ENERGY: EIA Release Date Schedule

Fed Gov Bowman takes a typically hawkish stance toward monetary policy, in a speech titled "Approaching Policymaking Pragmatically" (link). That "pragmatism", she says, is consistent with "a flexible, data-dependent approach, providing the Committee with optionality in deciding future policy adjustments." If anything, it seems like many on the FOMC have moved more toward her viewpoint since her dissent to September's 50bp rate cut, which blunts any market reaction to her comments.

• On the data side, "without question the data are imperfect", and she takes a hawkish-leaning interpretation of the latest readings:
  • for employment, she says that October's soft nonfarm payrolls gains can be explained away by hurricanes and the Boeing strike as well as the low survey response, and "it seems that payroll employment continued to increase in October at a pace close to the average monthly gain seen in the second and third quarters.";
  • for inflation, "my view is that inflation remains a concern...progress seems to have stalled in recent months", and she's not as calm as her FOMC colleagues in expecting housing inflation to subside: "persistently high core inflation largely reflects pressures on housing services prices, perhaps due to an increase in demand for affordable housing and an inelastic supply."
• She also appears to be concerned that employment will deteriorate to the point where the FOMC has to cut below neutral, even though inflation is too high - in other words, trading off one dual mandate goal for another: "We should also not rule out the risk that the policy rate may attain or even fall below its neutral level before we achieve our price stability goal."
• Overall, "uncertainty surrounding available data and the many variables that can affect future economic conditions suggest that we should pursue a cautious approach". Compared with her dissent to the 50bp cut in September, she voted for the November 25bp cut "since it aligns with my preference to lower the policy rate gradually, especially in light of elevated inflation and the uncertainty about the level of the neutral rate."
• However "my estimate of the neutral policy rate is much higher than it was before the pandemic, and therefore we may be closer to a neutral policy stance than we currently think. I would prefer to proceed cautiously in bringing the policy rate down to better assess how far we are from the end point, while recognizing that we have not yet achieved our inflation goal and closely watching the evolution of the labor market."
• She reiterates that monetary policy is not on a preset course, and the FOMC will move meeting by meeting. In addition to parsing incoming data in making decisions, she also notes (as have several of her Committee colleagues in recent months) that anecdotal information is useful: "in light of [] data measurement challenges... engaging with contacts helps me interpret the signals provided by the data and gain a better understanding of how the economy is evolving."

• Canada sold C$5bn of the 3.25% Dec’34 at an average yield of 3.368%.
• The bid-to-cover of 2.026 was the lowest for a 10Y auction since Oct 2022. It followed 2.382 in Oct and a five-auction average of 2.27.
• The Can-US 10Y yield differential hold a recent further increase on the day, currently at -104bp from -106.5bp at yesterday’s close, -112bp prior to CAD CPI and last week’s lows of almost -120bp.