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U.S. Consumer-Price Index Keeps Fed Rate Increases on Track; Senate Confirms Jefferson for Fed Board
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Good day. The Federal Reserve will likely continue raising interest rates in increments of at least a half percentage point at its coming policy meetings after Wednesday’s consumer-price index report for April. It showed the index rose 8.3% last month from a year earlier, compared with an annual increase of 8.5% in March. St. Louis Fed President James Bullard said the latest round of inflation data keeps the Fed on track for more rate rises, noting “Inflation is broader and more persistent than many have thought.” In other Fed developments, the Senate voted on a bipartisan 91-7 vote to confirm Philip Jefferson, an economist and administrator at Davidson College, to the Fed board of governors. Additionally, the Dallas Fed has found a new president: Lorie Logan, who manages the New York Fed’s holdings of securities and cash.
Now on to today’s news and analysis.
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April Inflation Report Cinches Fed’s Half-Point Rate Rise Path
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Federal Reserve Chairman Jerome Powell recently said the Fed wants inflation moving in a direction that gives the central bank more comfort. PHOTO: ALEX BRANDON/ASSOCIATED PRESS
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Another strong inflation reading in April is likely to keep pressure on the Federal Reserve to continue raising rates in half-percentage-point increments at the central bank’s next two policy meetings and possibly beyond that.
Wednesday’s consumer-price index report offers few signs that would give Fed officials comfort to dial back a more aggressive pace of rate increases this summer. The question now shifts to where inflation might settle and whether that level will be unacceptably high for the central bank.
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Fed’s Bullard Is Still on Board With Half-Point Rate Rises
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Federal Reserve Bank of St. Louis leader James Bullard said inflation data leaves the Fed on track for more rate rises and reiterated he wants to see the funds rate, now at a range of between 0.75% and 1%, at around 3.5% by year-end.
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Senate Confirms Philip Jefferson as Federal Reserve Board Governor
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The Senate confirmed Philip Jefferson, an economist and administrator at Davidson College, to the Federal Reserve. He is the third nominee of President Biden to win a seat on the central bank’s board of governors.
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Dallas Fed Names New York Fed Staffer Lorie Logan as President
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Lorie Logan, who manages the Federal Reserve Bank of New York’s massive holdings of securities and cash, will be the new president and chief executive of the Federal Reserve Bank of Dallas. She will start her new role on Aug. 22.
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U.S. Inflation Eased in April to 8.3% Annual Rate
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U.S. inflation remained close to its highest annual rate in four decades last month, declining only slightly to 8.3% with signs the economy continued to face upward price pressures. The Labor Department’s consumer-price index reading last month marked the first drop for inflation in eight months, down from an 8.5% annual rate in March. But the decline came primarily from a slight easing in April gasoline prices, which reached a new high on Tuesday. Broadly, the report offered little evidence that inflation was cooling.
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Legislative Leader Wants California to Spend $10 Billion on Homes
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Democratic State Senate Leader Toni Atkins unveiled details of a proposal she’s pushing to create a revolving fund to provide interest-free loans for up to 30% of the purchase price of a home for low- and middle-income households.
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Key Developments Around the World
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China’s Economic Slowdown Is Rippling All Around the World
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For decades, the world has depended on China as a massive factory floor and market. As its economic growth crumbles, the pain is spreading and the effects are showing up everywhere from German factories to Australian tourist spots.
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Ukraine Stops Russian Gas Flowing to Europe Through Key Pipeline
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Ukraine reduced flows of Russian natural gas through its territory to Europe, introducing a new threat to the energy security of a continent already racing to sever its dependence on Russian fossil fuels.
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Financial Regulation Roundup
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FASB to Consider Setting Rules on Crypto Accounting, Disclosure
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Regulators voted to consider setting clear rules on the accounting and disclosure of certain digital assets such as Bitcoin, a move that could fill a gap for companies holding the assets and provide more information to investors.
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Coinbase Says Users’ Crypto Assets Lack Bankruptcy Protections
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Cryptocurrency trading platforms might look and feel like regular brokerage apps to everyday users, but regulators have long warned they lack the oversight and investor protections that are built into traditional financial services.
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Businesses Seek to Soften SEC Cyber Rules
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Companies including Chevron Corp., Quest Diagnostics Inc. and Ernst & Young LLP are pushing to narrow proposed cybersecurity rules from the SEC in the private sector’s latest attempt to shape a growing array of regulations.
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8:30 a.m.: U.S. producer price index for April
11:50 a.m.: Bank of Canada’s Gravelle speech on commodity price shocks and the impact on growth and inflation
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8:30 a.m.: U.S. import and export price indexes for April
10 a.m.: University of Michigan consumer sentiment, preliminary for May
11 a.m.: Minneapolis Fed’s Kashkari speech on ‘Energy and Inflation: Drivers and Solutions’
12 p.m.: ECB’s Schnabel chairs panel at International Research Forum on Monetary Policy
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Inflation Has a Long Way to Fall to Stop Being a Problem
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The Federal Reserve’s tightening campaign outside of housing has yet to show much apparent effect on the real economy, Justin Lahart writes, noting consumer demand remains robust and the job market is strong.
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Inflation Is Headed Lower—but Maybe Not Low Enough
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The bad news is that in April, for the second month in a row, inflation clocked in above 8%, writes the Journal's Greg Ip in his Capital Account column. The good news is that sometime in the next 12 months, it will very likely fall to around half that. This isn’t exactly a heroic forecast. Bottom-up analysis of the consumer-price index’s components, inflation-linked bond yields, and wage behavior all point toward inflation settling at roughly 4%. The more important question is what comes after that?
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Global economic output will be around $1.5 trillion lower at the end of this year than had Russia not invaded Ukraine, according to the U.K.’s National Institute of Economic and Social Research, a loss of about 1% of the world’s gross domestic product. (Dow Jones Newswires)
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Revenue collected by the U.S. government almost doubled in April compared with a year earlier, reaching a record and driving a monthly government surplus of $308 billion, which Treasury officials said also set a record for the largest monthly surplus.
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Inflation in Brazil slowed in April from March but accelerated from a year earlier, as the cost of power declined and food and transportation prices rose more slowly in the month, the Brazilian Institute of Geography and Statistics said. Consumer prices increased by 1.06% from March, the fastest rise for the month since 1996, and by 12.13% from a year earlier, the fastest pace since 2003. In March, prices rose 1.62% from February and increased 11.30% from a year earlier. (DJN)
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Malaysia's GDP likely rose 4.0% on year in 1Q as most pandemic restrictions were eased during the quarter, according to the median estimate of 14 economists in a WSJ poll. Manufacturing and services were likely to have been the main drivers as mobility was close to normal in 1Q despite the rise in Covid-19 cases marked since late January, ANZ Research says in a note. (DJN)
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Germany’s annual rate of inflation rose in April to its highest reading since fall 1981, according to final data from statistics office Destatis. Consumer prices increased by 7.4% on year measured by national standards, in line with the first estimate and forecasts of economists polled by the Wall Street Journal, and by 7.8% on year by European Union harmonized standards, also in line with forecasts. (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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