Evelyn Reynolds

Federal Reserve Governor Christopher Waller said Wednesday he’s open to reducing the level of interest rate increases to half a percentage point in December.
“But I won’t be making a judgment about that until I see more data,” he said at a speech in Phoenix, where he also vowed not to be “head-faked” by an encouraging inflation report last week.

Federal Reserve Governor Christopher Waller said Wednesday he’s open to reducing the level of interest rate increases soon, so long as the economic data cooperates.
The rate-setting Federal Open Market Committee is set to meet Dec. 13-14. Market expectations are running high that policymakers will approve another rate hike, but this time opting for a 0.5 percentage point, or 50 basis point, move. That would come after approving four consecutive 0.75 percentage point increases.

“Looking toward the FOMC’s December meeting, the data of the past few weeks have made me more comfortable considering stepping down to a 50-basis-point hike,” Waller said in prepared remarks for an event in Phoenix. “But I won’t be making a judgment about that until I see more data, including the next PCE inflation report and the next jobs report.” A basis point equals 0.01 percentage point.

Christopher Waller testifies before the Senate Banking, Housing and Urban Affairs Committee during a hearing on their nomination to be member-designate on the Federal Reserve Board of Governors on February 13, 2020 in Washington, DC.
Sarah Silbiger | Getty Images

The next PCE inflation report is due on Dec. 1.
Investors have grown optimistic that a lower-than-expected increase in October’s consumer price index reading is indicative that inflation is cooling. Headline CPI increased 0.4% for the month and 7.7% from a year ago, while the core reading excluding food and energy rose 0.3% and 6.3%, respectively. All the readings were lower than market estimates.
The Fed favors the core personal consumption expenditures prices measurement, which rose 0.5% in September and 5.1% from a year ago, as a gauge of rising prices.

Waller said he’ll be watching the data closely as he remains suspect that the October CPI readings confirmed a new trend. As a governor, he is an automatic voter on the FOMC.

“Though welcome news, we must be cautious about reading too much into one inflation report. I don’t know how sustained this deceleration in consumer prices will be,” he said. “I cannot emphasize enough that one report does not make a trend. It is way too early to conclude that inflation is headed sustainably down.”
In making his assessment, Waller said he will be looking at three principal data points apart from the broad inflation readings: core goods prices, housing and non-housing services. He said he’s seeing encouraging signs on all three fronts but will need to see more and vowed not to be “head-faked by one report.”
“Like many others, I hope this [CPI] report is the beginning of a meaningful and persistent decline in inflation. But policymakers cannot act based on hope,” he said.
Earlier in the day, San Francisco Fed President Mary Daly told CNBC that she expects at least another percentage point of rate increases ahead. The Fed’s benchmark rate currently sits in a targeted range between 3.75% and 4%.

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Countries should strike up more economic alliances than security and defense ones, as those could make the world “more dangerous,” the president of the Center for China and Globalization said on Tuesday.
“I hope that the U.S. now has settled this midterm, we can get towards economic, global alliances rather than have a lot of security, military, defense alliances which will make us more and more dangerous,” Henry Wang said at the SALT iConnections conference in Singapore.
Echoing Wang’s point, Nicolas Aguzin, CEO of the Hong Kong stock exchange HKEX, said on the same panel that the globalization of trade has created many benefits, including bringing the East and West closer to each other.

Countries should strike up more economic alliances than security and defense ones, as those could make the world “more dangerous,” the president of the Center for China and Globalization said on Tuesday.
Doing that would also circumvent a slide toward deglobalization, which could hold back economic development across the world. The U.S. for example, could consider joining — or “re-joining” — the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), Henry Wang said at the SALT iConnections conference in Singapore.

“The U.S. is the vibe of globalization and [has] always taken the lead on globalization,” Wang said. 
“It was a pity to see the U.S. pulling out of the [Trans-Pacific Partnership, which] … set higher standards for global trade, including the digital economy, and also the liberalization of trade and facilitation of investments.”
Wang added that there should be more economic alliances and fewer security ones such as the AUKUS, Five Eyes and the Quadrilateral Security Dialogue, an informal strategic alliance.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership is a multilateral trade deal signed in 2018 that was formed after the United States, under the Trump administration, withdrew from the Trans-Pacific Partnership.
Claudio Reyes | Afp | Getty Images

“I hope that the U.S. now has settled this midterm, we can get towards economic, global alliances rather than have a lot of security, military, defense alliances which will make us more and more dangerous,” Wang said.
The CPTPP was formerly known as the TPP, which was part of the United States’ economic and strategic pivot to Asia.

Former U.S. President Donald Trump pulled the U.S. out of the trade pact in 2017, after it drew criticism from the protectionist end of the U.S. political spectrum. 
The TPP has since evolved into the CPTPP after other members of the pact forged on with it. It is now one of the biggest trade blocs in the world, attracting applicants such as China. 
The U.S. has not indicated any desire to rejoin the CPTPP. Instead, it launched its own separate non-trade relationship network with Asia-Pacific, the Indo-Pacific Economic Framework.
Echoing Wang’s point, Nicolas Aguzin, CEO of the Hong Kong stock exchange HKEX, said on the same panel that the globalization of trade has created many benefits, including bringing the East and West closer to each other.
“I mean, it had kept prices very low around the world in a lot of areas; we had productivity,” he said, adding that he doubts deglobalization would become a reality, in light of the complex interconnectedness of global supply chains. 

With new powers emerging, tensions are bound to arise at this juncture of globalization, Aguzin said.
“Asia, as a region, over the next 10 years, we represent about half of the output of the world. I mean you’re going to have some rocky moments, because it’s a big shift. There’s a big shift of power and influence from West to East,” he said.

‘Olympic-style’ competition

Economic alliances and healthy “Olympic-style” competition between the U.S. and China would therefore be better than confrontation, Wang added.
Wang said notes from the Chinese Communist Party meeting in Beijing indicate that Chinese policymakers are keen on “opening up,” which suggests Beijing still has appetite to promote trade and multilateralism.
The appointment of new Cabinet members from developed areas in China, such as Guangdong and Jiangsu, suggests Beijing has its eyes on more development, private businesses and investments from multinational companies, according to Wang.

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Households increased debt at the fastest pace in 15 years due to hefty increases in credit card usage and mortgage balances.
The credit card balance collectively rose more than 15% from the same period in 2021, the largest annual jump in more than 20 years, according to the New York Fed.
The increase stems from “a combination of robust consumer demand and higher prices,” a Fed official said.

Luis Alvarez | Digitalvision | Getty Images

Households increased debt during the third quarter at the fastest pace in 15 years due to hefty increases in credit card usage and mortgage balances, the Federal Reserve reported Tuesday.
Total debt jumped by $351 billion for the July-to-September period, the largest nominal quarterly increase since 2007, bringing the collective household IOU in the U.S. to a fresh record $16.5 trillion. That’s an increase of 2.2% from the previous quarter and 8.3% from a year ago.

The increase follows a $310 billion jump in the second quarter and represents a $1.27 trillion annual increase.
Debt has surged over the past year due to inflation running near its highest pace in more than 40 years and amid rising interest rates and strong consumer demand.

The biggest contributors to that debt load came from mortgage balances, which rose $1 trillion from a year ago to $11.7 trillion, and credit card debt, which climbed to $930 billion.
The credit card balance collectively rose more than 15% from the same period in 2021, the largest annual jump in more than 20 years, according to the New York Fed, which released the report. The increase “towers over the last eighteen years of data,” a group of Fed researchers said in a blog post on the central bank site.
“Credit card, mortgage, and auto loan balances continued to increase in the third quarter of 2022 reflecting a combination of robust consumer demand and higher prices,” said Donghoon Lee, economic research advisor at the New York Fed. “However, new mortgage originations have slowed to pre-pandemic levels amid rising interest rates.”

New York Fed researchers attributed the credit card growth to “very robust” consumption, rising prices and consumers using substantial levels of savings that remain on accounts.
Along with the rise in balances has come an increase in delinquencies.
However, while “delinquency rates are rising, they remain low by historical standards and suggest consumers are managing their finances through the period of increasing prices,” the researchers wrote.
Elsewhere in the report, the Fed said auto loan balances edged higher to $1.52 trillion while student loan debt nudged lower to $1.57 trillion. Student loan debt is the lowest since the second quarter of 2021 amid an extended period of forbearance and the Biden administration’s efforts to forgive some education loan debt.
Auto loan debt, while posting only a slight increase on a quarterly basis, is up 5.6% from a year ago.
Mortgage balances continued to grind higher amid a sharp increase in interest rates that has seen 30-year mortgages loan rates hover around 7%. Total debt climbed even though originations fell sharply, dropping nearly 17% to $633 billion.
Foreclosures remained low even as a pandemic-related moratorium expired. Student loan delinquent rates remained around 4%.

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