US: Liquidity Stress is Intensifying

There's good news and bad news in today's macro data (what scarce data there is). MNI's Chicago Business Barometer (PMI) printed a better than expected 43.8 (42.3 exp), up from ...

Fed's Logan: I would've preferred to hold rates steady this week. FED'S LOGAN: I WOULD FIND IT DIFFICULT TO CUT RATES AGAIN IN DECEMBER FED'S LOGAN: FED ALREADY MITIGATED EMPLOYMENT RISK WITH SEPTEMBER CUT Fed's Logan: The time has come for the Fed to modernize the target rate. Logan: Ample liquidity for a safe and efficient banking system Good morning. Thank you all for joining us again today. Yesterday’s discussions were so enriching, and I’m excited to build on them this morning. As you know, the Federal Open Market Committee (FOMC) reduced interest rates earlier this week and announced it would end the runoff of the Fed’s asset holdings as of Dec. 1. In my remarks this morning, I’ll discuss the stance of monetary policy. I’ll then turn to the topic of this conference and describe how the Fed’s balance sheet fosters a safe and efficient liquidity environment for the U.S. banking system. These are my views and not necessarily those of my FOMC colleagues. I would have preferred to hold interest rates steady at this week’s FOMC meeting. Congress gave the FOMC a dual mandate: to pursue maximum employment and stable prices. The labor market remains balanced and cooling slowly. Inflation remains too high, taxing the budgets of businesses and families, and appears likely to exceed the FOMC’s 2 percent target for too much longer. This economic outlook didn’t call for cutting rates. While the government shutdown has reduced the availability of national statistics, a wide range of alternative data sources continue to provide visibility into the state of the economy. Those sources include private-sector indicators, continuing administrative data such as unemployment claims, regional surveys run by many of the Federal Reserve banks, and the many conversations that my colleagues and I have with business and community contacts every week. The labor market remains roughly balanced. At 4.3 percent, the latest reading on the unemployment rate was up only slightly over the past year on net. Payroll job gains fell markedly in 2025. But slow job gains don’t necessarily mean there’s more slack in the labor market. Labor supply has fallen at the same time as demand, particularly due to changes in immigration policy and labor force participation. In consequence, despite the drop in job growth, we’re not seeing a rapidly widening gap between the number of jobs available and the number of people who want work. My staff estimates that break-even payroll growth, th