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[Quick Facts]

1. Fed's Cook says a soft landing is possible.

2. Fed's Mester says more evidence is needed.

3. U.S. initial jobless claims hit a three-month high.

4. U.S. homebuilder confidence weakens but better building conditions are in view.

5. U.S. oil plunges 3% as U.S. crude stockpiles rise to a three-month high.

[News Details]

Fed's Cook says a soft landing is possible

Fed Governor Lisa Cook said in a speech on Nov. 16 that the U.S. central bank must steer between the risk of doing too little and taking the fight against inflation too far. It's a task made particularly delicate because other global central banks have also tightened monetary policy quickly over the past couple of years.

I believe that a 'soft landing' is possible, with continued disinflation and a strong labor market, but it is not assured.

The economy is still growing and consumers are still spending, and "there is a risk that such continued momentum in demand could keep the economy and labor market tight and slow the pace of disinflation," Cook said.

Fed's Mester says more evidence is needed

Cleveland Fed President Loretta Mester said yesterday that the focus in financial markets on interest-rate cuts is premature and the latest report isn't enough to convince her that the central bank has won its battle against higher prices.

We are making progress on inflation. It is noticeable, but we need to see more progress because it's uncertain whether inflation will keep falling.

The question now is how long we are going to maintain a restrictive stance and perhaps we need to raise rates further given what is happening in the economy.

U.S. initial jobless claims hit a three-month high

U.S. initial jobless claims rose to a three-month high last week, suggesting that the labor market is cooling down and once again fueling the Federal Reserve's efforts to fight inflation. And continuing jobless claims rose to the highest level in two years. The labor market is slowing as rising interest rates dampen demand, which is consistent with a slowdown in economic activity. However, this does not mean that labor market conditions have changed materially. They are only cooling.

U.S. homebuilder confidence weakens but better building conditions are in view

High mortgage rates continue to dampen homebuilder confidence, but recent economic data suggests that housing conditions may improve in the coming months, according to the U.S. National Association of Home Builders (NAHB). The NAHB Housing Market Index fell six points to 34 in November, the fourth consecutive month of decline and the lowest level since December 2022.

Despite the decline in confidence in November, recent macroeconomic data suggests that housing construction conditions will improve in the coming months, especially as the 10-year U.S. bond yield is back below 4.5% for the first time since late September, which will help keep mortgage rates near or below 7.5%. Given the lack of existing home inventories, a small drop in mortgage rates will boost housing demand.

U.S. oil plunges 3% as U.S. crude stockpiles rise to a three-month high

According to data released yesterday by the Energy Information Administration (EIA), U.S. crude inventories rose to their highest level since last August, including an increase at the key hub of Cushing, Oklahoma, fueling market jitters about weak oil demand and stable supply.

The EIA's report triggered a recovery of weakening that has plagued the market recently as fundamentals have begun to loosen. While Biden's energy security advisor said the U.S. would impose sanctions on Iran's oil exports of more than 1 million barrels per day due to the Middle East conflict, a pickup in oil flows from Venezuela after the U.S. eased restrictions on it could help offset any supply reduction.

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