Atlanta Fed's Bostic Says 'Pent-Up Exuberance' for Rate Cuts a Risk

Atlanta Fed's Bostic Says 'Pent-Up Exuberance' for Rate Cuts a Risk By James Christie

Good day. The U.S. economy should see expanding activity, continued strength in the labor market, and inflation slowly returning to the Federal Reserve's 2% target, Atlanta Fed President Raphael Bostic wrote in an essay posted Monday to his bank's website. But he cautioned, "As promising as that all sounds, the resounding success I mentioned-a return to price stability without economic pain-is hardly assured." He also noted businesses appear eager to "pounce" at the first hint of a cut to interest rates. He warned that, "If that scenario were to unfold on a large scale, it holds the potential to unleash a burst of new demand that could reverse the progress toward rebalancing supply and demand. That would create upward pressure on prices. This threat of what I'll call pent-up exuberance is a new upside risk that I think bears scrutiny in coming months."

Now on to today's news and analysis.

Top News No Pressure From Urgency for Fed Policy Making, Bostic Says

With the U.S. labor market strong and growth above trend, there isn't pressure on the Federal Reserve to cut interest rates, Atlanta Fed President Raphael Bostic said Monday, MarketWatch reported . "The good news is the labor market and economy are prospering, furnishing the FOMC the luxury of making policy without the pressure of urgency," Bostic said in a new essay posted on his regional bank's website. The voting member on the Fed's interest-rate committee added that this could change. One concern about cutting interest rates is that businesses seem to be poised to "pounce" on the first hint of a move, and quickly boost spending and hiring, Bostic said. (MarketWatch)

U.S. Economy AI Talent Is in Demand Even as Tech Layoffs Mount

U.S. companies are ramping up recruitment of artificial-intelligence professionals and paying a premium for talent. New AI job listings are up 42% compared with a December 2022 low point, according to University of Maryland researchers.

Costs Driving Cheeseburger Prices Up-and Restaurant Owners Out

Independent restaurants are on financial life support, and wages for waitstaff, table bussers and cooks will grow more expensive for many eateries this year, with 22 states in January raising the minimum wage for hourly workers.

Key Developments Around the World China's High-Wire Act: Downshifting Growth Without Stagnation

After three years of pandemic-era distortions, the longer-term trajectory of the world's second-largest economy is coming into focus, and it is showing a plateauing of growth that would have alarmed previous Chinese leaders.

China Sets High Bar for Growth-and Turns to an Old Crisis Playbook U.K. Retail Sales Growth Dampened by Wet Weather

Tensions between Israel's wartime leadership are rising as the three members of the war cabinet jockey for political clout while disagreements mount over how to wage the war and secure a deal to release hostages.

Missile Strikes, Panic and a Race to Save the Rubymar Russia's Backdoor for Battlefield Goods From China: Central Asia

Two years after the invasion of Ukraine, drones and U.S.-made computer chips are increasingly flowing to Russia from China through Central Asian trade routes, showing the difficulty of strangling supplies to Moscow's war effort.

Financial Regulation Roundup Judge Strikes Down Law Requiring Corporate-Ownership Disclosure

An Alabama federal judge ruled the Corporate Transparency Act, a sweeping bipartisan anti-money-laundering law passed in 2021 and that became effective Jan. 1., was unconstitutional, leaving its future uncertain .

Apple Fined $2 Billion in One of Europe's Largest Antitrust Actions

The European Union fined Apple about $2 billion saying the iPhone maker set unfair rules for music-streaming app developers, an antitrust penalty that could mark the start of a wider battle between EU regulators and the tech giant.

Bitcoin Funds Pull In Money at Record Pace

Bitcoin exchange-traded funds have been a smash hit , helping feed into a frenzy that has sent the cryptocurrency's price toward a record high. BlackRock's iShares Bitcoin Trust eclipsed $10 billion in assets Thursday.

Forward Guidance Tuesday (all times ET)

10 a.m.: ISM Report on Services PMI for February; U.S. factory orders

12 p.m.: Fed's Barr speaks at 2024 National Interagency Community Reinvestment Conference

3:30 p.m.: Fed's Barr in roundtable at 2024 National Interagency Community Reinvestment Conference

Wednesday

8:15 a.m: ADP National Employment Report for U.S. for February

9:45 a.m.: Bank of Canada interest rate decision

10 a.m.: U.S. wholesale inventories for January; U.S. Job Openings and Labor Turnover Survey (JOLTS) for January; Fed's Powell presents Semiannual Monetary Policy Report to Congress to House Financial Services Committee

12 p.m.: San Francisco Fed's Daly speaks at 2024 National Interagency Community Reinvestment Conference

2 p.m.: Federal Reserve Beige Book

4:15 p.m.: Minneapolis Fed's Kashkari in Q&A session at 2024 WSJ CFO Network Summit

Research ECB Needs More Clarity Falling Inflation Is Sustainable

The European Central Bank is likely to leave key interest rates unchanged for the time being, as the "last mile" on the way to its inflation target is proving to be the most difficult, Fritzi Koehler-Geib, chief economist at KfW, writes in a note. "There is now also growing consensus among market participants that a key interest-rate cut in March or April is unlikely," she writes. The lack of clear signals of easing wage growth, amid signs that inflation remains persistent in services, will boost calls among policymakers for vigilance, she writes. Indeed, they have repeatedly pointed out that there is still a lack of evidence as to whether the downtick in inflation is sustainable. Geopolitical upheavals also are a risk for a possible resurgence of inflation, she adds.

-Ed Frankl

Bank of Canada May Be Misjudging Core Inflation

The latest inflation reading gives the Bank of Canada cover to adopt a more dovish stance this week, though there is a risk policymakers leave monetary policy restrictive for too long and inflict unnecessary pain on households and businesses, according to Desjardins analysts Royce Mendes and Tiago Figueiredo. The pair believe the central bank is misjudging core inflation and say the consumer-price index median and CPI trim it relies heavily on have become biased and likely overestimate the true underlying inflation rate. After accounting for biases, Desjardins estimates core inflation has continued a downward trend and is now below 3%, roughly 0.4 points lower than the average of unadjusted median and trim. It adds that, "Given the tightrope Canadian central bankers are walking, they can't afford any missteps."

-Robb Stewart

Commentary Is Your 401(k) Destroying Capitalism?

A respected Wall Street strategist was lambasted in 2016 for saying index funds are "worse than Marxism," but serious people are again pointing to what they say are hazards of autopilot retirement funds , Spencer Jakab writes.

Basis Points The Swiss franc is unlikely to reverse its recent fall against the euro in the near term as ongoing disinflation suggests the next Swiss National Bank chairman may stay clear of more franc-supporting measures, according to ING. (Dow Jones Newswires) Turkey's central bank could be forced to raise interest rates again if inflation continues to run hotter than expected, emerging-markets economist Liam Peach at Capital Economics writes in a report, noting "Inflation pressures in the economy remain very strong and suggest that the disinflation process has taken a setback at the start of this year." (DJN) Consumer prices in the Philippines are estimated to have increased 3.1% on year in February, according to the median forecast of eight economists polled by The Wall Street Journal. That would compare with a 2.8% rise in January and the Philippine central bank's inflation target range of 2%-4%. (DJN) Retail sales growth in the U.K. slowed in February , when consumer demand was damped by record rainfall, according to a British Retail Consortium report. A private gauge of China's services activities edged down again , but showed continued, albeit modest, expansion in the sector. Feedback Loop

This newsletter is compiled by James Christie in San Francisco.

Send us your tips, suggestions and feedback. Write to:

James Christie , Perry Cleveland-Peck [mailto:[e-mail]], Nihad Ahmed , Michael Maloney

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

03-05-24 0717ET