes the Fed has a shot at finding a "golden path" to bringing down ongoing high levels of inflation without also causing unemployment to surge. So far "we're still on it," he told Reuters. "The inflation rate came down an astounding amount for any year, much less a year in which the unemployment rate did not go up," he said. Inflation, as measured by the CPI, started last year at 6.3%. Data released last week showed the unemployment rate was 3.7% in December, just one-tenth of a percentage point above its level when the Fed began raising interest rates from the near-zero level in March 2022. There are risks to that path, Goolsbee said, including if housing inflation persists or if there are new supply shocks, such as what could occur from disruptions of shipping in the Red Sea. But the risks this year are different from last year in that they also include the potential that monetary policy could stay tight for too long, causing unemployment to rise, he added. The Fed's mandate is twofold: stable prices and maximum employment. With price pressures still too high, the Fed's rate-setting decisions have been primarily focused on getting inflation back to the 2% target. "If it continues to be clear that we are on (the) path to get back to that, then we also start paying more attention to the other side of the mandate," Goolsbee said. BALANCE SHEET As Fed policymakers weigh when they ought to start cutting rates, some have also begun to think about what to do with the central bank's balance sheet, which they began shrinking in May 2022. Goolsbee said the Fed's "autopilot" approach to the balance sheet reductions has served the Fed well, because investors understand the process and it does not need to be debated at each meeting. "We've got to have a high bar before we get off of it," he said, adding that bank reserves are still abundant, meaning there is little risk for now that further reductions could disrupt financial markets. He said he would defer to Chair Jerome Powell about when to start conversations on slowing or halting those reductions. https://www.reuters.com/markets/us/goolsbee-sees-progress-inflation-says-his-rate-cut-forecast-near-fed-median-2024-01-11/

2024-01-11 20:46

WASHINGTON, Jan 11 (Reuters) - U.S. enforcement of the G7's price cap on Russian oil since October is hitting the price Russia can get for its oil in global markets and reducing revenues for its war on Ukraine, a U.S. Treasury official told reporters on Thursday. The discount of Russian Urals crude oil to international benchmark Brent crude has risen about 40% since the U.S. started increasing enforcement of the G7's price cap by placing sanctions on tankers suspected of carrying Russian crude priced above the $60 a barrel cap. The price cap imposed by the Group of Seven countries, the European Union and Australia bans the use of Western maritime services such as insurance, flagging and transportation when tankers carry Russian oil priced at or above $60 a barrel. The West imposed the mechanism after Russia's February, 2022 invasion of Ukraine. The discount for Russian Urals to the Brent has widened from about $13 a barrel in October to about $18.50 a barrel now, the official said. Since October, the Treasury Department has imposed sanctions on about eight tankers suspected of breaching the price cap. The wider discount is a "meaningful link to the fact that the market is being more receptive to our enforcement and compliance actions around the price cap," the Treasury official said, on condition of anonymity. Proceeds from oil and gas sales for Russia's federal budget fell by about 24% to 8.822 trillion roubles ($99.4 billion) last year, Russian finance ministry data showed on Thursday, following weaker oil prices and reduced gas sales to Europe. Moscow however, has said it expected revenues to recover to 11.5 trillion roubles in 2024 as Russia has managed to redirect oil it used to sell to Europe to China and India. The U.S. Treasury says that redirection of oil trade and other costs for Russia on using non Western services decreases it revenues to fight the war in Ukraine. (This story has been corrected to say that the discount of Russian Urals crude oil to international benchmark Brent crude has risen, instead of fallen, in paragraph 2) https://www.reuters.com/markets/commodities/enforcement-g7-price-cap-hitting-russian-oil-prices-us-treasury-official-2024-01-11/

2024-01-11 20:22

RICHMOND, Virginia, Jan 11 (Reuters) - U.S. Federal Reserve officials took little fresh signal from consumer price data published on Thursday as they gauge whether inflation is headed firmly enough back to the central bank's 2% target to allow them to reduce interest rates in coming months. Overall consumer price inflation on a 12-month basis rose to 3.4% in December from 3.1% the month before. But excluding volatile food and energy costs the pace of price increases fell to 3.9% from 4%, showing ongoing moderation in underlying price pressures. It was an ambiguous outcome at a time when Fed officials are looking for some final but convincing bits of evidence that the pandemic-era spike in inflation has dissipated to the degree they can begin easing monetary policy and begin reducing the benchmark interest rate. To Chicago Fed Bank President Austan Goolsbee, the data marked the final month of a "hall of fame" year for inflation reductions, and though housing inflation came in a bit hotter than he had anticipated, services inflation improved more than he had forecast. Still, Goolsbee signaled he's not sure if it is enough progress for the Fed to start cutting rates. "When we have weeks or months of data to come, I don't like tying our hands," he said. The December CPI report "just shows there is more work to do and that work is going to take restrictive monetary policy," Cleveland Fed President Loretta Mester said in an interview with Bloomberg TV. "I think we need to see more evidence," before reducing interest rates, she said, with a March rate cut, currently anticipated by financial markets, "too early in my estimation." In separate comments to reporters following a presentation at the Virginia Bankers Association, Richmond Fed President Thomas Barkin said the December inflation report was "about as expected," with prices rising slowly for goods but shelter and services costs still increasing at a more vigorous pace. Barkin said that did not add to the sort of "conviction" about future declines in inflation that he feels he would need to begin reducing the Fed's target interest rate. "This gap between services and shelter and goods is one that I am watching carefully because you would not want a goods deflationary cycle to end and find yourself disproportionately bearing the cost of shelter and services," Barkin said. While noting the progress the Fed has seen in inflation this year, with some measures close to the central bank's 2% target over the past six months, "you'd have even more reassurance...if it were broader based" and included a slower pace of price increases for services and housing costs, Barkin said. The Fed is expected to hold its policy rate steady at the upcoming Jan. 30-31 meeting, but financial markets anticipate rate cuts will begin in March. https://www.reuters.com/markets/us/fed-officials-say-december-cpi-did-little-clarify-path-inflation-2024-01-11/

2024-01-11 20:12

Jan 11 (Reuters) - Cryptocurrency asset manager Grayscale Investments plans to file for a covered call exchange-traded fund in an effort to allow investors to generate income from options on its Grayscale Bitcoin Trust , said CEO Michael Sonnenshein. GBTC began trading as an ETF on Thursday on NYSE Arca after the U.S. Securities and Exchange Commission approved its conversion -- along with a spate of other proposals for spot bitcoin ETFs -- a day earlier. "This should be received as a declaration of not only not just having gotten GBTC to market as a spot bitcoin ETF, but our commitment to the product's growth and the ecosystem around the product itself," Sonnenshein said in an interview. Grayscale sued the SEC after it rejected its application to convert its existing trust into an ETF, and a federal appeals court ruled in the firm's favor in August, sparking optimism among market participants that the SEC could finally greenlight the products after a decade-long tussle. https://www.reuters.com/technology/grayscale-file-bitcoin-covered-call-etf-ceo-2024-01-11/

2024-01-11 20:06

WASHINGTON, Jan 11 (Reuters) - The U.S. Congress must raise spending on a food assistance program for low-income women and children or 2 million could be turned away this year, Biden administration officials said on Thursday. A bitterly divided Congress has for months failed to reach agreement on 2024 government spending levels and is racing to avert a partial shutdown on Jan. 19. An eventual deal should include $1 billion more for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), said Agriculture Secretary Tom Vilsack and White House Domestic Policy Council Director Neera Tanden on a call with reporters. The program, which had a budget of $6 billion last year, is facing a shortfall due to rising food costs and higher participation. The funding gap could result in as many as 2 million people being turned away from the program this year, according to a December analysis by the nonpartisan Center on Budget and Policy Priorities. "The longer Congress puts off fully funding WIC, the greater the risk grows to moms, babies and children who need and are seeking nutrition and health support from the program," Vilsack said. WIC provides food, nutrition education and healthcare referrals to about 6.7 million low-income people each year including about half of all infants born in the U.S., according to the Department of Agriculture, which administers the program. A stopgap federal funding bill in November that narrowly averted a government shutdown extended some nutrition programs until Sept. 30, but not WIC. If Congress does not raise spending levels, states would have to put applicants on wait lists, said Paul Throne, WIC director for Washington State, on the call. "We’re struggling to understand how we’re going to continue to serve the people who need us," Throne said. "We have not had waiting lists in Washington State for at least 30 years." https://www.reuters.com/world/us/millions-us-women-children-risk-hunger-without-more-aid-funding-white-house-says-2024-01-11/

2024-01-11 19:42

NEW YORK, Jan 11 (Reuters) - Traders in the U.S. equity options market are guarding against a drop in shares of the biggest regional bank exchange-traded fund, days before reports from lenders are set to kick off the corporate earnings season. The $3.8 billion SPDR S&P Regional Banking ETF (KRE.P), which tracks regional bank stocks, was recently down 2.3% at $50.56. The S&P 500 (.SPX), by contrast, was down around 0.2%. The defensive options bets are likely from investors guarding against possible declines following earnings report from the sector, market participants said. JPMorgan Chase (JPM.N), Bank of America (BAC.N) and Wells Fargo (WFC.N) are all set to report on Friday, with other big banks to post results in the following days. "If the big banks sneeze, the smaller banks catch cold, so playing defense in KRE is not unreasonable from that viewpoint," said Steve Sosnick, chief strategist at Interactive Brokers. While the positioning is not "overwhelmingly" defensive, general investor disinterest in hedging with put options in the broader market may be throwing the bearish trading in KRE into sharper relief, Sosnick said. On Thursday, some 134,000 KRE options contracts changed hands by 1:30 p.m. (1830 GMT), or 1.8 times the usual volume. Volume in put contracts, typically bought to protect against a drop in a share price, was twice its daily pace, according to data from options analytics service Trade Alert. Thursday's action follows a large bearish trade on Wednesday in which a trader bought 56,000 put contracts for $4.6 million to guard against a more than 16% decline in the ETFs shares by mid-May. "We had seen more selling in KRE recently, but this is a big downside volatility purchase," Chris Murphy, co-head of derivative strategy at Susquehanna Financial Group, said in a note. The Financial Select Sector SPDR Fund (XLF.P), which counts some of the biggest U.S. banks in its top 10 largest holdings, also drew bearish options action on Thursday. The financials ETF's shares were down 0.7% in afternoon trade on Thursday. KRE shares are up about 40% since May 2023, when they bottomed after the collapse of several regional banks. Options traders expect KRE shares to swing by 3.5%, in either direction by Friday, Jan. 19, LSEG data showed. https://www.reuters.com/markets/us/regional-bank-etfs-options-draw-defensive-plays-with-earnings-ahead-2024-01-11/