Author: smarttalksucce

Richmond Federal Reserve President Thomas Barkin said Friday he’s on board with reducing the amount of economic help the central bank is providing as concerns grow about inflation.

With the Fed indicating that it’s likely to start pulling back on its monthly bond purchases, Barkin said that seems reasonable, and he’s leaning toward beginning the process in November. Minutes from the September Fed meeting indicated that officials want to start tapering either next month or in December.

“If we do decide to taper at the next meeting, we’re going to have a discussion on which of those two dates, I’m sure, and my instinct would be if you’re going to decide it, go ahead and move,” he told CNBC’s Steve Liesman during a live “Squawk Box” interview. “But I’m certainly going to be open to debates on both sides.”

Fed officials have indicated they’ve met their inflation goal of 2%, though the full and inclusive employment part of the mandate remains elusive despite significant progress.

Like many of his colleagues, Barkin pointed to temporary factors like supply chain problems that have pushed car prices higher as a major factor in driving inflation, which is running around a 30-year high.

But he also conceded that it’s been a bigger problem that he expected.

“I do think there’s risk on the inflation side, and I’m watching that very carefully,” he said.

The minutes showed that the pace of bond purchases likely will slow by about $15 billion each month — $10 billion in Treasurys and $5 billion in mortgage-backed securities.

Fed officials have stressed that even after the start of tapering, it will be some time before interest rate hikes begin. Market pricing currently is for the first increase to come in July 2022, with another likely before the end of the year, according to the CME’s FedWatch tracker.

Barkin said he would base his rates decision on two factors — whether inflation is going to stay elevated or come back to its norm of around 1.5% to 2% of the past 25 years or so, and how close the labor market is to full employment.

“Is the labor market going to be this tight over the next six months? Is inflation going to come down or not?” he said. “Different answers to those questions in my mind would lead me to different points of view on when we would start to increase rates.”

He also was asked his position on whether Fed officials should be allowed to own individual stocks, but declined to answer pending an inquiry Chairman Jerome Powell is leading into best practices. Several officials have come under fire for trading stocks, and two regional presidents have resigned following controversies over their activities.

Consumers spent at a much faster pace than expected in September, defying expectations for a pullback amid pervasive supply chain problems, the Census Bureau reported Friday.

Retail sales for the month increased by 0.7%, against the Dow Jones estimate for a decline of 0.2%. Excluding auto-related sales, the number rose 0.8%, better than the 0.5% forecast.

Compared with a year ago, sales were up 13.9% on the headline number and 15.6% excluding autos.

The increase came during a month when the government ended the enhanced benefits it had been providing during the Covid-19 pandemic and against forecasts that growth would slow in the third quarter due to the delta variant spread and a perceived pullback in consumer activity.

But spending accelerated as coronavirus cases continued to drop.

“Students heading back to school and workers returning to the office are likely the catalysts for the increased retail sales,” said Natalie Kotlyar, national leader of BDO’s retail and consumer products practice. “People who are back to working in a downtown office may be taking more shopping trips on their lunch break or after work. With school back in session and many teens vaccinated, parents may also be more comfortable allowing their teens to take shopping trips to the mall.”

Sporting goods, music and book stores led the way with a 3.7% increase. General merchandise increased 2% while miscellaneous retailers rose 1.8%. As gas prices pushed higher, spending at fuel stations jumped 1.8%, for a 38.2% surge over the past year.

Food and beverage spending increased 0.7%, though restaurants and bars saw a gain of just 0.3%, a sign that fears over the virus may have kept some people at home. Food and drinking establishment spending is up 29.5% over the past year.

Online sales rose 0.6% for the month, while auto sales increased 0.5% despite inventory problems brought on by a shortage in semiconductors.

However, doubts remained about whether the sales strength can continue.

“Services spending may see some renewed strength over the next couple of months, as virus cases continue to drop back,” Capital Economics senior U.S. economist Andrew Hunter wrote. “But with goods shortages likely to persist, and the resulting surge in prices eating into real incomes, we expect consumption growth to remain subdued.”

The spending increases persisted against a backdrop of unexpectedly resilient inflation, which is running around 30-year highs. The consumer price index, which measures the cost of a variety of goods and services, rose another 0.4% in September and is up 5.4% from a year ago, though the gain was smaller when stripping out food and energy.

Inflation is being pushed higher by supply chain problems that have seen massive backups at ships along the California coast and prompted President Joe Biden to order the ports to stay open 24 hours.

Still, there are concerns that the supply problem will hamper the upcoming holiday shopping season, and consumers are being encouraged to shop now to avoid problems later.

Correction: Natalie Kotlyar is the national leader of BDO’s retail and consumer products practice. A previous version misspelled her last name.

Federal Reserve officials could begin reducing the extraordinary help they’ve been providing to the economy by as soon as mid-November, according to minutes from the central bank’s September meeting released Wednesday.

The meeting summary indicated members feel the Fed has come close to reaching its economic goals and soon could begin normalizing policy by reducing the pace of its monthly asset purchases.

In a process known as tapering, the Fed would reduce the $120 billion a month in bond buys slowly. The minutes indicated the central bank probably would start by cutting $10 billion a month in Treasurys and $5 billion a month in mortgage-backed securities. The Fed is currently buying at least $80 billion in Treasurys and $40 billion in MBS.

The target date to end the purchases should there be no disruptions would be mid-2022.

The minutes noted “participants generally assessed that, provided that the economic recovery remained broadly on track, a gradual tapering process that concluded around the middle of next year would likely be appropriate.”

“Participants noted that if a decision to begin tapering purchases occurred at the next meeting, the process of tapering could commence with the monthly purchase calendars beginning in either mid-November or mid-December,” the summary said.

The Fed next meets Nov. 2-3. Starting the tapering process in November is on the aggressive side of market expectations.

The minutes said members’ estimates “were consistent with a gradual tapering of net purchases being completed in July of next year.”

“If they announce [tapering] in November, I don’t see why they would wait. Just go ahead and get going,” said Kathy Jones, chief fixed income strategist at Charles Schwab. Jones said she was a bit surprised by a notation in the minutes that “several” members “preferred to proceed with a more rapid” tapering pace.

“That would be pretty aggressive,” she said. “There must be some outspoken people who are pretty concerned that they need to move even faster.”

St. Louis Fed President James Bullard is one such member, telling CNBC on Tuesday that he thinks tapering should be more aggressive in case the Fed needs to rate interest rates next year to combat persistent inflation.

At the September policymaking session, the committee voted unanimously to hold the central bank’s benchmark short-term borrowing rate at zero to 0.25%.

The committee also released the summary of its economic expectations, including projections for GDP growth, inflation and unemployment. Members scaled back their GDP estimates for this year but upped their outlook for inflation, and indicated they expect unemployment to be lower than earlier estimates.

In the “dot plot” of individual members’ expectations for interest rates, the committee indicated it could begin raising interest rates as soon as 2022. Markets currently are pricing in the first rate hike for next September, according to the CME FedWatch tool. Following the release of the minutes, traders increased the likelihood of a September hike to 65% from 62%.

Officials, though, stressed that a tapering decision should not be seen as implying pending interest rate hikes.

However, some members at the meeting showed concern that current inflation pressures might last longer than they had anticipated. Traders are pricing in a 46% chance of two rate hikes in 2022.

“Most participants saw inflation risks as weighted to the upside because of concerns that supply disruptions and labor shortages might last longer and might have larger or more persistent effects on prices and wages than they currently assumed,” the minutes stated.

The document noted that “a few participants” said there could be some “downside risks” for inflation as long-standing factors that have kept prices in check come back into play. The majority of Fed officials have been holding to theme that the current price increases are transitory and due to supply chain bottlenecks, and other factors likely to subside.

Inflation pressures have continued, though, with a reading Wednesday showing that consumer prices are up 5.4% over the past year, the fastest pace in decades.