#2022-33, December 16, 2022

United States Economy, Inflation, and the Federal Reserve

This week, the New York Federal Reserve Bank released its monthly Survey of Consumer Expectations.  Top level conclusions of the survey report that income growth within American households is expected to grow, but consumer perceptions of credit access have deteriorated year-over-year compared to November ’21.  More households are reporting that it is harder to obtain credit today than one year ago, and expectations on future credit availability remain unchanged.  Median inflation expectations amongst consumers did decrease at the one- and three-year-ahead horizon points.

In addition to the monthly consumer survey, higher level macroeconomic indicators have shown some measure of retreat in the persistent and high rates of inflation that have dogged American consumers and the Federal Reserve.  As you know, the Federal Open Market Committee (FOMC) has a mandate to achieve maximum employment and inflation rates at 2% in the long term.  Recent industry expectations rated the FOMC as likely to raise the target range for the federal funds rate between 50 and 75 basis points (bps).  The FOMC decided to raise the target range 50 bps to 4.25%-4.5%.

The FOMC noted that it continues to expect ongoing increases in the target range to achieve a monetary policy that is “sufficiently restrictive to return inflation to 2% over time”.  The Association stays hopeful that the FOMC strikes the right balance in its monetary policy goals as the American economy heads into 2023 searching for so-called soft or hard landings.  Notably, New York Federal Reserve President John Williams made remarks following the December 13-14th meetings that it is still possible that peak federal funds rates may yet exceed the 5.1% projection next, but the 6%-7% projected by some Wall Street forecasts is “definitely not my baseline”

The FOMC will next meet on January 31-February 1, 2023.

To read more about the NY Fed’s Survey of Consumer Expectations, please click here.

To read more about NY Fed President Williams’ Remarks, please click here.

CFPB Director Chopra Testifies to Senate Banking Committee

On Thursday, December 15th, Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra testified to the Senate Banking Committee for the CFPB’s semi-annual report to Congress.  Director Chopra was requested to explain and supply greater detail on the agency’s recent decision to expand the definition of “unfairness” in the Unfair, Deceptive, or Abusive Acts and Practices (UDAAP) examination manual.

Director Chopra engaged with Committee members Pat Toomey (R – PA), and Steve Daines (R – MT) during his testimony, and refuted criticisms that the Bureau was expanding definitions and lacking transparency in its actions, but rather recent events “give entities a sense of what current law requires”. These changes are the subject of a lawsuit by the American Bankers Association (ABA) and others.

To view Director Chopra’s testimony, please click here.

To read Director Chopra’s Opening Remarks, please click here.

To read about the updates to the CFPB’s UDAAP Manual from March ’22, please click here.

FDIC Notice of Proposed Rule-making Modernizing Signage

In welcome news, the Federal Deposit Insurance Corporation (FDIC) approved a notice of proposed rule-making (NPR) to amend regulations that govern the use of the official FDIC sign and advertising statements created by banks and financial service providers.  The FDIC last made major changes to their rules for signage in 2006.

The proposed rule clarifies long-sought scenarios where information about deposit insurance coverage may be misleading or confusing to consumers, and whether consumer funds are, in fact, protected by deposit insurance.  Comments to the proposal are due 60 days after the publication of the proposal in the Federal Register, and the Association plans to file a comment letter in early 2023.  Please contact Brad Papalardo, Ben Craigie, or Kathleen Murphy with comments and feedback.

To read more about the NPR, please click here.