Finance

Fed Governor Waller says inflation softening faster than he expected put him in half-point-cut camp

Published

3 months ago

September 20, 2024

Fed Governor Waller says inflation softening faster than he expected put him in half-point-cut camp

Federal Reserve Governor Christopher Waller said Friday he supported a half percentage point rate cut at this week’s meeting because inflation is falling even faster than he had expected.

Citing recent data on consumer and producer prices, Waller told CNBC that the data is showing core inflation, excluding food and energy, in the Fed’s preferred measure is running below 1.8% over the past four months. The Fed targets annual inflation at 2%.

“That is what put me back a bit to say, wow, inflation is softening much faster than I thought it was going to, and that is what put me over the edge to say, look, I think 50 [basis points] is the right thing to do,” Waller said during an interview with CNBC’s Steve Liesman.

Both the consumer and producer price indexes showed increases of 0.2% for the month. On a 12-month basis, the CPI ran at a 2.5% rate.

However, Waller said the more recent data has shown an even stronger trend lower, thus giving the Fed space to ease more as it shifts its focus to supporting the softening labor market.

A week before the Fed meeting, markets were overwhelmingly pricing in a 25 basis point cut. A basis point equals 0.01%.

“The point is, we do have room to move, and that is what the committee is signaling,” he said.

The Fed’s action to cut by half a percentage point, or 50 basis points, brought its key borrowing rate down to a range between 4.75%-5%. Along with the decision, individual officials signaled the likelihood of another half point in cuts this year, followed by a full percentage point of reductions in 2025.

Fed Governor Michelle Bowman was the only Federal Open Market Committee member to vote against the reduction, instead preferring a smaller quarter percentage point cut. She released a statement Friday explaining her opposition, which marked the first “no” vote by a governor since 2005.

“Although it is important to recognize that there has been meaningful progress on lowering inflation, while core inflation remains around or above 2.5 percent, I see the risk that the Committee’s larger policy action could be interpreted as a premature declaration of victory on our price stability mandate,” Bowman said.

As for the future path of rates, Waller indicated there are a number of scenarios that could unfold, with each depending on how the economic data runs.

Futures market pricing shifter after Waller spoke, with traders now pricing in about a 50-50 chance of another half percentage point reduction at the Nov. 6-7 meeting, according to the CME Group’s FedWatch.

“I was a big advocate of large rate hikes when inflation was moving much, much faster than any of us expected,” he said. “I would feel the same way on the downside to protect our credibility of maintaining a 2% inflation target. If the data starts coming in soft and continues to come in soft, I would be much more willing to be aggressive on rate cuts to get inflation closer to our target.”

The Fed gets another look at inflation data next week when the Commerce Department releases the August report on the personal consumption expenditures price index, the central bank’s preferred measure. Chair Jerome Powell said Wednesday that the Fed’s economists expect the measure to show inflation running at a 2.2% annual pace. A year ago, it had been at 3.3%.

Finance

Treasury delays deadline for small businesses to file new BOI form

Published

11 hours ago

December 26, 2024

Business Finance News

Janet Yellen, U.S. Treasury secretary, on a tour of the Financial Crimes Enforcement Network (FinCEN) in Vienna, Virginia, on Jan. 8, 2024.

Valerie Plesch/Bloomberg via Getty Images

The U.S. Treasury Department has delayed the deadline for millions of small businesses to Jan. 13, 2025, to file a new form, known as a Beneficial Ownership Information report.

The Treasury had initially required many businesses to file the report to the agency’s Financial Crimes Enforcement Network, known as FinCEN, by Jan. 1. Noncompliance carries potential fines that could exceed $10,000.

This delay comes as a result of legal challenges to the new reporting requirement under the Corporate Transparency Act.

The rule applies to about 32.6 million businesses, including certain corporations, limited liability companies and others, according to federal estimates.

Businesses and owners that didn’t comply would potentially face civil penalties of up to $591 a day, adjusted for inflation, according to FinCEN. They could also face up to $10,000 in criminal fines and up to two years in prison.

However, many small businesses are exempt. For example, those with over $5 million in gross sales and more than 20 full-time employees may not need to file a report.

Why Treasury delayed the BOI reporting requirement

The Treasury delayed the compliance deadline following a recent court ruling.

A federal court in Texas on Dec. 3 had issued a nationwide preliminary injunction that temporarily blocked FinCEN from enforcing the rule. However, the 5th U.S. Circuit Court of Appeals reversed that injunction on Monday.

CNBC Small Business Survey finds confidence rising among small businesses

“Because the Department of the Treasury recognizes that reporting companies may need additional time to comply given the period when the preliminary injunction had been in effect, we have extended the reporting deadline,” according to the FinCEN website.

FinCEN didn’t return a request from CNBC for comment about the number of businesses that have filed a BOI report to date.

Some data, however, suggests few have done so.

The federal government had received about 9.5 million filings as of Dec. 1, according to statistics that FinCEN provided to the office of Rep. French Hill, R-Ark. That figure is about 30% of the estimated total.

Hill has called for the repeal of the Corporate Transparency Act, passed in 2021, which created the BOI requirement. Hill’s office provided the data to CNBC.

“Most non-exempt reporting companies have not filed their initial reports, presumably because they are unaware of the requirement,” Daniel Stipano, a partner at law firm Davis Polk & Wardwell, wrote in an e-mail.

There’s a potential silver lining for businesses: It’s “unlikely” FinCEN would impose financial penalties “except in cases of bad faith or intentional violations,” Stipano said.

“In its public statements, FinCEN has made clear that its primary goal at this point is to educate the public about the requirement, as opposed to taking enforcement actions against noncompliant companies,” he said.

Certain businesses are exempt from BOI filing

The BOI filing isn’t an annual requirement. Businesses only need to resubmit the form to update or correct information.

Many exempt businesses — such as large companies, banks, credit unions, tax-exempt entities and public utilities — already furnish similar data.

Businesses have different compliance deadlines depending on when they were formed.

For example, those created or registered before 2024 have until Jan. 13, 2025, to file their initial BOI reports, according to FinCEN. Those that do so on or after Jan. 1, 2025, have 30 days to file a report.

There will likely be additional court rulings that could impact reporting, Stipano said.

For one, litigation is ongoing in the 5th Circuit, which hasn’t formally ruled on the constitutionality of the Corporate Transparency Act.

“Judicial actions challenging the law have been brought in multiple jurisdictions, and these actions may eventually reach the Supreme Court,” he wrote. “As of now, it is unclear whether the incoming Trump administration will continue to support the Government’s position in these cases.”