BRIEFLY: Fact sheet on LIBOR demise published; Powell inflation indicators only ‘transitory’

(April 30, 2021) A two-page fact sheet that lays out what’s behind the demise of the London Interbank Offer Rate (LIBOR), a widely used rate used for such lending products as adjustable rate mortgages,  has been published by the New York Fed’s Alternative Rate Reference Committee (ARRC). The fact sheet explains (among other things) LIBOR, the problems it poses, why it is being replaced at the start of next year, and the Fed’s favored replacement for the rate, the Secured Overnight Financing Rate (SOFR). A “part II” of the sheet, available separately (and linked to the first fact sheet) outlines how SOFR will work … Readings on inflation are likely to rise more in the coming weeks before moderating,Federal Reserve Chair Jerome H. (“Jay”) Powell said this week, adding that, ultimately, there will only be a “transitory” effect on inflation. Powell said the rise in inflation indicators will be partially due to supply bottlenecks from a rebound in spending as the economy continues to reopen. Those indicators likely will also be driven by emerging reports of a strengthening economy: Real GDP increased at a seasonally adjusted annual rate of 6.4% during the first quarter of 2021, the federal Bureau of Economic Analysis said this week. In the fourth quarter of last year, real GDP increased 4.3%.

Background on USD LIBOR