Uneasy Optimism on Display at Jackson Hole; Powell Says Fed Will Move Carefully on Rate Hikes By Michael Maloney
Good day. Central bankers from around the world are finally getting the inflation slowdown they have long been expecting, but worry it won't last. That apprehension explained the uneasy optimism underlying their discussions in Jackson Hole over the weekend about whether interest rates have reached a summit. In his speech at the economic symposium in Wyoming, Federal Reserve Chair Jerome Powell argued for holding interest rates steady for now, but kept the door open to raising them later this year if the economy doesn't slow enough to keep inflation declining.
Now on to today's news and analysis.
Top News Central Bankers Are Unsure Whether They've Raised Rates Enough
Officials at the Jackson Hole economic symposium stressed they are trying to strike the right balance between raising rates too little and too much . "There's a risk that we've underdone this [and] we have to go further" because the inflation problem "is just bigger than we thought," Ben Broadbent, deputy governor of the Bank of England, said during a closing panel discussion Saturday. "There's also a risk that we've already done not just enough but too much."
Powell Says Fed Will 'Proceed Carefully' on Further Rate Rises Fed leader Jerome Powell underscored how he is trying to thread the needle between restraining the economy enough to reduce price pressures without throwing it into a needlessly severe slowdown. Powell twice said in his Jackson Hole address that the Fed would "proceed carefully" in any further move, signaling he saw little urgency to raise rates at the central bank's next policy meeting in September.
Text of Powell's Jackson Hole Speech [https://urldefense.com/v3/__https://s.wsj.net/public/resources/documents/powell20230825a.pdf__;!!F0Stn7g!Hj-RVMNZN04T4nxecHuoi7EGqHhfiJRkp7v3jzPyf_CSpH7CAlDJkUoDRov_NvSyUXvVGLS6rEuCtDzcMLsADJvsLRAYezAUYt_kFGPf$ ] Rising Long-Term Rates Loom Over Autumn on Wall Street What Wall Street Said About Powell's Speech Fed Keeping Rates Higher Raises Chances of Economic Breakages Harker Says Fed Should Stand Pat, 'See How Things Turn Out'
Banks and corporations need to sort through the Federal Reserve's rate-tightening campaign of the past year and a half before the central bank boosts interest rates again, the president of the Philadelphia Fed, Patrick Harker, said.
Lagarde Says ECB Will Set Rates as High as Needed
European Central Bank President Christine Lagarde said officials will set interest rates as high as needed -and leave them there for as long as necessary-to bring inflation down to target in the 20-nation eurozone, MarketWatch reports.
U.S. Economy Rising Insurance Costs Start to Hit Home Sales
Buyers' concerns about insurance costs are slowing sales and causing some canceled deals in areas with particularly high flood or wildfire risks. Home-insurance companies are trying to claw back steep underwriting losses by hiking rates, or pulling back from disaster-prone areas. The average annual home-insurance premium for Floridians has tripled in five years, from $1,988 in 2019 to $6,000, according to the Insurance Information Institute.
U.S. Consumer Sentiment Fell in August
Sentiment among U.S. consumers weakened slightly in August, as some of the recent improvement in the economy lost momentum after inflation heated up a little. The final reading of the consumer sentiment index dipped to 69.5 in August from 71.6 in July, according to data from a survey carried out by the University of Michigan. (Dow Jones Newswires)
Americans Are Bailing on Their Home Insurance
Homeowners are increasingly forgoing home insurance , gambling that the likelihood of a disaster isn't high enough to justify the cost of a policy. Some say they are doing so because they can no longer afford the rising premiums.
Student Loans to Emerge From Deep Freeze, Borrowers Are Confused
Student-loan borrowers are finding out that restarting a $1.6 trillion federal program is much more confusing than switching it off. With pandemic relief ending, borrowers will start owing interest as of Friday.
How Did Things Go Wrong at an Arizona Park Built With Muni Bonds?
Municipal bonds have a reputation for safety, but a financial meltdown at a sports arena in Mesa, Ariz., shows all munis aren't created equal , highlighting a risky corner of the $4 trillion municipal-bond market.
Key Developments Around the World Fed's Inflation Fight, China's Slowdown Hammer Emerging Markets
Rising U.S. interest rates and China's economic sluggishness are dealing a double blow to emerging markets. Investors had expected developing economies to shine this year as U.S. interest rates fell, the dollar weakened and Chinese demand rebounded after three years of pandemic-driven lockdowns. Instead, the reverse happened: The Federal Reserve kept raising rates to slow inflation, driving the dollar higher. Separately, China's recovery faded amid fears its economy is entering an era of slower growth.
Party Priorities Complicate Plans to Revive China's Economy
Ideology is driving China's economic policy to a degree not seen since the country's opening to the West nearly half a century ago, deterring its leaders from taking steps to spur the sputtering economy.
Japanese Companies Making Big Promises to Boost Stock Prices
Japanese companies, long viewed as moribund, are trying to change how investors think about them by promising better growth, governance and returns.
Australian Retail Sales Rebound
Australian retail sales rose more than expected in July, adding to uncertainty about consumers and their willingness to spend against a backdrop of falling real wages, rising living costs and soaring mortgage interest rates.
Brazil Inflation Points to Steady Rate Cuts
Brazil's consumer-price inflation was worse than expected in the month through mid-August, but still not bad enough for the country's central bank to change its plans to cut its benchmark interest rate by half a percentage point at coming meetings, XP Investimentos economists said in a research note. Consumer prices rose 0.28% from July 16 through Aug. 15 and rose 4.24% from a year earlier, Brazil's statistics agency says. The market consensus was for an increase of 0.16% in the month, though underlying inflation trends continued to improve, they say.
-Jeffrey Lewis
Financial Regulation Roundup U.S. Tackles Crypto Tax Mess
The federal government is escalating efforts to make cryptocurrency investors comply with tax law , nearly 15 years after people started trading bitcoin.
The 'Fidelity Mafia' Behind Big Crypto
Some of the most prominent players in the digital-assets industry cut their teeth at the same place : Fidelity Investments. The mutual-fund powerhouse is a cornerstone of the traditional financial system that the founders of bitcoin and other cryptocurrencies intended to disrupt. Yet Fidelity became a bitcoin pioneer in 2014, mining the token when it was trading around $400. It encouraged employees to experiment with blockchain technology and develop products that led to the launch of its crypto business unit four years later. Along the way, it built a deep talent pipeline for the industry.
Binance Drops Sanctioned Russian Banks From Peer-to-Peer Service
Binance has stopped offering clients the option to pay one another through sanctioned Russian banks, days after a Wall Street Journal article detailed how the crypto giant was helping Russians move money abroad.
Wells Fargo Fined $35 Million for Excessive Advisory Fees
Wells Fargo has agreed to pay $35 million to settle charges that some of the bank's financial advisers charged excessive fees. The bank has also paid affected account holders about $40 million, including interest, to reimburse them for the overcharging, the Securities and Exchange Commission said.
Who Wins When a Bank Fails? Wine Guy Frank Martell
Frank Martell knew he had scored when he bought dozens of Bonds from Silicon Valley Bank and First Republic Bank. Bond wine, that is, a hard-to-find Napa Valley cult favorite that goes for several hundred dollars a bottle. The Cabernet Sauvignons were part of two wine collections the government seized this year, one from SVB and one from First Republic, after the two California banks collapsed.
Cap on Tax Deductions Has a Business Loophole
Many business owners can easily-and legally-dodge the $10,000 cap on state and local tax deductions, and that costs the federal government as much as $20 billion a year , a new estimate by the Tax Policy Center shows.
Chinese Stocks Rally After Beijing Moves to Boost Market
Stocks in mainland China soared on Monday, after the government cut a tax on trading and said it will take more steps to revive its sagging capital markets.
Forward Guidance Monday (all times ET)
4 a.m.: EU money supply for July
10:30 a.m.: Dallas Fed manufacturing survey
Tuesday
9 a.m.: S&P CoreLogic Case-Shiller Home Price Index for June
10 a.m.: Conference Board Consumer Confidence Survey for August
10 a.m.: Job Openings and Labor Turnover Survey (JOLTS) estimates for U.S. July
10:30 a.m.: Dallas Fed retail outlook survey
Research Inflation Seen Slowing and Keeping Fed From Hiking
Despite Fed Chair Jerome Powell's indication that rates could rise further, inflation is likely to surprise on the downside and stave off another hike, Capital Economics' Andrew Hunter said in a note. He predicts rate cuts taking the federal-funds rate to a 3.25% to 3.5% range by the end of 2024, from the current 5.25% to 5.5%. "Although we're no longer very confident in the idea that the economy will fall into recession over the coming quarters, we think that most of the conditions are already in place for core inflation to return to the Fed's 2% target regardless," Hunter said.
-Paulo Trevisani
Eurozone Interest Rates Can't Come Down Yet, Le Maire Says
(MORE TO FOLLOW) Dow Jones Newswires
08-28-23 0715ET
