Government Shutdown Would Deprive Fed of Data; Kashkari Says Taming Inflation Might Require 'Meaningfully Higher' Rates

Government Shutdown Would Deprive Fed of Data; Kashkari Says Taming Inflation Might Require 'Meaningfully Higher' Rates By James Christie

Good day. Data that Federal Reserve officials study to gauge the effects of interest rates on the U.S. economy could be delayed if there is a shutdown of parts of the federal government, Nick Timiraos of The Wall Street Journal writes. He notes that three government shutdowns in the past 30 years have postponed economic data releases, and that a shutdown of more than two weeks could deprive officials of key information they would use to decide whether to raise rates at their Oct. 31-Nov. 1 meeting. Meanwhile, Minneapolis Fed President Neel Kashkari sees a better-than-even chance of a soft landing for the U.S. economy. But he cautions that interest rates might still need to go "meaningfully higher" for the Fed to reach its inflation target.

Now on to today's news and analysis.

Top News Shutdown Would Blindfold Fed in Piloting Course on Rates

Federal Reserve officials are walking a tightrope to tame inflation without creating a needlessly severe economic slowdown. If that isn't tricky enough, they might have to do it blindfolded if there is an extended government shutdown.

If Congress doesn't pass a stopgap funding measure before Sunday, a shutdown of certain agencies could delay the routine release of fresh economic data on wages, employment, inflation and output.

Fed's Kashkari Warns of Possible Need for More Rate Hikes

Neel Kashkari, head of the Federal Reserve Bank of Minneapolis, gives the U.S. economy a 60% chance of a soft landing with one more rate rise, he said in an essay, but more might be needed to bring inflation down to the Fed's 2% target.

Pro Take: The Fed Is Bringing Inflation Down, but Workers Still Fear Losing Ground By Bob Fernandez

Worker activism is on the rise in the U.S. as unions seek to recoup economic ground lost to inflation and to hedge against potential price increases in the future with new multiyear contracts. Median household income fell 5% to $74,580 in 2022 from $78,250 in 2019 after rising in the prior few years, the latest census data shows. The consumer-price index, meanwhile, climbed 21% between January 2019 and last month, with higher commodity prices and supply-chain snarls fueling price increases. Read more .

U.S. Economy U.S. Home Prices Increased in July

The S&P CoreLogic Case-Shiller National Home Price Index, gained 1% from a year earlier in July, after holding steady the prior month, and on a month-over-month basis, the index increased a seasonally adjusted 0.6% in July.

Rising Loan Costs Are Hurting Riskier Companies

Many companies borrowed at ultralow rates during the pandemic through so-called leveraged loans. Interest costs in the $1.7 trillion market are biting and investors fear unsustainably high interest rates will spark bank-loan defaults .

Senators Unveil Funding Deal to Avert Government Shutdown

Senate Democratic and Republican leaders unveiled a plan to avoid a government shutdown, releasing legislation to extend funding until Nov. 17 while also providing about $6 billion apiece for Ukraine and disaster relief.

Why Now Is a Horrible Time to Refinance Student Loans

Borrowers facing down the return of federal student-loan payments might be tempted to refinance their loans in an attempt to save money. For many, that is a terrible idea . Experts say refinancing would benefit only a handful.

Key Developments Around the World Chinese Central Bank Vows to Step Up Policy Support

China's central bank said Wednesday that it would step up policy support for the Chinese economy, and repeated its pledge to keep liquidity reasonably ample and maintain stable credit expansion for the economy.

China's Industrial Profit Rose in August China's Business Environment Is Deteriorating, U.S. Companies Say China Has Second Thoughts About Controlling Prices in Housing Market RBA on Alert as Australia's Monthly CPI Rises in August

Australia's monthly consumer-price index rose 5.2% in August , snapping a recent run of declines and keeping the Reserve Bank of Australia on alert for the prospect of a further interest-rate increase before the end of the year.

Bank of Thailand Raises Policy Rate as Govt Gears Up for Stimulus

Thailand's central bank raised its policy rate to the highest in nearly a decade in a bid to mitigate the risks of stronger inflation due to the government's stimulus plans and the baht's recent weakening.

German Consumer Confidence for October Dips Further

Consumer confidence in Germany weakened for the second consecutive month in October, falling to minus 26.5 from minus 25.6 in September, as consumers prioritized more savings over spending amid a gloomy economic picture.

The Kremlin's Latest Battle Is With Russia's Oil Companies

Russia, one of the world's biggest oil exporters, is suddenly running low on fuel at home , causing heightened tensions between the Kremlin and Russia's oil companies, including the ousting of executives at state-controlled Rosneft Oil.

Japan Can Import Russian Oil Above Price Cap Through June, U.S. Says Financial Regulation Roundup The World's Biggest Crypto Firm Is Melting Down

Under threat of enforcement actions by U.S. agencies, Binance's empire is quaking , while over the past three months, more than a dozen senior executives have left and the exchange has laid off at least 1,500 employees this year.

JPMorgan Paying $75 Million to Settle Suit Over Jeffrey Epstein Ties

JPMorgan Chase agreed to pay the U.S. Virgin Islands $75 million to settle a lawsuit alleging the bank aided Jeffrey Epstein's sex trafficking, ending a legal battle that exposed his close ties to the bank and the island territory.

Forward Guidance Wednesday (all times ET)

8:30 a.m.: U.S. durable goods report for August

10:30 a.m.: Dallas Fed Energy Survey

Thursday

3 a.m.: ECB General Council meeting

5 a.m.: EU business and consumer surveys for September

8:30 a.m.: U.S. weekly jobless claims; U.S. gross domestic product for second quarter, third estimate

10 a.m.: U.S. pending home sales for August

1 p.m.: Fed's Cook speaks at Minorities in Banking Forum, Federal Reserve Bank of Dallas

Research Survey Finds Lower Discretionary Spending Intentions in U.S.

U.S. consumers expect to pull back on discretionary spending, but still want to spend more during the holidays, according to a survey by Stifel analysts. Net discretionary intentions-the difference between consumers reporting they plan to spend more and plan to spend less-were flat year-on-year in September and declined five points sequentially from late August, according to the latest survey of consumers by Stifel analysts. Still, consumers on average plan to spend 1% more this holiday season. That points to slightly better holiday season spending than back-to-school spending, as earlier survey data showed consumers planned to spend 9% less on back-to-school purchases.

-Ben Glickman

Commentary How Much Savings Do Americans Have Left, Anyway?

Any remaining savings could make it easier for people to weather a rainy day, and that would make a recession, if it comes, shallower, and lowers the chances of one occurring at all, Justin Lahart writes.

$100 Oil Needs Western Drills to Stay Quiet

Even with oil above $90 a barrel, 11 fewer rigs were operating in the U.S. on Sept. 22 than one week earlier, and 134 fewer were operating than a year ago, according to oil-field services company Baker Hughes, Carol Ryan writes.

How Elon Musk Came to Influence the Fates of Nations

In a world where geopolitical leadership depends increasingly on technology, Musk ought to be one of the U.S.'s most important assets. And yet he is a de facto independent actor . This poses an interesting problem for the U.S., Greg Ip writes.

Basis Points U.S. consumer confidence fell in September for the second month in a row, indicating growing unease about the health of the economy. Private research group The Conference Board said Tuesday its consumer-confidence index fell from an upwardly revised 108.7 in August to 103.0, and the expectations-specific index declined from 83.3 in August to 73.7, tumbling below the 80-mark that historically signals a recession within the next year. (Dow Jones Newswires) Manufacturing activity in the mid-Atlantic U.S. expanded in September despite firms being less optimistic about the future, according to the Federal Reserve Bank of Richmond. Its Fifth District Survey of Manufacturing Activity's index came in at five points this month, versus minus seven reported in August, marking its first positive reading since the spring of 2022. (DJN) Sales of newly built homes in the U.S. fell in August as interest rates and home prices stayed elevated, dampening buyer demand. New-home sales fell 8.7% to an annual rate of 675,000 in August, from a revised 739,000 in July, the Commerce Department reported Tuesday. (MarketWatch) Brazil's 12-month inflation rate rose in the month through mid-September led by transportation costs. Consumer prices rose 0.35% from August 16 through Sept. 15 and were up 5% from a year earlier, Brazil's Institute of Geography and Statistics said. Consumer prices rose 0.28% in the month through mid-August and increased 4.24% in the 12 months through mid-August. (DJN) Feedback Loop

This newsletter is compiled by James Christie in San Francisco and Perry Cleveland-Peck in Barcelona.

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09-27-23 0715ET