The pummeling taken by bank bond portfolios during more than a year of rising interest rates fueled worries this spring after the collapse of Silicon Valley Bank that a spiraling financial crisis might soon develop and crash the U.S. economy.
New research, though, indicates those investment losses - most of them unrealized - were offset nearly dollar for dollar by the benefits of cheap deposits that kept core bank operating margins steady.
"There are a lot of things about this inflation that we're still trying to understand," Chicago Fed President Austan Goolsbee said during a forum at the conference. "Mocking the 'immaculate disinflation' is a mistake because there was a large component that was 'immaculate inflation'" driven by supply-side and other shocks that were unique to the COVID-19 pandemic.
Just how it plays out could shape a 2024 U.S. presidential election that may be conducted under either the incumbent-killing shadow of rising unemployment and high inflation, or the bluer skies of a strong job market and reasonably stable prices. At the same time, he said the job market is showing an "unprecedented" break from past behavior with a steady drop in job openings without any rise in the unemployment rate.
"You're not seeing front-line people get laid off. You're seeing professionals get laid off," Barkin said, a group he feels is less likely to file unemployment claims and more likely to take time off for further training or other activities.
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