Fed Rate Decision Today: No-Need-to-Cut Camp Is Feeling Emboldened By Bob Henderson
The Federal Reserve announces its latest interest rate decision today and while no one expects a change, markets will parse every word of Chair Jerome Powell's press conference for clues about future cuts. Meanwhile, U.S. wage growth accelerated in the first quarter, complicating the Fed's inflation fight, and Binance founder Changpeng Zhao was sentenced to four months in jail for violating U.S. anti-money-laundering requirements. Read on for this news and more.
Top News Fed Decision: Will Firmer Wage Growth Prompt Rethink?
A third month of disappointing inflation data dashed the prospect of the Federal Reserve setting the stage today for a summer rate cut .
Now the question is whether firmer-than-anticipated wage growth last quarter will prompt a broader rethink at the Fed over how to manage the proverbial "last mile" of bringing down inflation.
For the last six months, Fed Chair Jerome Powell has downplayed concerns that economic strength could lead to inflationary heat, in large part because solid growth had coincided with a slowdown in price and wage pressures.
But Tuesdays Labor Department report on compensation growth could make the Feds wait-and-see posture a little less comfortable.
Lahart's Take: 'Catch-Up' Inflation Categories Might Be Destined to Cool, But That Doesn't Mean They Don't Hurt By Justin Lahart
One reason inflation has stayed uncomfortably high this year is price measures for some items are still catching up with inflation pressures that already happened. Unfortunately this doesn't mean they can be ignored .
Housing inflation is where the catch-up issue has been most pronounced, to the point where many investors, economists and policymakers wave it away. Rent prices in the Labor Department's consumer-price index reflect rents both for newly signed leases and leases signed a while ago. The same goes for the Commerce Department's personal-consumption expenditures index, or PCE, which is the Federal Reserve's preferred inflation measure.
U.S. Economy U.S. Wage Growth Accelerated in First Quarter, Foiling the Fed
U.S. wage growth picked up in the first three months of the year and remained well above its prepandemic pace, adding to evidence that the Federal Reserve's war on inflation is far from won.
Financial Regulation Judge Sentences Founder of Binance, the Largest Crypto Firm, to Four Months in Jail
Billionaire Changpeng Zhao, founder of the world's biggest crypto exchange, was sentenced Tuesday in a Seattle federal court to four months in jail. Zhao, 47, pleaded guilty in November to violating U.S. anti-money-laundering requirements. He agreed to step down as Binance's chief executive and pay a criminal fine of $50 million.
Forward Guidance Wednesday (all times ET)
8:15 a.m.: ADP National Employment Report for April
10 a.m.: U.S. construction spending for March
10 a.m.: U.S. Jobs and Labor Turnover Survey (JOLTS) for March
10 a.m.: ISM Report on Business Manufacturing PMI for April
2 p.m.: Federal Reserve interest rate decision
2:30 p.m: Fed's Powell post-FOMC meeting press conference
Thursday
4:00 a.m.: Eurozone manufacturing PMI for April
8:30 a.m.: U.S. weekly jobless claims
8:30 a.m.: U.S. trade report for March
8:30 a.m.: U.S. factory orders for March
Research Fed in 'Wait and See' Mode
The Fed's main message after Wednesday's rate decision is likely to be that "policy needs more time, the next move is most likely a rate cut, and the committee is in a wait-and-see mode until the Fed has more clarity on inflation," Bank of America economists say in a note. They also expected quantitative tightening to be slowed by reducing the monthly cap of Treasurys redemption to $30 billion from $60 billion. Rates and currencies reaction are likely to be limited. "We suspect Powell is comfortable with the substantial pricing out" of interest-rate cuts this year and "will also likely find it hard to 'out hawk' the market."- Paulo Trevisani
Basis Points Canada's economy lost momentum after a strong start to the year and is tracking below the central bank's latest forecast, supporting expectations a first cut to interest rates could come before summer. - Robb M. Stewart Europe's economy has a north-south divide -and now it's the poorer south that is powering the region's return to growth. - Tom Fairless, Paul Hannon and Ed Frankl New Zealand's unemployment rate jumped sharply in the first three months of this year as the country's economy slumbered in an extended recession and high interest rates continued to batter household budgets. - James Glynn Australia manufacturing sector activity improved strongly in April but it is too soon to call an end to a cyclical downswing in the sector seen over the last year. - James Glynn South Korea's export growth accelerated in April on brisk demand for semiconductors, smartphones, cars and other Korean goods overseas, reaffirming trade momentum. - Kwanwoo Jun About Us
WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ's global team of reporters and editors. This newsletter was compiled by markets reporter Bob Henderson in New York. Send your tips, suggestions and feedback to bob. henderson@wsj.com.
This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
05-01-24 0715ET
