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Americans Expect Inflation to Ease, New York Fed Finds; Lawmakers Urge Fed to Act on Digital Dollar
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Good day. U.S. consumers see the inflation outlook improving a bit after annual inflation hit 9.1% in June, a new four-decade high, as measured by the Labor Department’s consumer-price index. On Monday, the Federal Reserve Bank of New York said the median expectation of respondents to a survey in July was for an annual inflation rate of 6.2% in one year, down from the 6.8% they expected in June. Fed policy makers are likely to welcome the decline in inflation expectations, but have been pointing to another increase in interest rates in September, for a fifth increase this year, to mitigate price pressures. Meanwhile in Washington, a bipartisan group of lawmakers wants the Fed to move swiftly toward issuing a digital dollar, with one lawmaker framing competition over new forms of central-bank money as “a new digital assets space race.”
Now on to today’s news and analysis.
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Consumers Lower Their Expectations of Future Inflation
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U.S. consumers are paying higher prices for everyday goods, but Americans expect inflation to ease over time. PHOTO: OLIVIER DOULIERY/AGENCE FRANCE-PRESSE/GETTY IMAGES
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Americans are expecting less inflation in coming years, according to a recent survey by the Federal Reserve Bank of New York.
Respondents’ median expectation in July was for an annual inflation rate of 6.2% in one year, down from the 6.8% they expected in June, the regional reserve bank said Monday. They expected inflation in three years to be at 3.2%, down from the 3.6% they expected in June, and inflation in five years to be at 2.3%, down from a previous 2.8%.
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Rapid Wage Growth Keeps Pressure on U.S. Inflation
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Workers’ wages are rising briskly, a factor contributing to four-decade high U.S. inflation.
Average hourly earnings grew 5.2% in July from a year earlier, and annual wage gains have exceeded 5% each month this year, the Labor Department said Friday. The rapid earnings growth adds to other evidence that employers are continuing to increase pay as they try to find and keep workers in a tight job market.
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Wall Street Shuffles Bets on Consumer Loans as Economy Slows
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Some investors are spurning low-rated bonds backed by consumer loans, preferring debt offering more protection when missed payments mount. Others are avoiding debt tied disproportionately to low credit scores.
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Market Rout Sends State and City Pensions to Worst Year Since 2009
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Public pension plans lost a median 7.9% in the year ended June 30, according to Wilshire Trust Universe Comparison Service data, their worst annual performance since 2009 and a fresh sign of the financial stress facing savers.
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Data Show Gender Pay Gap Opens Early
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New data on wages for college graduates who received federal student aid showed a pay gap emerging between men and women soon after they joined the workforce, even among those with the same degree from the same school.
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Key Developments Around the World
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Colombia’s New Leftist Government Targets Top 2% in Big Tax Plan
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Colombia’s new leftist government on Monday unveiled a broad plan to raise taxes on the wealthy and on major commodity exports to finance rural development and social programs for the poor.
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Europe Steels Itself to Maintain Economic Pressure on Russia
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European countries are feeling the pain of an economic war with Russia triggered by its invasion of Ukraine, but governments are unlikely to back off, seeing no alternative to maintaining sanctions on Moscow.
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Financial Regulation Roundup
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U.S. Lawmakers Look to Digital Dollar to Compete With China
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Lawmakers are pushing the Federal Reserve to move swiftly toward issuing a digital dollar, to combat steps from China and others they say could one day threaten the U.S. status as the global reserve currency.
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U.S. Sanctions Virtual Currency Mixer Tornado Cash
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The U.S. blacklisted Tornado Cash, accusing the cryptocurrency platform of laundering more than $7 billion in virtual currency, including $455 million allegedly stolen by the Lazarus Group hacking collective.
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Antitrust Bill Targeting Big Tech in Limbo
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Congress is set to depart for its August recess without acting on a bipartisan antitrust bill targeting the largest U.S. technology companies, in a setback for supporters who pushed for a vote before the busy fall election season.
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8:30 a.m.: U.S. productivity and costs for second quarter (preliminary)
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8:30 a.m.: U.S. consumer-price index for July
12 p.m.: Online Q&A session with Bank of England Chief Economist Huw Pill
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The Conference Board’s Employment Trends Index fell to 117.63 in July from a revised 118.71 in June, data from the private-research group showed Monday. The gauge of U.S. employment trends has now been on a downward trend since March, said Frank Steemers, senior economist at The Conference Board. (Dow Jones Newswires)
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Brazilian economists revised their inflation forecasts down slightly over the past week, according to the Central Bank of Brazil’s weekly survey. The median forecast of 140 economists was for the 12-month inflation rate to end this year at 7.11%, down from 7.15% a week earlier. Brazil’s 12-month inflation rate reached 12.13% in April, and has come down slightly since then. (DJN)
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Brazil's central bank will leave its benchmark lending rate, known as the Selic, unchanged through the end of this year, according to the bank's weekly survey of economists. (DJN)
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China's consumer-price index likely rose 2.9% in July, up from 2.5% in June, according to 15 economists polled by The Wall Street Journal. The rise in consumer inflation was mainly driven by higher food prices, especially rising pork prices, the economists say. (DJN)
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The Philippine economy likely grew 9.0% in the second quarter from a year earlier, compared with an 8.2% expansion the previous quarter, according to the median forecast of seven economists polled by The Wall Street Journal.
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Australian business conditions and confidence strengthened in July despite sharply rising interest rates, deteriorating consumer sentiment, and a huge jump in inflation through the first half of the year. (DJN)
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This newsletter is compiled by James Christie in San Francisco.
Send us your tips, suggestions and feedback. Write to:
James Christie, Jon Hilsenrath, Michael S. Derby, Nell Henderson, Nick Timiraos, Paul Hannon, Kim Mackrael, Tom Fairless, Megumi Fujikawa, Perry Cleveland-Peck, Michael Maloney, Paul Kiernan, James Glynn
Follow us on Twitter:
@WSJCentralBanks, @NHendersonWSJ, @michaelsderby, @NickTimiraos, @PaulHannon29, @kimmackrael, @TomFairless, @megumifujikawa, @pkwsj, @JamesGlynnWSJ, @cleveland_peck
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