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Trump Picked Warsh to Cut Rates. His Committee Is Talking About Hikes.
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- Federal Reserve Chairman Kevin Warsh faces a shift in the Fed’s stance from expected rate cuts to potential hikes at his first meeting.
- The shift is driven by rising inflation above 3%, a pickup in hiring and inflationary pressures from the AI build-out and higher commodity prices.
- The Fed is expected to remove its “easing bias” language and show an extended hold on rates in its dot plot, with almost no one arguing for a cut.
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China Moves to Boost the Use of Yuan Globally
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- Pan Gongsheng, head of the People’s Bank of China, announced a new yuan repo facility and an offshore FX trading pilot program.
- The PBOC will improve short-term interest rate regulation by narrowing the rate corridor and increasing overnight reverse repo operations.
- The PBOC is formulating tools to provide emergency liquidity to non-bank institutions during a crisis.
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U.K. Inflation Remains Unexpectedly Flat Ahead of Bank of England Meeting
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- The U.K.’s annual inflation rate remained at 2.8% in May, defying expectations and strengthening views that the Bank of England will hold rates.
- Energy prices, with motor fuel up 25% from May 2025, exerted upward pressure, but food inflation fell to its lowest since December 2024.
- A U.S.-Iran deal to reopen the Strait of Hormuz eased energy price expectations, prompting markets to roll back tighter monetary policy forecasts.
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ECB’s Tracker Continues to Point to Slower Wage Growth
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- Eurozone wage growth shows no sign of picking up despite rising energy prices, according to European Central Bank figures.
- A tracker of pay deals indicates wages are set to rise by 2.6% in 2026, unchanged from earlier estimates.
- The European Central Bank raised its key interest rate last week despite no accelerating wage growth.
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ECB May Raise Key Rate Again if Evidence Supports, Chief Economist Says
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- The European Central Bank may again raise its key interest rate, despite a potential U.S.-Iran peace deal.
- The ECB last week raised its key rate to 2.25% from 2%, a decision made before the U.S.-Iran interim peace deal.
- Chief Economist Philip Lane said energy prices have not returned to prewar levels, with future rate decisions dependent on data.
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Sweden’s Central Bank Holds Key Rate, Sees Higher Chance of a Hike Later This Year
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- Sweden’s Riksbank held its key policy rate at 1.75% but increased the probability of a rate hike later this year due to inflation risks.
- The Riksbank has held rates steady for six consecutive meetings, monitoring falling inflation and a stuttering domestic economy.
- The central bank’s assessment did not include the U.S. and Iran’s preliminary agreement to end the war in its forecasts.
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Japan Imports Rise as Energy Supply Diversification Progresses
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- Japan’s imports grew 12.5% in May from a year earlier, driven by a war-induced oil shock and higher global energy costs.
- Overall oil imports fell 28.5%, but U.S. oil imports jumped 663.4%, showing progress in diversifying supplies.
- Exports increased 17.0% in May, though economists expect momentum to ease due to higher energy prices dampening global demand.
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About Us
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WSJ Pro Central Banking brings you news and analysis from a global team of reporters and editors at The Wall Street Journal and Dow Jones Newswires. Send your tips, suggestions and feedback to service@dowjones.com. An artificial-intelligence tool created these summaries, which are based on the text of the article and checked by an editor. Read more about how we use artificial intelligence in our journalism.
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