Fed Keeps Rates on Hold, China Cuts, ECB Expected to Raise; Beyoncé Effect Hits Sweden

Fed Keeps Rates on Hold, China Cuts, ECB Expected to Raise; Beyoncé Effect Hits Sweden By James Christie

Good day. The Federal Reserve kept interest rates unchanged yesterday, but holding the benchmark federal-funds rate in a range between 5% and 5.25% might be short-lived. "Nearly all committee participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year," Chairman Jerome Powell said after the central bank's policy meeting. Today, China's central bank cut another key interest rate and the European Central Bank wis set to issue its interest-rate decision, with a quarter-point rise expected as eurozone inflation likewise remains well above target. Meanwhile, a Danske Bank economist pins higher-than-expected inflation in May in Sweden on Beyoncé launching a world tour in Stockholm, with fans who flocked to the capital city sending hotel prices soaring.

Now on to today's news and analysis.

Top News Fed Holds Rates Steady but Expects More Increases

Federal Reserve officials agreed to hold interest rates steady after 10 consecutive increases, but signaled they are leaning toward raising them next month if the economy and inflation don't cool more.

Most of them penciled in two more rate increases this year and lifted their expectations for growth and inflation in projections released Wednesday after their two-day policy meeting.

Transcript: Fed Chief Powell's Postmeeting Press Conference

Fed Chairman Jerome Powell discussed why the central bank opted to hold interest rates steady Wednesday during a press conference after its policy meeting, and why this may be just a pause in its rate-raising campaign to fight inflation. He also discussed the U.S. labor market's resilience, tighter credit conditions, and concerns about banking system turmoil and the commercial real-estate market. Here is a transcript of his remarks .

Parsing the Fed: How the June Statement Changed

Use this tool to compare the latest Fed policy statement with its immediate predecessor and see where policy makers have updated their language.

U.S. Economy The Fed Rate Pause Won't End Mortgage Misery

The good news about the Fed's rate pause? It won't make your financial life more miserable. That said, it won't make it less miserable either. Here are some factors to consider across your investing portfolio.

After Surging Early in the Year, Retail Spending Could Be Cooling

Consumer spending at stores, restaurants and websites across the U.S. could be leveling off after a surprisingly strong start to this year as Americans feel pressure from elevated interest rates and inflation.

How Republicans and Big Business Broke Up

Once considered natural political allies, the Republican Party and big business are drifting apart. One sign of their estrangement : GOP lawmakers are weaning themselves off money from corporate political-action committees.

Reparations for Black Californians Face Uphill Climb in Legislature

State political leaders, including Black legislators who support reparations, say it could take years for many of a task force's recommendations to be adopted. Direct financial compensation to Black Californians, they said, may not happen at all .

Key Developments Around the World China Cuts Rates to Prop Up Flagging Recovery

China's central bank cut another key interest rate after downbeat data showed the economy slackened in May and youth unemployment rose again, in an effort to buttress a fragile recovery in the world's second-largest economy.

Executive of China-Backed Infrastructure Bank Quits

The communications chief of the China-led Asian Infrastructure Investment Bank said he resigned, accusing the bank's management of being "dominated by the Communist Party," allegations the bank called "baseless.

Russia's Big Economic Problem: Not Enough Workers

The war in Ukraine has fueled Russia's worst labor crunch in decades after hundreds of thousands of workers fled the country or were sent to the front lines, weakening the foundations of the economy.

New Zealand Felt a Recession Could Be Necessary. It Got One

New Zealand's central bank said last year it would tolerate a recession as a price for bringing inflation under control . That contraction was realized at the end of the March quarter, as high interest rates and storm damage took its toll.

The Beyoncé Effect: Sweden's Inflation Feels the Hit

Call it Bey-flation. Sweden's higher-than-expected inflation in May was due in part to Beyoncé launching her Renaissance World Tour in Stockholm, according to an economist at Danske Bank.

Financial Regulation Roundup Tax Rules to Kick Off New Clean-Energy Market

The Biden administration is setting the stage for large companies to start buying clean-energy tax credits to bring fresh sources of capital to projects that produce wind energy, solar power, clean hydrogen and batteries, among others.

American Investment Banks Give Up Some China IPO Mandates

International investors have soured so much on Chinese initial public offerings that investment banks are backing out of potential listings and even small deals with an obvious sales pitch have become a tough sell .

Lawsuit Seeking $14,729 Tax Refund Could Lead to Corporate Windfall

What is income? If the U.S. Supreme Court decides to answer that simple-sounding question, the result could yield a windfall for large companies and block Democrats' proposals to tax wealthy Americans.

Forward Guidance Thursday (all times ET)

8:15 a.m.: European Central Bank interest-rate decision; Canada housing starts for May

8:30 a.m.: U.S. retail sales for May; U.S. weekly jobless claims

9:15 a.m.: U.S. industrial production and capacity utilization for May

Friday

3 a.m.: St. Louis Fed's Bullard speaks to Future of Macroeconomic Policy Conference at Norges Bank

4:30 a.m.: Bank of England/Ipsos Inflation Attitudes Survey

5 a.m.: European Union harmonized consumer-price index for May

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

Research Wholesale Prices Show Progress in Fed's Inflation Fight

The Federal Reserve may have already achieved its goal in its fight against inflation, Peter Cardillo, chief market economist at Spartan Capital Securities, writes in a note about May wholesale inflation data. May's producer-price index declined 0.3%, compared to a 0.2% increase in April, a steeper slowdown than forecast. Excluding food and energy, the gauge maintained the previous pace, at a 0.2% increase, as expected. Personal consumption flipped to a negative 0.4% from a positive 0.4%. "If the June-July inflation data shows further softening, the restrictive monetary policy is behind us," Cardillo writes.

-Paulo Trevisani

Morgan Stanley Lifts BOE Rate Forecast After Strong Labor Data

Morgan Stanley Research has raised its Bank of England rate expectation to 5% as of August, up from 4.75%, after data on Tuesday showed U.K. wage growth excluding bonuses rose 7.2% in the quarter that ended in April. "Tuesday's stronger-than-expected labor market data imply more hikes will be needed," Morgan Stanley U.K. economist Bruna Skarica writes in a note. "We had already anticipated a 25-basis-point move in June, and we add another 25bp hike in August, given that the monetary policy report will feature an uplift to the wage growth forecast," she writes.

-Miriam Mukuru

Commentary The End of the Fed's Tightening Is Still in Sight

Investors are facing an unexpected new reality : The sooner the Federal Reserve feels it can stop raising interest rates, the less likely that it will need to cut rates in the future, Justin Lahart writes.

Stock Market to Fed: You Haven't Done Enough

Monetary policy simply isn't very tight , and that explains why the U.S. economy remains stronger and inflation is more stubborn than Federal Reserve officials expected-and why their job is still not done, Greg Ip writes.

Regional Banks Face Years of Trouble

Regional banks will be focused on strengthening balance sheets and trying to keep depositors and regulators happy for a long time, even as the threat of broader banking system troubles hangs over them, James Mackintosh writes.

Beijing Must Act to Avoid an 'L-Shaped' Future

Even given China's big problems-high youth unemployment, unfavorable demographics and the leadership's "fortress economy" mind-set-the speed with which its recovery has unraveled is remarkable, Nathaniel Taplin writes.

Basis Points U.S. supplier prices rose 1.1% in May from a year earlier, continuing their recent cooling pattern after the producer-price index, which generally reflects supply conditions across the economy, increased 2.3% in April from a year earlier, the Labor Department said. The index fell 0.3% in May from April, driven by declining food and energy prices. Food costs fell by 1.3% and energy by 6.8% over the month, led by gasoline prices. (Dow Jones Newswires) U.S. inventories of crude oil unexpectedly ballooned last week, while stockpiles of refined fuels also saw considerable gains, according to the Energy Information Administration. It said commercial crude-oil stockpiles climbed by 7.9 million barrels last week to 467.1 million barrels, leaving them almost precisely at the five-year average. Analysts surveyed by The Wall Street Journal had predicted crude stockpiles would fall by 300,000 barrels from the prior week. (DJN) Taiwan's central bank on Thursday left interest rates unchanged , following the U.S. Federal Reserve in pausing monetary tightening amid cooling inflation and a slowing global economy. Feedback Loop

This newsletter is compiled by James Christie in San Francisco.

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06-15-23 0715ET