FOMC Minutes Show Split Over Need for Rate Rise; A Tame CPI Could Help Keep Rates Steady By James Christie

Good day. Federal Reserve officials are watching the consumer-price index, and other data, as they mull whether another interest-rate increase this year is needed to keep inflation declining. If the September CPI report out today is tame, that would likely argue for keeping rates on hold at the next Fed meeting. Economists surveyed by The Wall Street Journal estimate consumer prices rose 0.3% in September from the prior month and 3.6% from a year earlier. On Wednesday, the Fed released minutes from its Sept. 19-20 policy meeting, revealing officials were split on whether they would need to raise interest rates again this year. The minutes also suggested officials thought the risks around raising rates too much or too little were more balanced than they had been since the Fed began lifting borrowing costs last year.

Now on to today's news and analysis.

Top News Fed Minutes Show Officials Divided on Future Rate Rise

Federal Reserve officials were split over whether they would need to raise interest rates again this year when they decided last month to hold their benchmark policy rate steady.

"A majority of participants judged that one more increase in the target federal-funds rate at a future meeting would likely be appropriate, while some judged it likely that no further increases would be warranted, " said the minutes from the Fed's Sept. 19-20 policy meeting released Wednesday.

What to Watch in the CPI Report

A tame report on consumer inflation on Thursday would likely kill the prospect of an interest-rate increase by the Federal Reserve at its next meeting, despite signs of continued strength in the labor market.

Waller Says Tighter Financial Conditions Will Do Some of Fed's Work

The recent run-up in Treasury yields is doing some of the Federal Reserve's job of slowing the U.S. economy, Fed governor Christopher Waller said on Wednesday. The Fed will keep a "close eye" on this dynamic "and we'll see how these higher rates feed into what we're going to do with policy in coming months," he said. Waller added that the Fed has been getting "very good inflation data" and if that trends continue, inflation would return to the central bank's 2% target. (MarketWatch)

U.S. Economy The Federal Deficit Is Even Bigger Than It Looks

When it comes to the size of the federal government's annual deficit, appearances can be deceiving. The gap between spending and revenue for fiscal year 2023, which ended on Sept. 30, was $1.7 trillion, the Congressional Budget Office projected ahead of the official Treasury Department figures. That would be a roughly $300 billion widening in the shortfall from fiscal year 2022. But the gap was actually much larger . That is because of the odd way President Biden's attempt to broadly cancel student debt shows up in budget figures.

What Will Bank Earnings Say About the Economy?

U.S. households and businesses have been resilient in the era of high interest rates. Big-bank earnings may show whether they are starting to crack . JPMorgan, Wells Fargo and Citigroup will kick off 3Q bank results Friday.

UAW Strikes at Ford Pickup-Truck Plant in Kentucky

The United Auto Workers union went on strike at a Ford Motor pickup-truck plant in Kentucky Wednesday evening, with 8,700 workers walking off the job, escalating its nearly four-week labor action by hitting the automaker's largest factory.

Hollywood Studios Suspend Talks With Actors

Negotiations between Hollywood studios, streamers and striking actors stalled Wednesday after less than two weeks, dampening hopes that normalcy could soon return to the industry, which has largely been on ice since May.

Miami's Rental Market Rollercoaster Is Headed Downhill

After a historic run-up in prices, the luxury rental market in the Miami area is seeing a significant slowdown . Local real-estate agents said the velocity of people moving to Miami has slowed and fewer people are willing to overpay.

U.S. Corporate Bankruptcies Accelerate in Third Quarter

U.S. bankruptcy filings continued to mount [https://www.marketwatch.com/story/u-s-corporate-bankruptcies-accelerate-in-third-quarter-as-2023-rivals-2020-as-worst-year-in-more-than-a-decade-6bc2af72#::text=Bankruptcy%20filings%20are%20mounting%20in%202023.&text=S%26P%20Global%20Market%20Intelligence%20recorded, 2023%20so%20far%20to%20516.] in September, leaving 2023 on track to potentially surpass 2020 as the worst year for corporate bankruptcies in more than a decade. S&P Global Market Intelligence recorded 62 bankruptcy filings in September, bringing the total for the third quarter to 182, up from 157 during the second quarter. That brings the total for 2023 so far to 516. (MarketWatch)

Key Developments Around the World A Bigger World Bank Takes on China's Clout

For the past year, Treasury Secretary Janet Yellen has been circling the world seeking to breathe new life into a 79-year-old pillar of the U.S.-led international order, the World Bank, amid frustration with the West .

Facing Exclusion From U.S., Chinese EV Suppliers Map Route Back In

Chinese battery companies critical to electric vehicles are pursuing deals with U.S. free-trade partners South Korea and Morocco, seeking to tap growing demand in America and bypass rules aimed at shutting them out of the market.

IEA Warns of Increased Risk to Oil Markets Amid Israel Conflict

The conflict in Israel and rising tensions across the Middle East are raising risks to the global oil market , as demand for crude is set to rise to a record in 2023, according to the International Energy Agency.

BOJ Wasn't Tightening When It Raised Bond Yield Cap, Noguchi Says

The Bank of Japan raising its cap for the yield on 10-year Japanese government bonds to 1% from 0.5% in July wasn't monetary tightening, board member Asahi Noguchi said Thursday. The central bank will contain excessive rises in bond yields that aren't backed by higher inflation expectations, Noguchi said. He added that consumers would likely stay reluctant to spend until they become confident that real wages, adjusted for inflation, keep rising. "It is the Bank of Japan's mission for the time being to realize such a situation as soon as possible by patiently continuing monetary easing," he said. (Dow Jones Newswires)

Financial Regulation Roundup Caroline Ellison Tells Jury She Dreaded Inevitable Collapse of FTX

Testifying on Wednesday in Sam Bankman-Fried's fraud trial, top FTX deputy Caroline Ellison tearfully told his jury she was terrified by the crypto exchange's implosion after months of deception .

The Trial of Crypto's Golden Boy Belgium Plans Ukraine Fund Using Taxes on Frozen Russian Assets

Belgium is creating a $1.8 billion fund for Ukraine using tax revenue from profit generated by seized Russian central bank assets, the first major step making use of roughly $280 billion in Russian assets frozen under Western sanctions.

Goldman Sachs Finalizes Deal to Unload Lender at Steep Loss

Goldman Sachs has agreed to sell specialty lender GreenSky to a group of investors, a major step in what has become a costly retreat from the Wall Street bank's grand ambitions to serve the masses.

Forward Guidance Thursday (all times ET)

8:30 a.m.: U.S. consumer-price index for September; U.S. weekly jobless claims

10 a.m.: Dallas Fed's Logan speaks at Digital Inclusion Research Forum, hosted by the Dallas, Atlanta, Philadelphia and Kansas City Feds

1 p.m.: Atlanta Fed's Bostic speaks at National Agriculture Conference

2:30 p.m.: New York Fed underlying inflation gauge

Friday

5 a.m.: EU industrial production for August

8:30 a.m.: U.S. import and export price indexes for September

9 a.m.: ECB's Lagarde joins "IMF Seminar: Debate on the Global Economy"

10 a.m.: University of Michigan consumer survey, preliminary for October

Research Bank of England Likely Done With Hiking Cycle in Light of GDP Data

U.K. economic growth in August, which at 0.2% came in line with expectations, probably further weakens the case for another Bank of England rate hike in November, HSBC's chief European economist Simon Wells says in a note. The BOE was expecting 0.4% on-quarter growth in the third quarter at its most recent forecasts, so in light of recent monthly prints it will likely see downside news when the quarterly print is released next month, he says. "We think 3Q is on track to be broadly flat," Wells adds, with August's reading continuing the U.K. economy's pattern of one step forward, one step back, after GDP contracted 0.6% in July. His central case is that the BOE is done hiking.

-Edward Frankl

Latin American Economies Expected to Slow

Economic growth in Latin America has slowed and shows signs of a continued moderating trend, Goldman Sachs economist Alberto Ramos writes in a research note. Brazil, which saw strong economic growth in the second quarter, had a visible loss of dynamism in the third quarter, and Mexico's economy also showed signs of slowing, he writes. Countries in the region have made progress in bringing inflation rates down, with progress among highly inertial components such as core inflation and services. Rising energy prices and weaker local currencies pose risks to the improvement in inflation, as do tight labor markets and resilient domestic demand in Brazil and Mexico, Ramos writes.

-Jeffrey T. Lewis

Commentary China's Country Garden Wilts

The largest private Chinese property developer still standing is likely to be on its knees soon, and that could undermine Beijing's halting attempts to put a floor under the housing market, Jacky Wong writes.

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10-12-23 0716ET