Cleveland Fed President Mester recently discussed the current state of the economy in a question and answer session. She pointed out that while there is some slowing in the economy, it is rebalancing. Despite signs of economic strength, disinflation can still occur.
Mester also expressed her belief that the neutral rate will not be as low as it was previously. She anticipates slower employment growth and a slight uptick in the unemployment rate, although healthy labor markets are expected to remain intact. Mester acknowledged that the average family is still struggling with inflation, which could explain the sour consumer mood.
In terms of banking risks, commercial real estate risks for banks are manageable. The Fed has been working hard to ensure that banks are prepared for discount window operations, and this effort will continue to be a focus for them moving forward.
The financial markets have been volatile in recent days, with US stocks trading lower but recovering from their lowest levels. The S&P index was down by 51.17 points or 0.98% at 5192.39, while the Dow Industrial Average was down by 463 points or 1.17% at 39103.40. The NASDAQ index had also dropped by 214 points to 16182, indicating continued uncertainty in technology companies’ future performance.
US yields were mixed and had retreated from their highest levels, with the 2-year yield at 4
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