RBA Announces Major Shake-Up; Beige Book Says Banking Turmoil Fallout Is Limited; Fed's Williams Signals Support for May Rate Rise By Perry Cleveland-Peck
Good day. Australian Treasurer Jim Chalmers announced this morning the biggest reforms of the Reserve Bank of Australia in three decades, moving to bolster the level of expertise involved in the setting of interest rates, while striking hard at what many critics say is the closed culture of the central bank. The overhaul follows an independent review of the central bank, which concluded it was ill-equipped to meet challenges that include the biggest surge in price pressures in more than 30 years. Meanwhile, the latest Federal Reserve Beige Book, released yesterday, reported banks in several parts of the U.S. tightened lending standards and raised concerns about liquidity and uncertain expectations for future growth after Silicon Valley Bank and Signature Bank collapsed. Still, nine of the 12 Fed districts reported little or no change in economic activity over the six-week period ended April 10, according to the report, a compilation of economic anecdotes from the central bank's business contacts around the country. Also on Wednesday, John Williams of the New York Fed said the central bank had more work ahead to bring down inflation, suggesting another interest-rate increase would be warranted at the Fed's meeting in two weeks.
Now on to today's news and analysis.
Top News Australia Plans Biggest Shake-Up of Central Bank in Decades
Australia said it would make broad changes to how its central bank operates , in a move that will weaken the governor's influence over key decisions including interest rates.
The biggest change will see the Reserve Bank of Australia adopt a monetary policy committee structure that has parallels to the setup of the Bank of Canada and the Bank of England. Australian Treasurer Jim Chalmers said RBA policymakers would now gather to set interest rates eight times a year, compared with the current 11 meetings.
Fed Report: Lending Slowed, Economy Cooled After Bank Failures
Consumers and businesses borrowed less as overall economic growth flattened in the weeks since two mid-March bank failures sparked financial turmoil, the Federal Reserve said in its Beige Book report Wednesday.
Analysis: Fed Beige Book Finds Limited Fallout from Banking Turmoil
Top Fed Official Signals Support for May Interest-Rate Increase
"Inflation is still too high, and we will use our monetary policy tools to restore price stability," said New York Fed President John Williams in a speech Wednesday night to a group of financial industry professionals in Manhattan.
Glynn's Take: Australia Abandons RBA Board Structure But Raises Risk of Miscommunication By James Glynn
In announcing the Reserve Bank of Australia's most extensive reforms in 30 years, Treasurer Jim Chalmers has also tampered with policy-making processes that helped the central bank achieve the longest continuous boom of any developed economy on record. The changes could mean more accountability for the RBA but there are risks to how well it communicates. Read more .
U.S. Economy House Republicans Unveil Bill to Raise Debt Ceiling, Cut Spending
The proposal-dubbed the Limit, Save, Grow Act-would set discretionary spending levels for the coming year at fiscal 2022 levels and limit spending growth to no more than 1% a year , Speaker Kevin McCarthy (R., Calif.) said.
TSMC Seeks Up to $15 Billion From U.S. for Chip Plants
The world's biggest contract chip maker is pushing back on some of the conditions Washington has attached to chip-factory subsidies as it looks for up to $15 billion in government money.
Key Developments Around the World Canada Government Workers Strike Over Pay to Offset Inflation
About 150,000 Canadian government workers went on strike early Wednesday, in a dispute over wage increases that could have implications on efforts by the country's central bank to sharply slow inflation.
India's Population to Surpass China's by Midyear
The milestone highlights the dramatic demographic shifts that are reshaping the world , as India's population will continue to grow during the next four decades, while China's population is forecast to decline rapidly.
Financial Regulation Roundup The Era of Easy Deposits Is Over for Main Street Banks
Main Street banks including Citizens Financial Group Inc. said in earnings reports they are having a tougher time hanging onto customer money in a world where the Federal Reserve has aggressively raised interest rates .
FDIC Starts Selling $114 Billion of Bonds From Failed Banks
The Federal Deposit Insurance Corp. has begun selling bonds it inherited from Silicon Valley Bank and Signature Bank to recoup the cost of rescuing their depositors, starting with a sale of about $700 million of mortgage-backed bonds.
The $1.2 Trillion Question Hanging Over Banks in Europe
A $1.2 trillion liquidity crunch looms for Europe's lenders, with their biggest hurdle in late June, when they must pay back about 478 billion euros, equivalent to some $525 billion, of ultracheap loans to the European Central Bank.
Sumitomo Mitsui Reopens Market for Risky Bank Bonds
The riskiest type of bank bonds appear to be back on the menu for investors, after a Japanese megabank reopened a segment of the bond market called into question after UBS Group's emergency takeover of Credit Suisse Group.
CFPB Says Staffer Sent 250,000 Consumers' Data to Personal Account
A Consumer Financial Protection Bureau employee forwarded to a personal email account confidential information on thousands of consumers and dozens of financial firms, in what the agency has described as a "major incident."
Forward Guidance Thursday (all times ET)
8:30 a.m.: U.S. weekly jobless claims
10 a.m.: U.S. existing home sales for March; U.S. Leading Index for March; EU FCCI Flash Consumer Confidence Indicator for April
11:30 a.m.: Bank of Canada's Macklem and Rogers speak to Standing Senate Committee on Banking, Commerce and the Economy
12 p.m.: Fed's Waller speaks at Global Interdependence Center
12:20 p.m.: Cleveland Fed's Mester speaks at Akron Roundtable
3 p.m.: Fed's Bowman speaks at Odessa College
4:15 p.m.: ECB's Schnabel speaks to Stanford Graduate School of Business
5 p.m.: Atlanta Fed's Bostic in discussion with Lynda L. Weatherman, CEO of Economic Development Commission of Florida's Space Coast
7:45 p.m.: Philadelphia Fed's Harker speaks at Samuel Zell and Robert Lurie Real Estate Center Members' Meeting
Friday
4 a.m.: Eurozone Flash PMI for April
10:30 a.m.: ECB's Elderson speaks to Peterson Institute for International Economics
4:35 p.m.: Fed's Cook speaks at Georgetown University McDonough School of Business
Research Resilient Eurozone Means ECB Hawks Are in Ascendancy
Recent financial turmoil has faded without leaving any obvious mark on euro-area growth prospects, giving European Central Bank hawks reason to call for interest-rate increases, Citi economists write in a note. The eurozone's composite output PMI rose in March, signaling above-trend growth, while industrial production is on track for a 1.3% on-quarter gain in the first quarter, the largest since the fourth quarter of 2021, the economists write, leading Citi to revise its 2023 GDP-growth forecast to 1.3%, up from 1.0%. Citi still forecasts a peak rate of 4% by September, and doesn't see rate cuts before the second half of 2024, the economists add.
-Edward Frankl
Bank of England to Add Two More Interest-Rate Increases
Deutsche Bank Research now expects the Bank of England will increase interest rates by 25 basis points twice more, once in May and once most likely in June, to take the terminal rate to 4.75%, up from Deutsche's previous forecast of 4.25%, the current BOE rate. The revised forecast reflects how all key U.K. economic metrics have outperformed expectations since the BOE's March meeting, writes senior economist Sanjay Raja. "Since the March meeting, growth momentum has stayed positive, credit conditions seem broadly unfazed by the recent banking stress, wage growth has outperformed expectations, and core inflation stays stubbornly resilient," he writes. "We see four reasons the monetary policy committee will likely hike more, and likely beyond May."
-Miriam Mukuru
Commentary Forget Macron, Europe and the U.S. See Eye-to-Eye on China's Threat
Europeans use milder language than Americans when discussing China, saying they wish to "de-risk" their economic relationship with the country, not "decouple." But in substance, the approach looks much the same , Greg Ip writes.
Yellen: Security Comes Before Economy in U.S.-China Relationship For Food Price Inflation Clues, Watch India
A subpar monsoon is an underappreciated threat to global food inflation , and that is particularly true with India's own general elections looming, which could lead to political pressure to restrict grain exports, Megha Mandavia writes.
Basis Points Producer prices in Canada edged up in March, though Canadian companies paid slightly less for raw materials as pricing pressures continue to show signs of easing. Statistics Canada's industrial product price index rose 0.1% from the month before, when the index slid 0.6%. On a 12-month basis, the index was down 1.8%. Excluding energy products, producer prices were 0.4% higher on-month in March, the data agency said. (Dow Jones Newswires) Canadian housing starts dropped across the country in March, retreating after a rebound the month before. Starts came in at a seasonally adjusted annualized rate of 213,865 units for the month, an 11% decline from February, Canada Mortgage and Housing Corp. said. Market expectations were for starts to come in at 245,000, according to economists at TD Securities. (DJN) Brazil's industrial production fell in February as output of consumer products including food and pharmaceuticals declined. Production fell a seasonally adjusted 0.2% in the month and 2.4% from a year earlier, the Brazilian Institute of Geography and Statistics said.
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04-20-23 0715ET
