Bank of England Expected to Follow the Fed, ECB in Holding Rates Steady; Brazil Cuts Key Rate By James Christie
Good day. The Bank of England is expected to keep interest rates unchanged today, following in the footsteps of the European Central Bank and the Federal Reserve. The ECB last month ended a historic run of 10 consecutive rate increases, while Fed officials yesterday voted to keep rates unchanged at a 22-year high. At their September meeting, most Fed officials projected one more rate increase this year, but some have sounded in recent weeks as though they aren't eager to hike again unless hotter-than-expected economic data force them to. Elsewhere, Brazil's central bank cut its key rate at a third consecutive meeting, while Norway's and Malaysia's central banks kept rates unchanged.
Now on to today's news and analysis.
Top News Fed Extends Pause on Rate Hikes, Keeps Door Open to Moving Higher
Federal Reserve Chair Jerome Powell hinted the central bank might be done raising interest rates for now but was careful not to rule out another increase after officials extended a pause in hikes.
Officials voted unanimously on Wednesday to leave rates unchanged at a 22-year high. "The committee is proceeding carefully," Powell said during a press conference where he said nothing to shift the market's expectation that officials won't raise rates in December.
Parsing the Fed: How the November Statement Changed Transcript: Fed Chief Powell's Postmeeting Press Conference How Higher Rates for Longer Can Be Good News for the Economy Fed Takes Heart in a Supply-Side Boom
When spending and employment grow as quickly as they have lately, it normally means inflation pressure is building and the Federal Reserve might have to raise interest rates. But on Wednesday, Fed Chair Jerome Powell suggested otherwise. Demand, he said, has indeed grown rapidly, but so has supply. A supply-side boom generates the best of all worlds: brisk growth and falling inflation, Greg Ip writes .
Pro Take: Treasury Yields Fall as Powell Softens View on Inflation Threat By Bob Fernandez
Treasury yields broadly fell Wednesday as the Federal Reserve held interest rates steady.
Investors appeared to be "pricing in the end of the rate-hike cycle even if Fed Chair Jerome Powell is not yet ready to declare victory," Joe Brusuelas, chief economist at RSM US, an assurance, tax and consulting firm, said of the 2-year Treasury note. Read more .
U.S. Economy CFOs Take Measured Approach to Using Real-Time Payments
With real-time payments, chief financial officers can pay their suppliers in seconds, but many are holding off on using them in the back office, waiting to see if the value ultimately outweighs the costs. The Fed in July launched FedNow, a real-time payments system allowing businesses and consumers to move money instantly.
Americans Can Put More Cash in 401(k)s Next Year, Thanks to Inflation
Most American workers will be able to put up to $23,000 into their 401(k)s and similar workplace retirement plans in 2024, up $500 from this year, the Internal Revenue Service said on Wednesday.
U.S. Oil Inventories Rise Amid Steady Production
U.S. commercial crude-oil stockpiles rose by 800,000 barrels last week to 421.9 million barrels, and remain about 5% below the five-year average, while crude output held at 13.2 million barrels a day.
Key Developments Around the World Brazil's Central Bank Cuts Key Rate, Signals More Cuts to Come
The Central Bank of Brazil cut its benchmark lending rate by half a percentage point to 12.25% on Wednesday, as expected, and said it expects to make more cuts of the same size at coming meetings.
Norway Central Bank Keeps Rate in Place, but Another Hike Looms
The Norwegian central bank maintained its key policy rate at its current level on Thursday, but confirmed an increase is likely later this year. The decision by Norges Bank to keep the rate at 4.25% follows a series of increases up until September, and the full effects of tighter monetary policy have yet to be felt on the Norwegian economy, the bank said.
Malaysia Central Bank Keeps Policy Rate Unchanged Bank of Canada Might Cut Rates Once Core Inflation Trends Down
The Bank of Canada can only consider interest rate cuts once there is clear evidence core inflation is on a downward trend , Gov. Tiff Macklem said, while some economists see rate relief on the horizon as the economy slows.
Japan Cabinet Approves $113 Billion Stimulus to Ease Inflation Impact
Japan's cabinet approved an economic stimulus package worth more than $110 billion, including income tax cuts, part of Prime Minister Fumio Kishida's program to lessen the impact of inflation as his approval rate falls.
Financial Regulation Roundup Prosecutors, Defense Paint Conflicting Pictures of Bankman-Fried
Prosecutors and defense attorneys clashed Wednesday over whether FTX founder Sam Bankman-Fried was a liar who stole billions of dollars-or an unconventional executive who made mistakes.
Court Sends Stock-Buyback Rule Back to SEC
A conservative appeals court dealt a setback to the Securities and Exchange Commission's plan to give investors more information about stock buybacks after business groups challenged the rule.
DOJ Policy on M&A to Spur Extra Scrutiny of Targets' Compliance
A Justice Department shift around disclosure of possible wrongdoing uncovered in mergers and acquisitions reinforces the need for buyers to dive into a target's compliance efforts , before and after a deal closes, corporate advisers said.
Startup Sues Regulator in Effort to Launch Election-Betting Market
Kalshi said in a complaint that the CFTC was "arbitrary, capricious and otherwise contrary to the law" when it rejected the startup's proposal to launch a market for derivatives tied to results of congressional elections.
New York Adds Stiffer Requirements to Cybersecurity Rules
New York's financial watchdog published significant updates to its cybersecurity regulations Wednesday, adding strict provisions around board oversight and ransom payments that go further than recent federal rules.
AI Could Spark Next Financial Crisis, SEC Chair Says
In an exclusive interview with MarketWatch , Securities and Exchange Commission Chair Gary Gensler argued that generative artificial intelligence technologies in the vein of ChatGPT have the potential to revolutionize the way we invest by leveraging large data sets to "predict things that were unimaginable even 10 years ago," but that these new powers will come with great risks. "A growing issue is that [AI] could lead to a risk in the whole system," Gensler said. "As many financial actors rely on one or just two or three models in the middle...you create a monoculture, you create herding." (MarketWatch)
Singapore Makes Its Largest Bank Take a Technology Timeout
The Monetary Authority of Singapore barred DBS Group from acquiring new business ventures and making "nonessential" IT changes for six months, in effect stopping the bank from rolling out new technology initiatives until it proves its systems are in order.
Forward Guidance Thursday (all times ET)
8 a.m.: Bank of England interest-rate decision
8:30 a.m.: U.S. productivity and costs, preliminary for third quarter; U.S. weekly jobless claims
Friday
5:30 a.m.: S&P Global / CIPS UK Services PMI for October
8:30 a.m.: Canada labor force survey for October; U.S. employment report for October
10 a.m.: ISM Report on Business Services PMI for October
Research Texas Economy Melted a Bit in Blazing-Hot Summer, Dallas Fed Says
A scorching Texas summer may have cost the state $24 billion . Texas temperatures this summer were 2.5 degrees higher than the average over the last roughly two decades, leading to heat-exhausted workers, fewer tourists and lower economic activity, the Federal Reserve Bank of Dallas says. "The impact of an increase in summer temperatures on Texas GDP growth is twice as pronounced as the change in the rest of the U.S. because summers are generally hotter relative to the rest of the country, " the Dallas Fed's Aparna Jayashankar, Prithvi Kalkunte, Anil Kumar and Pia Orrenius write in a report. The researchers estimate this summer's heat wave could have diminished Texas GDP by about 1%, or an estimated $24 billion. Depending on the calculations, the impact could be lower.
-Bob Fernandez
Commentary RBA Decision Is Tough to Call With Cautious Bullock at the Helm
The Reserve Bank of Australia's decision next week on whether to resume raising interest rates in response to higher-than-expected third-quarter inflation is too close to call , James Glynn writes.
Basis Points Job openings in the U.S. rose slightly in September to 9.6 million from a revised 9.5 million in August, the Labor Department said Wednesday. While job postings are still high, they have subsided from a record 12 million in 2022. (MarketWatch) U.S. private-sector hiring ticked up a little in October as the labor market tightened again and wage growth softened slightly. Employment in the nonfarm private sector rose by 113,000 jobs, compared with 89,000 in September, according to data from the ADP National Employment Report released Wednesday. (Dow Jones Newswires) Activity among U.S. goods manufacturers contracted at a faster-than-expected pace in October, as demand continued to suffer under high interest rates and industry contended with strikes in the auto sector. The index of manufacturing activity fell to 46.7 in October from 49.0 in September, the Institute for Supply Management said. (DJN) Panama Canal officials will cut available slots for ship transits by half this winter as extreme drought leaves the man-made waterway, which handles around 7% of global seaborne trade, lacking enough water. Feedback Loop
This newsletter was compiled by James Christie in San Francisco and Michael Maloney in New York.
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11-02-23 0715ET
