Get Ready for the Fed Minutes

Get Ready for Hardika Singh’s Fed Meeting Report

The release of the minutes from the Federal Reserve’s meeting this afternoon could shed some light on policymakers’ outlook for the path of interest rates. Fed Chairman Jerome Powell’s remarks in Sintra underscored a sense of cautious optimism. He alternately said the economy had made “significant progress,” “real progress” and “fairly substantial progress” toward lower inflation and stable growth. At the same time, demand for workers picked up in May, with job openings rebounding during the month. And a Texas-based regional bank with heavy exposure to commercial real estate raised $228 million from a group of investors, underscoring the growing pressure on banks that lend to the sector. Read on for more on this news and more.

Note to readers: The Pro Central Banking newsletter will no longer be published tomorrow due to the July 4th holiday. We will be back on Friday.

Powell discusses progress, puts rate cuts into perspective

Federal Reserve Chairman Jerome Powell said he was pleased with how inflation has resumed a downward trend after a rebound earlier this year, but said it was too early to tell whether the central bank might be able to cut interest rates by the end of the summer, as investors increasingly expect.

Hannon’s View: Cautious ECB Links Decision Points to Projections By Paul Hannon

The European Central Bank is charting a course towards an ever lower key interest rate, which implies great caution.

The eurozone’s central bank cut its benchmark interest rate for the first time in nearly five years on June 6, but appears in no rush to make further cuts. However, at the central bank’s annual meeting in Sintra, Portugal, the outlines of a road map were outlined.

Job openings rebound in the United States, showing that the labor market is still quite dynamic

The number of U.S. job openings rebounded in May after falling to their lowest level in more than three years, indicating that there is still strong demand for workers. Job openings rose to 8.1 million in May from 7.9 million in April, the government said Tuesday. (MarketWatch)

Financial regulators give boost to Texas banks facing real estate risks

A Texas-based regional bank with heavy exposure to commercial real estate is raising $228 million from an investor group led by Fortress Investment Group, the latest sign of growing pressure on banks that lend to the sector.

The commercial real estate market has been under threat since rising interest rates and the rise of remote working caused a widespread decline in property values. This situation increasingly threatens banks with heavy losses, particularly smaller institutions that hold a higher concentration of loans in this sector.

Forward Guidance Wednesday (Eastern Time)

6:30 a.m.: Speech by New York Fed President John Williams in Portugal

8:15 a.m.: ADP employment report

8:30 a.m.: First applications for unemployment benefits

8:30 a.m.: US trade deficit

9:45 a.m.: S&P final US services PMI index

10:00 a.m.: Factory orders

10:00 a.m.: ISM Services

2:00 p.m.: June FOMC Meeting Minutes

Friday

8:30 a.m.: Employment report

Euro credit looks more attractive than dollar credit, says BlackRock

Euro-denominated bonds offer better risk compensation than dollar bonds, making them more attractive, BlackRock strategists said in a note. “We prefer long-term European bonds to U.S. bonds,” they said. “Spreads in Europe are not as tight relative to the U.S. or historically.” Spreads on U.S. investment-grade bonds are already tight, making bonds less attractive, BlackRock said. “We prefer the income from short- and intermediate-term bonds and pockets that compensate investors for taking risk,” the strategists said. – Miriam Mukuru

Chicago Fed President Austan Goolsbee on Tuesday argued for lower interest rates in the coming months, saying that keeping the policy rate where it is now while inflation continues to fall means policy will put more downward pressure on demand. – MarketWatch The growing likelihood of a second Trump administration has helped spark a sharp selloff in U.S. government bonds as investors bet that policies such as tax cuts could push up deficits and inflation. Treasury yields, which rise when bond prices fall, began to surge on June 28, a day after a debate between President Biden and former President Donald Trump that Wall Street saw as a blow to Biden’s reelection chances. – Sam Goldfarb Former President Donald Trump’s proposed rate plan would trigger five additional interest rate hikes from the Federal Reserve, according to Goldman Sachs’ chief economist. Jan Hatzius, speaking at the European Central Bank’s annual conference in Sintra, Portugal, described the impact of Trump’s proposal for a 10% tariff on all imports. – MarketWatch Last week’s presidential debate put the age issue at the heart of the American campaign. But another age issue is playing out in many Western democracies: a growing bloc of older voters demanding that their needs be met. Older voters loom large in this year’s elections in the United States, the United Kingdom and France. Not only do they vote more regularly than younger people, they also represent a growing share of the electorate. – David Luhnow and Richard Rubin By Friday, British Prime Minister Rishi Sunak will almost certainly be ousted from Downing Street and his ruling Conservative Party will find itself facing its biggest black hole in more than a century. Polls ahead of Thursday’s British election show the opposition Labor Party and its leader Keir Starmer are on track to win by a margin of about 20 percentage points, ending 14 years of Conservative rule. – Max Colchester and David Luhnow Australian retail sales growth was twice as strong as economists expected in May, fueling arguments that the Reserve Bank of Australia could raise interest rates as early as August. The rate of expansion in Australia’s services sector activity slowed in June, in line with a broader slowdown in the economy, with input price inflation falling to a 33-month low. The seasonally adjusted Judo Bank Australia services purchasing managers’ index fell to 51.2 in June from 52.5 in May. The latest reading signaled a fifth straight monthly expansion in services activity, albeit at the slowest pace in the current streak. – James Glynn A private gauge of China’s services sector reported the slowest pace of growth in activity in eight months in June, mirroring the trend seen in official data. Caixin’s services purchasing managers’ index fell to 51.2 in June from 54.0 in May, its lowest level since October 2023, Caixin Media Co. and S&P Global said Wednesday. – Dow Jones Newswires South Korea’s government has raised its gross domestic product forecast for this year, reflecting buoyant exports and solid growth in the first quarter. Asia’s fourth-largest economy is expected to expand 2.6% in 2024, up from a projection of 2.2% in January, the Ministry of Economy and Finance said in a half-year outlook released Wednesday. – Kwanwoo Jun Saudi Arabia’s sovereign wealth fund made a profit last year, but bills from its spending spree on megaprojects have been rising faster. The Public Investment Fund posted a $17 billion profit for 2023 in its results released Monday, compared with a $3.9 billion loss in 2022. At the same time, the fund disclosed a massive increase in its financial liabilities. – Eliot Brown About Us

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ’s global team of reporters and editors. This newsletter was written by markets reporter Hardika Singh in New York. Send your tips, suggestions and comments to ([email protected]).

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

(END) Dow Jones Newswires

07-03-24 0715ET