2023-12-11 16:01

NEW YORK, Dec 11 (Reuters) - The path U.S. consumers expect inflation to take over the next year softened in November to the lowest level in more than two years, amid retreating projections of higher gasoline and rental costs, a New York Federal Reserve survey showed on Monday. Consumers expect inflation to be at 3.4% a year from now, down from an expectation of 3.6% in October and the lowest reading since April 2021, the regional Fed bank said in its latest Survey of Consumer Expectations. The report said that inflation at the three- and five-year horizons was steady at 3% and 2.7%, respectively. Amid the near-term retreat in expected inflation, respondents to the New York Fed survey also projected smaller rises in the cost of gasoline and rent. The rise in fuel costs is seen at 4.5% a year from now, down from the expected 5% in October, while rent was seen at 8%, a drop from an expected increase of 9.1% in October. The year-ahead expected rise in rent was the lowest since January 2021. The New York Fed released the survey a day before the start of the U.S. central bank's final two-day policy meeting of 2023. Financial markets overwhelmingly expect the Fed to leave its benchmark overnight interest rate unchanged in the 5.25%-5.50% range. The main reason the Fed is likely to hold rates steady owes to falling real world inflation pressures, as inflation moves back toward the central bank's 2% target. The softening in expected inflation will likely buttress Fed officials' desire to stand pat on rates, as the central bank collectively believes that where inflation is expected to go imposes a strong gravitational pull on where it is now. The New York Fed finding of easing inflation expectations is further supported by data released on Friday by the University of Michigan, which also found a sharp retreat in where the public sees inflation in a year, at 3.1% in December from 4.5% in November. In a press conference following the U.S. central bank's last policy decision in early November, Fed Chair Jerome Powell said that amid the inflation surge of the last few years, readings showing relatively contained inflation expectations have given policymakers confidence it could return to its 2% target. "It's just clear that inflation expectations are in a good place," Powell said at the time, adding that "the public does believe that inflation will get back down to 2% over time, and it will - they're right." New York Fed President John Williams said last month that retreating year-ahead expected inflation readings are flirting with the range they were in between 2014 and 2019, which was a time of tepid inflation gains. The New York Fed report also found what it deemed "mixed" expectations for the job market, with projections of moderating income gains and more concern about losing one's job, even as there was less worry about a rising unemployment rate. The regional Fed bank also said household financial assessments were mostly unchanged in November, both in terms of current views and expectations. https://www.reuters.com/markets/us/near-term-expected-us-inflation-more-than-2-year-low-ny-fed-says-2023-12-11/

2023-12-11 15:49

NEW YORK, Dec 11 (Reuters) - JPMorgan Chase (JPM.N) is preparing to overhaul branches it acquired from failed First Republic Bank as the lender expands its formidable national footprint. "Branches have been a winning strategy for us that is helping us capture more market share,” Jennifer Roberts, CEO of Chase Consumer Banking, told Reuters in an interview. Of the customers who hold deposits with the bank, 75% visit a branch annually, she said. The largest U.S. lender has more than 4,800 branches across 48 states. By the end of this year, JPMorgan is likely to open 167 locations, exceeding an earlier projection of 150, Roberts said. Rival Bank of America (BAC.N) is also adding branches. The moves contrast with a national decline as consumers use more online services. U.S. banks closed 123 branches and opened 80 in October, bringing the total number of active bank branches at the end of the month to 77,690, according to S&P. JPMorgan added 84 branches when it acquired First Republic in May, the largest bank to fail since 2008. In June, JPMorgan announced plans to shut 21 of those locations. “Even though there could be some branch network consolidations, the total number of new branches would be higher and you will see our branch network growing,” Roberts said. JPMorgan had the highest net branch openings in the U.S. in October, opening 22 branches and closing 14 others, according to S&P. In the last 12 months, the company has opened 157 branches and closed 163. FIRST REPUBLIC'S RECIPE JPMorgan has retained 90% of First Republic customers, Marianne Lake, Co-CEO of JPMorgan's consumer and community bank, told investors last week. The lender will start the branch makeover by shutting two flagship sites in New York and San Francisco that will reopen in June. The two revamped locations will be reopened as the first-ever JPMorgan branches focused on affluent clients and have a different design than Chase retail branches. They will probably incorporate some of First Republic's signature perks, like umbrellas, cookies and coffee. "The strategy here is to take some of the white glove service that First Republic had, and their clients love, and marry that with the scale that JPMorgan has," said Mark O'Donovan, the CEO of Chase Home Lending who is among the executives overseeing the First Republic integration process. First Republic had a "very nice recipe" for serving affluent clients that JPMorgan aims to retain, Roberts said. "There is an opportunity to do that more there by elevating training and we are figuring out how we can accomplish it," she added. The morning after the acquisition was announced, Roberts and O'Donovan were at First Republic's headquarters in San Francisco to plan the integration and addressed employees to allay their concerns after the bank collapsed. While there have been some departures, a majority of First Republic employees who moved to JPMorgan in July have stayed put, a spokesperson said. "Even though we saw some attrition in the summer mainly from the sales team or bankers who were in client relationship roles, it has largely stabilized now," O'Donovan said. https://www.reuters.com/business/finance/jpmorgan-begins-first-republic-makeover-it-opens-more-branches-2023-12-11/

2023-12-11 15:38

JOHANNESBURG, Dec 11 (Reuters) - The South African rand fell against the dollar on Monday, weakened by expectations the U.S. Federal Reserve might not cut interest rates early next year and ahead of a week of local and global economic data releases. At 1511 GMT, the rand traded at 19.0925 against the dollar , over 0.6% weaker than its previous close. The dollar index last traded around 0.18% stronger against a basket of global currencies. "This follows Friday's strong U.S. jobs data which has seen traders rethink the potential for Fed rate cuts early in 2024," said Lloyd Miller, head of financial markets at ETM Analytics. "The currency's usual fragility and volatility (is) on display amid South Africa's weak economy and persistent fiscal and political risks," Miller added. This week global investors await several developed market central bank meetings and data on U.S. inflation that could hint at the possibility of interest rate cuts next year. Locally, investors will on Tuesday focus on mining and manufacturing figures before turning their attention towards consumer inflation for November on Wednesday. The October inflation reading neared the upper limit of the central bank's target range of 3% to 6% and influenced its decision to keep its main interest rate unchanged at its November meeting. On the Johannesburg Stock Exchange, the blue-chip Top-40 index ended almost 0.2% higher. South Africa's benchmark 2030 government bond was weaker, with the yield up 8 basis points to 10.135%. https://www.reuters.com/markets/currencies/south-african-rand-weaker-doubts-over-early-fed-rate-cut-2023-12-11/

2023-12-11 15:38

JOHANNESBURG, Dec 11 (Reuters) - The South African rand was weaker in early trade on Monday ahead of a week jam-packed with both local and global economic data releases. At 0645 GMT, the rand traded at 19.0150 against the dollar , about 0.2% weaker than its previous close. The dollar last traded around 0.07% stronger against a basket of global currencies. This week global investors await several developed market central bank meetings and data on U.S. inflation that could hint at the possibility of interest rate cuts next year. Locally, investors will on Wednesday turn their attention to consumer inflation for the month of November. The October inflation reading neared the upper limit of the central bank's target range of 3% to 6% and influenced its decision to keep its main interest rate unchanged at its November meeting. South Africa's benchmark 2030 government bond was slightly weaker in early deals, with the yield up 1.5 basis points to 10.070%. https://www.reuters.com/markets/currencies/south-african-rand-weaker-ahead-data-filled-week-2023-12-11/

2023-12-11 13:04

Most analysts in Reuters poll expect rate hike to 16% Bank of Russia to announce decision at 1030 GMT Friday Governor Nabiullina to hold media briefing at 1200 GMT Friday This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine MOSCOW, Dec 11 (Reuters) - Russia will raise interest rates to 16% on Friday, a Reuters poll showed on Monday, with inflation pressure exacerbated by labour shortages and lending growth forcing the central bank to extend its monetary tightening cycle to one last hike. The expected 100 basis point increase at the Bank of Russia's final meeting of the year should mark the end of a tightening spree that began in July, when rates were as low as 7.5%. Stubbornly persistent inflation pressure, aggravated by the rouble's dramatic weakening earlier this year, as well as labour shortages, government spending and high lending, has pushed rates to their current level of 15%. Twenty-three of 27 analysts and economists polled by Reuters on Monday predicted that the Bank of Russia would raise its key rate (RUCBIR=ECI) to 16% at Friday's meeting. Three predicted a sharper hike, one forecast a hold at 15%. The bank surprised analysts in late October with a stronger-than-expected 200 basis point hike to 15%. Alexander Fetisov, head of Rosselkhozbank's analytics department, forecast a 100-basis point hike, with higher credit growth and increasing inflation expectations creating grounds for the central bank to make another hike and maintain tight rhetoric. "A more radical increase cannot be ruled out with the aim of mitigating likely inflation trends at the start of 2024 and to maintain the inflation forecast range for 2024 at 4-4.5%," Fetisov said. Monthly inflation accelerated in November at its fastest pace since April 2022, data showed on Friday, all but cementing analyst expectations for a hike. Annual inflation stood at 7.48% last month, well above the bank's 4% target and almost exceeding its 7-7.5% forecast range for 2023. "The overheated labour market, growing state spending and active issuance of subsidised mortgages are leading to significant inflationary pressure," said Sovcombank, forecasting a hike to 16%. Inflation and high interest rates are among challenges facing Russia's economy as President Vladimir Putin prepares for a March presidential election, though Moscow's success in evading a Western oil price cap is helping drive a recovery in economic growth and easing pressure for now. In late February 2022 Russia ramped up its benchmark rate to 20% in an emergency move after Moscow despatched tens of thousands of troops to Ukraine, which led to increasingly wide-ranging Western sanctions being imposed in response. The key rate was then gradually cut to 7.5%, before the bank started hiking in July. https://www.reuters.com/markets/europe/russia-end-rate-hiking-cycle-with-final-increase-16-friday-2023-12-11/

2023-12-11 12:12

NEW YORK, Dec 11 (Reuters) - Bond investors are expecting the Federal Reserve this week to temper the market's conviction that U.S. interest rates will be cut early next year, even as portfolios get positioned for lower yields later in 2024. Many portfolio managers have reduced long-duration bets to be more neutral on their bond positions, at least in the short term. Going long duration against a benchmark reflects expectations U.S. yields will fall because the Fed will cut rates. Investors widely expect the Fed to hold interest rates steady on Wednesday but do not expect it to signal a shift from its tightening policy stance. According to a Reuters poll of economists, the Fed will keep rates unchanged until at least July, later than earlier thought. In contrast, federal funds futures, the most straightforward measure of determining where traders believe the Fed's benchmark overnight rate will be at any given time, lowered the odds of a rate cut in March on Friday, pricing in about a 46% chance, from 64% a week ago following a stronger-than-expected U.S. payrolls report. Futures traders still saw a 79% chance in May, according to the CME's FedWatch, but that was also down from 90% a week earlier. Fed Chair Jerome Powell had said, in a Dec. 1 speech, that while the target rate is "well into restrictive territory," the Fed is prepared to tighten policy further if deemed appropriate. "There's a real disconnect between what the Fed says and what they would like to see in terms of tighter financial conditions and what the market is doing," said John Velis, head of U.S. macro strategy, at BNY Mellon in New York. "What that means is that Dec. 13 is going to be a hawkish meeting. I don't think the Fed will announce a pivot. You may see the dots push back against market pricing for early rate cuts," referring to the Fed's closely followed dot plot, which comes out four times a year and graphs policymakers' rate projections. Recent U.S. economic numbers have shown a resilient economy despite aggressive rate hikes since March last year. Friday's U.S. non-farm payrolls, for example, showed a still-robust labor market, creating 199,000 new jobs in November, beating consensus expectations and rising from the previous month. The unemployment rate also slipped to 3.7%. U.S. inflation is slowing but is still a ways away from the Fed's 2% inflation target. BIG BOND RALLY With investors anticipating Fed rate cuts, investors bought Treasuries, pushing 10-year yields 78 basis points (bps) lower since November, and two-year yields down roughly 49 bps. The rapid decline in yields has made "financial conditions looser than they otherwise would have been," said James Camp, managing director of fixed income and strategic income, at Eagle Asset Management. That was a reversal from late October when the 10-year yield hit 5%. Market participants reckoned at the time that the Fed may not be as aggressive in raising rates because the bond market was doing the job for them by pushing yields higher. "We now have the mirror opposite of that," Camp said. "It's going to be interesting to see if there's a hawkish dialogue from the Fed because I think they need to do that if they really want the economy to continue to slow." FROM LONG TO NEUTRAL, FOR NOW With asset managers betting on "higher-for-longer" rates at least until the summer, their portfolios have become more neutral or closer to their benchmark, from being long duration. Duration, expressed in years, measures how much a bond's price will move when the Federal Reserve changes interest rates. "We were at the longest duration a couple of weeks ago," said Andrew Szczurowski, head of agency mortgage-backed securities and portfolio manager at Morgan Stanley Investment Management. Szczurowski said with the 80-90 basis point drop in yields, "we're getting closer to neutral." The ultimate goal, however, is still to extend duration as the Fed will eventually cut rates. When the Fed embarks on an easing cycle, longer-duration securities tend to rally. "We see the beginnings of recession actually hitting in the second quarter and we expect the Fed to cut at the back half of the year," said Eagle's Camp. https://www.reuters.com/markets/us/bond-investors-brace-fed-pushback-rate-cuts-2023-12-11/