Closing Stock Market SummaryThe stock market continued its selloff today with each of the major indices closing below their respective 50-day moving averages. The market opened flat before downside momentum picked up steam around midmorning. The major indices were stuck in a narrow trading range throughout the afternoon with the S&P 500 closing below the 4,000 level.
The selling effort was indiscriminate, leaving many stocks with losses. The S&P 500, the Vanguard Mega Cap Growth ETF (MGK), and the Invesco S&P 500 Equal Weight ETF (RSP) all closed with a 1.1% loss.
Growth and value stocks both suffered notable losses with the Russell 3000 Growth Index closing down 1.1% while the Russell 3000 Value Index closed down 1.2%.
Market breadth reflected the selling bias today. Decliners led advancers by a nearly 4-to-1 margin at the NYSE and a 2-to-1 margin at the Nasdaq.
Every S&P 500 sector closed in the red with losses ranging from 0.4% (financials) to 3.4% (energy).
The energy sector was in last place, by a wide margin, while energy complex futures sold off. WTI crude oil futures fell 5.5% to $91.60/bbl. Natural gas futures fell 2.6% to $9.06/mmbtu. Unleaded gasoline futures fell 7.0% to $2.53/gal. This comes after Bloomberg reported that the EU is set to meet its gas storage filling goal two months ahead of target. Also, European Commission President von der Leyen said that an emergency intervention is being planned to rein in energy prices.
On an individual basis, Big Lots (BIG 24.08, +2.53, +11.7%) made a big upside move on favorable quarterly results while Best Buy (BBY 74.89, +1.19, +1.6%) also had a sizable earnings-driven gain.
The 2-yr Treasury note yield rose four basis points to 3.46% while the 10-yr Treasury note yield was unchanged at 3.11%.
Ahead of Wednesday's open, Brown-Forman (BF.B) reports quarterly results.
Wednesday's economic data includes the weekly MBA Mortgage Applications Index (prior -1.2%) at 7:00 a.m. ET, August ADP Employment Change (Briefing.com consensus 315,000) at 8:15 a.m. ET, August Chicago PMI (Briefing.com consensus 53.1; prior 52.1) at 9:45 a.m. ET, and weekly EIA Crude Oil Inventories (prior -3.28 million) at 10:30 a.m. ET.
Reviewing overnight developments:
- The Conference Board's Consumer Confidence Index rose to 103.2 in August (consensus 97.4) from a downwardly revised 95.3 (from 95.7) in July. This was the first increase in the index in four months. In the same period a year ago, the Consumer Confidence Index stood at 115.2.
- The key takeaway from the report is that even with the August improvement in confidence, the Expectations Index remains below 80.0, which suggests the continued presence of an elevated risk of recession.
- July JOLTS Job Openings totaled 11.239 million after the prior revised total of 11.04 million (from 10.698).
- June FHFA Housing Price Index rose 0.1% after the prior revised 1.3% increase (from 1.4%).
- June S&P Case-Shiller Home Price Index rose 18.6% (consensus 19.0%) following a prior 20.5% increase.
Dow Jones Industrial Average: -12.5% YTD
S&P 400: -13.9% YTD
S&P 500: -16.4% YTD
Russell 2000: -17.4% YTD
Nasdaq Composite: -24.1% YTD
After Hours Summary: CHWY -9.1%, AMBA -7.4%, HPQ -4.2%, PVH -3.6% lower on earnings; HPE +2.6%, CHPT +1.4% higher on earningsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: HPE +2.6%, CHPT +1.4%
Companies trading higher in after hours in reaction to news: CPTN +20.8% (receives non-binding LoI for a $100 mln investment from Koito Manufacturing), DBRG +5.5% (DBRG and EQIX in final round of talks for data center business of Malaysia's Time Dotcom unit, according to Bloomberg), ZEV +2.8% (enters into purchase agreement for up to $50 mln with Lincoln Park Capital), AMGN +2% (topline data from Lumakras (sotorasib) phase 3 trial), NFLX +1.5% (NFLX names two SNAP execs to lead its ads business, according to AdAge), BHP +0.7% (BHP, CAT and Finning to replace BHP's entire haul truck fleet at the Escondida mine), RTX +0.5% (awarded a $972 mln US Air Force contract modification), OCN +0.3% (files for 2,139,994 share offering by selling shareholders)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: CHWY -9.1%, AMBA -7.4%, HPQ -4.2%, PVH -3.6% (also to reduce people costs in global offices by ~10%), CRWD -0.8%
Companies trading lower in after hours in reaction to news: EYPT -8.4% (receives subpoena from US Atty relating to DEXYCU), SNAP -5.7% (NFLX names two SNAP execs to lead its ads business, according to AdAge), AOSL -1.9% (to delay form 10-K), OSCR -0.6% (Health First to terminate services agreement), BA -0.5% (US Army grounds entire fleet of Chinook helicopters due to risk of engine fires, according to WSJ; also awarded a US Defense contract worth up to $5.02 bln), DELL -0.2% (in sympathy with HPQ earnings), HIL -0.1% (selected by Egypt to provide project mgmt for stem cell project)
Gas prices slide in UK after record-breaking rally
But analysts caution that prices remain elevated and volatile going into winter
Gas prices in the UK fell sharply on Tuesday after hitting new highs at the end of last week, although prices remain at extremely elevated levels heading into the winter.
The drop followed a sell-off in Europe on Monday, when UK markets were closed for the bank holiday weekend, with UK prices closely tracking moves in Europe.
The European sell-off was triggered by warnings from the EU on Monday that emergency interventions to curb the price of electricity might be necessary, with plans to separate it from the soaring cost of gas.
Analysts cautioned, however, that gas prices remain extremely elevated and volatile as traders continue to scramble to secure supplies ahead of the winter amid fears that Russia could make further cuts in supplies to the continent.
On Tuesday, Russia’s Gazprom reduced flows to Engie, the French company said, citing a contract dispute.
Germany’s chancellor Gerard Scholz said efforts to fill storage had put the country in a better position to deal with the Russian gas threat, although Berlin is still imposing plans to reduce consumption through the winter months.
Traders said the European sell-off on Monday was partly just a retracement after gains in the gas price accelerated to unprecedented levels last week, adding that they should not yet be taken as a signal that the upward trend has been broken.
Record gas prices have stoked a cost of living crisis across Europe, while in the UK there are warnings that typical household energy bills could surpass £6,000 per annum in the spring, more than four times the level a year ago.
“The balance of risk for prices still points to the upside,” said analysts at Energy Aspects, a consultancy.
They added that they expected prices to “remain extremely volatile over the coming weeks and price in a wide range between €270—340/MWh”.
The European benchmark TTF prices hit an all-time record high of 343 per megawatt hour last week, before easing. Prices traded around €251 per mwh ($74 per million British thermal units), the lowest level in two weeks but still more than three times the level at the beginning of June before Russia restricted flows on the Nord Stream 1 pipeline.
In the UK, gas prices fell by 24 per cent on Tuesday to £4.25 a therm ($50 per mmbtu) having briefly traded above £6 per therm last Friday after gaining almost 40 per cent over the week. Prices remain almost 10 times the level they were at the start of 2021.
UK prices have been lower than in Europe for much of the summer as the country is using its liquefied natural gas import capacity to send on supplies by pipeline to Europe.
The UK also gets about 50 per cent of its annual gas consumption from domestic production in the North Sea.
How Does a Brand Like Louis Vuitton Choose a New Designer?
Martine Rose, Grace Wales Bonner and Telfar Clemens are among the designers who have been considered by Vuitton-owner LVMH to succeed the late Virgil Abloh, according to sources. A final pick is expected within weeks.
Louis Vuitton owner LVMH has spent nearly a year searching for a successor for Virgil Abloh, who died in November 2021 at 41. Martine Rose, Grace Wales Bonner and Telfar Clemens are among the designers who have been considered by Vuitton-owner LVMH, according to sources. A decision is expected within weeks. (Representatives from Louis Vuitton and LVMH did not respond to a request for comment.)
Given the circumstances, it’s not surprising the leather goods giant has taken time to announce a new men’s artistic director. Abloh’s work for Louis Vuitton had cultural resonance that transcended fashion, attracting a younger, more diverse consumer and resulting in significant sales momentum.
While Abloh’s tenure was ultimately one chapter in the story of the 168-year-old Louis Vuitton, any successor will face the delicate task of moving the brand forward while respecting his legacy.
How does a company like LVMH go about finding that person?
Evolution or Revolution
First off, a label’s stewards — the board of directors, a CEO, a founder — must be clear about whether they aim to overhaul its image, as with the appointment of Demna at Balenciaga, Jonathan Anderson at Loewe or Phoebe Philo at Céline, or “evolve” it, as Saint Laurent CEO Francesca Bellettini did when she hired Anthony Vaccarello to replace Hedi Slimane in 2016.
When a brand is doing well and the creative director exits — as was the case of Saint Laurent, or Louis Vuitton men’s — putting together a list of viable candidates may be harder than when a company is in need of a significant refresh.
“There is less risk with brands that are not in good shape,” said Anne Raphaël, a managing partner at executive recruitment firm Boyden. “It’s easier to take a bet.”
An overhaul typically requires a brand to seek candidates from outside the company, while an evolution often means mining the internal team, such as when Sarah Burton succeeded Alexander McQueen, Matthieu Blazy replaced Daniel Lee at Bottega Veneta or Virginie Viard took over at Chanel. Of course, a revolution can also come from within (see: Alessandro Michele’s Gucci) just as an evolution can come from drafting in someone from outside the company (see: Vaccarello’s Saint Laurent).
Critical Attributes
The most important thing is that candidates are able to establish a clear point of view. If they have their own label, they also need to convince recruiters that they have the skills to simultaneously turn out two separate, differentiated visions, even if they are linked by an underlying approach.
Candidates must also demonstrate ability to operate in a corporate environment, something many young designers have never done. Some adapt easily to a more structured working process. Others struggle. This is especially important when a designer needs to build new teams from scratch, which can be challenging for inexperienced talents.
Being able to connect with the CEO is also critical. “They should be able to challenge each other,” Raphaël said. “It has to be a collaboration.”
Product or Storytelling
Bigger brands with strong studio teams are often less interested in skilled design technicians than those who excel at brand vision and communication.
“Product of course is important, but putting that aside, what I am really looking for is somebody that can develop a brand vision into a lifestyle that penetrates the mood and also predicts the future of popular culture,” said Lewis Alexander, an independent recruiter who has worked with labels including Bottega Veneta, Celine and Louis Vuitton.
“It’s not only about offering a collection, they have to be able to tell a story,” added Raphaël.
At Louis Vuitton, it was Abloh’s skill as an industrial product designer — combined with his ability to communicate ideas — that made his work so potent. On the other hand, Alaïa, which appointed Pieter Mulier to succeed its namesake founder, needed a technical maestro. Mulier’s tenure under Raf Simons in the Dior couture atelier made him a compelling choice.
Company executives often ask candidates to complete a creative project that can range from product ideas to a brand book or something more abstract, like conceiving a room in the brand’s essence, depending on the nature of the search.
“They need to show that they get it,” said Caroline Pill, a partner in the fashion, luxury and beauty practise at London-based Heidrick & Struggles. “Sometimes it’s going back to the archives, sometimes it’s imagining a new world.”
Increasingly, a candidate’s personal brand is also a factor. If they have their own following and can bring that following along for the ride that can be seen as a big plus. Abloh did this exceptionally well. Gabriela Hearst, too, has brought the eco-consciousness at the core of her personal brand to her work at Chloé with some success. (Her Nama sneaker, made from low-impact materials, is a best-seller.)
Sealing the Deal
While most design contracts are between three and five years, the best partnerships last longer. Incentives for designers include multi-year contracts that go into the seven or eight figures, as well as additional benefits, like luxurious housing paid for by the company, that make it difficult to leave.
On some occasions, deal sweeteners can include “shadow equity” or bonuses tied to business results. They can also include an investment in the designer’s namesake brand, as LVMH did with Off-White, Marc Jacobs and JW Anderson. This has benefits in both directions, however, effectively locking the designer in and keeping them from working for competitors. (Sometimes this can also deliver meaningful revenue, as the Marc Jacobs brand has for LVMH.)
However, sometimes a designer does not want investment, which can be a deal-breaker for the hiring company, as they want to control as much of the designer’s time as they can. Alternatively, the company may suggest a new designer put their label on pause if they don’t believe they will have the time or energy to do both jobs.
Other roadblocks to getting a deal signed: If a designer is working for a competitor, a brand may have to wait out a non-compete, or pay a hefty sum — and legal fees — in order to bring them over sooner. There’s also a chance that a designer has a better offer, or is simply not ready to commit to a creative director role.
The Final Decision
Ultimately, the final decision at a company like LVMH is made by the group’s CEO, who listens to recommendations from top advisors, the board of directors and the brand CEO. The selection is part art, part science.
“Gut feeling is in the valuation of how well the candidate is understanding the brand vision,” Raphaël said. “Everything else is extremely thoughtful.”
‘Sexy Lingerie Capitals’ Battle for Supremacy
Producing everything from the raciest underwear on Shein to comfy bras on European high streets, China’s intimate apparel industry is fragmenting into specialist hubs in improbable locations.
The factories that keep the world supplied with underwear are dotted around the globe, but those in one country continue to play an outsized role in this most intimate of industries. Not only is China the world’s largest exporter of underwear and lingerie, but it also hosts the largest trade show of its kind for the sector.
This year’s China International Brand Underwear Fair and China Intimate Apparel Culture Week (SIUF) finally kicked off in Shenzhen on August 10, after months of delays. The country’s dynamic zero-Covid policy shrunk foreign participation, but the three-day long event still featured hundreds of domestic suppliers and international brands. Despite travel restrictions, organisers reported over 89,000 visits.
Shenzhen was a fitting setting for the fair, as it is located in the heart of China’s largest lingerie manufacturing base. Thousands of factories in southern Guangdong province and the wider Pearl River Delta region produce everything from bras and panties to bathrobes for both international and domestic brands. The region has been China’s main hub for intimate apparel for decades, with factories in cities like Shantou responsible for the lion’s share of output. Another city in the region, Gurao, reportedly produced two billion bras annually in its heyday, giving it the nickname “bra town.”
But more recently China’s intimate apparel industry has been hit by waves of near-shoring by international brands and off-shoring by domestic producers, setting the scene for new specialist hubs to emerge across the country.
Erotic Lingerie and Novelty Underwear for the Masses
At the other end of the country from Guangdong, there is a small county in Jiangsu province transforming itself into a specialised base for lingerie manufacturing. Guanyun county was until recently an impoverished farming community known for producing rice and wheat. Now reporters flock to the region to cover lingerie fashion shows held in a community that the local government promotes as “China’s lingerie capital.”
Lei Congrui, 31, is at the forefront of Guanyun’s transformation. Lei’s father died when he was young, and his mother supported the family by running a children’s clothing shop. In 2007, he was a just teenager selling small consumer goods online in his hometown, when he got his start in the new trade. After noticing that Lei was selling condoms online, a buyer once asked if he sold sexy lingerie.
“I said yes without really knowing what it was, and then started sourcing from other manufacturers,” Lei said. “Demand picked up and we started manufacturing ourselves.” He then dropped out of college to focus on building the company.
From a small workshop manned by just seven relatives, Lei’s brand Midnight Charm has grown into a 400-person operation. Industrial sewing machines line the factory floor and plastic bags of notions hang from hooks above each machine. The mostly female employees in their 30s and 40s stitch together revealing chemises and sexy outfits.
“We didn’t know how to make lingerie at first,” admitted Lei. “We just looked at the samples and figured out how to recreate them on our own…At first the quality was really bad, but because lingerie was still a novelty for our Chinese online buyers, low prices were more important than quality.”
After seeing Lei’s success, more than 500 more small companies in Guanyun have come to employ 20,000 people to produce sexy lingerie, mostly for the local online market in small cottage industry workshops. The local government says these factories are producing more than $300 million worth of lingerie products annually and, according to a report by AFP, the county produces 70 percent of domestic Chinese demand for sexy lingerie.
Lei has expanded his customer base much further than others, counting buyers from China, Africa and Europe — but half of his production is for the American market, including for small Amazon sellers and China’s ultra fast fashion giant Shein. Now online retailers send him samples and his team reverse-engineers them.
“We haven’t been able to meet demands of bigger more established brands,” Lei said. “We are still a relatively small factory. Those bigger brands are making a wider range of underwear and lingerie, but we are focused on specialty sexy lingerie.”
Despite his humble demeanour, Lei has a factory that is now turning over three to five million pieces a year, bringing in millions of dollars in annual profits.
Lei’s ambition is to eventually build Midnight Charm into a respected intimate apparel brand — a Chinese Victoria’s Secret, he said — with a dedicated R&D design team.
Industry insiders say that Guanyun county’s transformation is emblematic of a trend in China’s lingerie industry as production bases diversify.
Manufacturing Base Fragments Further
Renaud Anjoran, CEO of Sofeast, a company providing auditing and quality assurance to international brands, started visiting lingerie manufacturing facilities in 2005. Lingerie production has been traditionally most dense in the southern Pearl River Delta, he said, because that is where the industry first set up base after moving to mainland China from Hong Kong in the 80s and 90s.
Today the region maintains a high concentration of mid- to high-end lingerie manufacturers and has developed into a strong base for lace, accessories and notions that supply the industry. It remains a centre of production for bras, he said. “It’s very manual work and you need people who are used to doing the manual operation of sewing the cups,” he said. “It is a relatively complicated operation. You cannot train people to do it in in a couple of weeks.”
Nevertheless, the industry has become more fragmented, he said, driven in part by rising labour costs over the past two decades. “Very often they go to an inland province like that because the owner of the factory is [originally] from that town [or there’s some kind of] connection,” he said. “It’s tempting for them to relocate completely or to open a second factory in a faraway [location] because they can [still] see the trends [but]…there’s more and more competition on pricing.”
Elaine Guo, design director of Passionworks, a specialty supplier of silk lingerie and pyjamas for the Chinese market, said that international brands will look to at least three different regions in China for manufacturing. Aside from the Pearl River Delta, she said, a manufacturing hub has developed in Zhejiang province just south of Shanghai where some factories are producing similar or higher quality than those in Guangdong province. Up north in Dalian, yet another hub has developed that mostly exports to Japan.
Guo produces upscale silk pieces for Chinese lingerie and underwear brands like Ubras, Maniform, and Neiwai. Her operations are in Shanghai, but she says the costs have risen there and workers are less willing to stay. “A lot of people left before the Covid lockdown. A lot of people went back to their hometowns,” she said.
Inland regions are also experiencing rising labour costs for manufacturers. “At first our workers earned 1000 yuan ($148) a month, but now they take home 6 to 7,000, and with overtime they can bring in over 10,000 ($1456),” said Midnight Charm’s Lei in Jiangsu province.
SIUF’s business director Chuck Ge says this is an industry-wide trend. “In recent years I do see many manufacturers shifting to other regions in inner China or ASEAN (Association of Southeast Asian Nations) countries, for the lower labour cost or cheaper land,” he said.
China accounts for more than 35 percent of the $10.1 billion export trade of global intimate apparel, according to 2020 data from MIT’s Observatory of Economic Complexity. Following China are Vietnam, Bangladesh, Sri Lanka, Germany and other countries in Asia and Europe, but none of them account for more than 10 percent of the trade. Exports from Italy, France and Austria, where much of the higher-end production takes place, are further down the league tables, accounting for less than 3 percent each.
But even as countries like Bangladesh and Vietnam reap the rewards in terms of production capacity, China is growing its design expertise. Many Chinese intimate apparel companies are relocating their headquarters and design departments from domestic regional production hubs to China’s mega-cities, said Guo.
Reliability Concerns Exacerbate Near-shoring Pressures
China’s future as a leading lingerie manufacturing hub is less certain than it was a few years ago.
In addition to concerns over exposure to alleged forced labour in supply chains in China’s Xinjiang region, the pandemic has impacted the international perception of the country’s manufacturing industry in ways that could prompt international brands to look elsewhere for options. Guo suggests that recent lockdowns have created disruptions and growing uncertainty about the reliability of Chinese supply chains.
While these and other factors may lead to a further exodus of lingerie manufacturing, Anjoran says there can be no complete exit from China.
“When you chase the lowest cost, there’s always somebody cheaper than you,” he said. “When it’s simple products, they went to Bangladesh or other places like this. But whenever the product involved bras, it has been much harder for them to leave China.”
Guo argues that the sheer number of factories producing lingerie and suppliers offering components as well as textiles and accessories makes China a good place to stay. The clustering of the industry over decades and the full supply chain of fabrics, notions and assembly is not so easily reproduced elsewhere.
That may be why some leaders in the mass market lingerie segment like Triumph and Marks & Spencer keep some production in China. Luxury lingerie brands often have a range that is produced in Asia and a range that is produced elsewhere, Anjoran said.
Some high-end players have been near-shoring production at China’s expense. Ten years ago, Reuters reported that Italian luxury lingerie brand La Perla was moving their underwear and nightgown production away from China to facilities in Turkey, Tunisia, and Portugal. La Perla’s website now says their main production facility is in Italy and they have facilities in Portugal and other EU member countries, while continuing to source some fabrics from Asia.
Hong Kong fashion lingerie maker Hop Lun, whose founder is Swedish, manufactures in Jiangxi and Guangdong provinces for their Chinese brands, but revealed in a Financial Times report earlier this year that a significant part of their production has moved to Indonesia and Bangladesh because of US-China trade tensions and China’s rising labour costs. The company is also reportedly looking to move production lines to Europe and North America to be closer to western clients like Marks & Spencer and H&M.
But there is another way that China could either regain lost ground or maintain its position as a leading lingerie exporter. Across the entire fashion industry, many Chinese producers have already pivoted from OEM (original equipment manufacturing) to ODM (original design manufacturing) before shifting further up the value chain to OBM (original brand manufacturing). But some local brands that didn’t start in a factory now have the potential to go global by leveraging Chinese lingerie expertise and supply chains.
Chinese lingerie brands like Neiwai, Ubras, and Neitangpai are using strong brand stories to appeal to a cosmopolitan consumer in China, suggests Daxue Consulting analyst Zoe Lu, and are aiming to take market share from incumbents like Aimer, Gujin and ManiForm. Some of these newer brands, including Neiwai, whose marketing campaigns focus on female empowerment and body positivity, have already started actively targeting the international market.
In an apparent bid to do so, the brand even partnered with an Italian textile company to source some of its fabrics, a reminder that while China retains some of its strength in lingerie production, the sector’s supply chain is increasingly global.
Sony Music Sues Triller Over Missed Royalty Payments
The major label says the platform continued to use its catalog after it terminated their licensing agreement. It follows Swizz Beatz and Timbaland’s lawsuit over the Verzuz acquisition.
Earlier this month, Sony Music Entertainment withdrew the rights to its catalog from the shortform video app Triller, claiming the company owed millions in royalty payments. Now, the major label is suing the platform for copyright infringement and breach of contract, saying Triller failed to heed their licensing agreement’s termination, as Billboard reports. Sony accused the label of “brazen contempt” for its intellectual property rights, and of failing to pay any royalties since March this year. The label is seeking unspecified compensatory and statutory damages, an order to stop Triller infringing its copyrights, and a declaration that Triller deliberately infringed copyright.
When contacted by Pitchfork, a representative for Sony Music Entertainment offered no additional comment. Pitchfork has also reached out to representatives for Triller.
Sony’s clampdown follows a lawsuit Swizz Beatz and Timbaland filed earlier this month, claiming the company still owed them $28 million after buying Verzuz. In 2021, Universal Music Group pulled its music from the platform due to a royalty dispute that was resolved a few months later.
Fed’s Williams Says Rates Will Stay High for a While
Market expectations for rate cuts appear incorrect, says New York Fed president
Federal Reserve Bank of New York President John Williams said Tuesday that the U.S. central bank will need to push its short-term interest-rate target to a point where it will restrain the economy and maintain that stance for a while as part of its bid to lower inflation.
“Our focus is on getting inflation back down to 2%” and the current level of price pressures is “far too high,” Mr. Williams said at a Wall Street Journal event.
To get inflation down in an economy with strong labor markets and continued forward momentum, Mr. Williams said the central bank will very likely need to take monetary policy into an area where it holds back economic activity. That could bring the central bank’s interest-rate target range above 3.5%, up from its current range of 2.25% to 2.5%.
Mr. Williams didn’t comment about the size of the rate rise he would like to see at the Fed’s policy meeting next month, but he pushed back on the idea the central bank might soon be able to reverse course and lower rates.
“We’re going to need to have restrictive policy for some time; this is not something that we’re going to do for a very short period of time and then change course,” he said. “We’ll continue through next year” with a restrictive policy stance and “it’s going to take some time before I would expect to see adjustments of rates downward.”
Mr. Williams spoke in an interview that was streamed on WSJ.com. The central banker serves as vice chairman of the rate-setting Federal Open Market Committee and is a highly influential voice on economic and monetary-policy issues.
His comments Tuesday were the New York Fed leader’s first public remarks since the Kansas City Fed’s annual Jackson Hole, Wyo., research conference. At that event, Fed leader Jerome Powell said the central bank must lower high levels of inflation and warned that the effort could bring pain to the economy.
The Fed has raised rates aggressively this year to combat high price pressures and at its June and July policy meetings, it raised its federal-funds target rate range by 0.75-percentage-point increments, a historically aggressive action. It is next scheduled to meet Sept. 20-21.
Financial-market participants are debating whether the Fed will deliver another large rate increase next month, or, heartened by recent data showing some signs of moderating inflation pressures, whether it could downshift to a more modest half-percentage-point increase. In television interviews, several regional Fed officials welcomed the turn in the recent price pressure data but said they weren’t ready to say inflation had peaked.
Mr. Powell said Friday that the Fed’s choice when it meets in September “will depend on the totality of the incoming data and the evolving outlook,” adding, “at some point, as the stance of monetary policy tightens further, it likely will become appropriate to slow the pace of increases.”
Mr. Williams also said a day will come where the Fed may be able to slow the pace of rate rises. “There’s going to be a period in the future, at some point, where you’re adjusting, you know, probably in smaller steps,” he said.
On Tuesday, two other regional Fed officials also weighed in on the monetary-policy outlook. In an essay published on his bank’s website, Atlanta Fed chief Raphael Bostic said, “I don’t think we are done tightening,” and added, “inflation remains too high, and our policy stance will need to move into restrictive territory if inflation is to come down expeditiously.”
But Mr. Bostic also said “incoming data—if they clearly show that inflation has begun slowing—might give us reason to dial back from the hikes of 75 basis points that the Committee implemented in recent meetings.”
Meanwhile, in a speech, Richmond Fed leader Thomas Barkin said, “I don’t expect inflation to come down, immediately or suddenly or even predictably,” adding that it is critical for the Fed to take action to lower price pressures. He also said based on his local business contacts he doesn’t believe the economy is in recession.
The leaders of the Atlanta and Richmond Fed banks currently don’t hold voting roles on the FOMC.