Conference Board Chief Economist on CEO confidence and Fed communication (with Katie Greifeld; Romaine Bostick)

Peterson notes that businesses appreciate the Fed's commitment to price stability given persistent inflation from tariffs, oil shocks, and supply chains. She sees the Fed as unlikely to move rates this year. She highlights the challenge of communicating differently to markets (financial conditions) versus consumers (cost of bread), and suggests the Fed's inflation framework needs clearer boundaries around the 2% target and possibly less focus on the labor market.

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The Conference Board 4.8
Policy Institute
Dana Peterson 7.5

Conference Board Chief Economist on CEO confidence and Fed communication (with Katie Greifeld; Romaine Bostick)

yields

Peterson expects the Fed to do nothing this year, implying rates and yields remain rangebound as the committee debates the persistence of inflation.

Asks how Warsh's commitment to price stability is being received by CEOs, given the tumble in CEO confidence in Q2.

Katie Greifeld
Dana Peterson

Companies really appreciate the commitment to price stability. Inflation has been higher due to oil price shock and pass-through through supply chains, concerning both businesses and consumers.
Asks how the commitment to price stability squares with the market pricing in a rate hike by October and no rate relief soon.

Katie Greifeld
Dana Peterson

There's disagreement among FOMC members on whether inflation is temporary or persistent. For the most part, they are probably not going to do anything this year.

For some, this is going to be a temporary shock... Others are saying this may be more persistent and we have other structural drivers of inflation.
Asks about the disconnect between communicating to markets versus the public, referencing Warsh's 'inflation is a choice' comment.

Romaine Bostick
Dana Peterson

Markets and consumers need different communication. For consumers, the promise is that the Fed will keep inflation down. When you have supply shocks, the Fed doesn't have much control, making execution difficult.

Markets want to know about financial conditions, consumers want to know about how much bread costs.
Asks what a new or improved inflation framework could look like.

Romaine Bostick
Dana Peterson

A clear framework is needed. There's no desire to move away from 2%, but the boundary around it (25 or 50 bps) needs discussion. There was less talk about the dual mandate, suggesting a shift towards price stability and possibly less focus on the labor market.

It's hard to say whether that's right or not, especially given labor shortages in a number of industries.

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