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Powell Open to Holding Rates Steady in June; Bowman Warns Against Bank Regulation Overreach
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Good day. Federal Reserve Chair Jerome Powell suggested he was open to holding interest rates steady at the central bank’s meeting next month, saying that banking stress could mean rates may not need to rise as high as otherwise to slow the economy. Minneapolis Fed leader Neel Kashkari also said a rate-hike pause in June may make sense. New York Fed President John Williams presented research showing the Covid-19 pandemic didn’t change estimates of a “neutral” interest rate that neither stimulates nor restricts demand, a finding with important implications for how high officials may raise rates to slow the economy. And Fed governor Michelle Bowman warned that policy makers should avoid using recent bank failures "as a pretext to push for other, unrelated changes to banking regulation."
Now on to today’s news and analysis.
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Jerome Powell Keeps June Interest-Rate Pause in Play
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Jerome Powell said there were limits to how much the Fed could divorce monetary policy from financial-market stabilization efforts. PHOTO: AL DRAGO/BLOOMBERG NEWS
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"Until very recently, it has been clear that further policy firming would be required," Fed Chairman Jerome Powell said Friday at a conference hosted by the central bank. "As policy has become more restrictive, the risks of doing too much versus doing too little are becoming more balanced."
At the same conference, New York Fed chief John Williams said a widely followed model used to estimate the inflation-adjusted neutral rate of interest showed “there is no evidence that the era of very low natural rates of interest has ended.”
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Neel Kashkari Is Open to Forgoing June Rate Hike
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Minneapolis Fed President Neel Kashkari said he could support holding interest rates steady at the central bank’s next meeting to give officials more time to assess the effects of past rate increases and the inflation outlook. “I’m open to the idea that we can move a little bit more slowly from here,” he said in an interview Friday.
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Michelle Bowman Warns Against Broad Overhaul of Banking Rules
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The Fed governor cautioned policy makers against undertaking a broad revamp of the regulatory framework facing small and regional banks, saying complex new rules could hasten the consolidation of the banking industry and potentially push more activities outside of the regulated banking system.
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Biden, McCarthy Attempt to Revive Budget Talks
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President Biden and House Speaker Kevin McCarthy agreed to meet Monday afternoon in a last-ditch effort to reach a deal to avoid a default on U.S. sovereign debt after negotiations to raise the federal borrowing limit reached an impasse.
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Rebound in Treasury Yields Fueled by Resilient Growth, Inflation
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A weeklong selloff in U.S. Treasurys was only slowed Friday by a setback in debt ceiling negotiations, with rebounding expectations for economic growth and inflation driving bond yields to two-month highs.
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It’s Harder Than Ever to Land a White-Collar Job
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Hiring for the office set is cooling off and employers are getting picky again. Amid layoffs and hiring freezes, many employers have slowed down filling office jobs, from receptionist to chief financial officer, executives and recruiters say. They’re slow-walking candidates, piling on new requirements ranging from more years of experience to higher scores on technical tests, to running prospective hires through additional rounds of interviews.
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In Today’s Housing Market, It’s Timing Over Location
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Anyone on the hunt for a new house lately has learned a hard truth about real estate: The only thing more important than location is timing. Mortgage rates surged so quickly in 2022 that those who bought homes mere months apart are now on starkly different financial paths.
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Some buyers’ good fortune to lock in historically low rates could pay off for decades and impact their life choices. Many late to the market have shifted from having fear of missing out to actually missing out.
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Key Developments Around the World
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Bank of Canada’s Fight Against Inflation Isn’t Over
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Some economists now expect Canada’s central bank to further tighten the screws on monetary policy to ensure it has a handle on inflation. The Bank of Canada could lift its policy rate above 4.5% this summer after an unexpected rise in inflation in April, they say.
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Biden Sees Potential Thaw With China After Tough G-7 Statement
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President Biden said Sunday he expected a thaw in relations with China, a day after he and other Group of Seven leaders took steps to tackle what they see as Beijing’s economic intimidation.
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One of China’s Poorest Provinces Faces Imminent Debt Problem
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One of China’s poorest provinces is testing Beijing’s mettle with a mountain of debt that local borrowers are struggling to repay. Investors worry it is a harbinger of another major debt crisis in the country, and believe the central government will have no choice but to defuse it.
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To Aid Ukraine, Allies Look to Security Model Like Israel’s
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As Ukraine enters a pivotal stage in its war with Russia, U.S. and NATO leaders are coalescing around a vision for shoring up Ukrainian defenses and seeking to guarantee the country’s sovereign future. It is a security model that Western leaders, including President Biden, have compared with what Israel has now.
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Financial Regulation Roundup
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A Crypto Hedge Fund Imploded. The Comeback Isn’t Going So Well.
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Su Zhu and Kyle Davies, who ran the collapsed crypto hedge fund Three Arrows Capital, are among the founders of Open Exchange, which wants to let its customers trade bankruptcy claims on failed crypto companies, including Celsius, FTX and even Three Arrows itself. But the venture, which went live in April, has been hit with numerous problems since it launched.
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Bitcoin Believers Tone Down the Miami Party
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The crypto crash has left firms considerably less flush, but the most enthusiastic crypto enthusiasts still headed to the Bitcoin Conference.
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You Take a Friend on Your Yacht. Is It a Taxable Gift?
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Billionaire Harlan Crow took Supreme Court Justice Clarence Thomas on lavish trips and more, and that’s shining a spotlight on U.S. gift taxes for everyone. "It’s not a gift, it’s a party," one tax pro says.
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Bank Runs Trash Long-Held Assumption on Deposits
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Recent bank failures are upending a long-held theory among banking executives and regulators—that the value of a lender’s deposit business goes up when interest rates move higher.
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8:30 a.m.: St. Louis Fed’s Bullards speaks at American Gas Association’s Financial Forum
10 a.m.: FCCI Flash Consumer Confidence Indicator for EU for May
10:15 a.m.: European Central Bank’s Lane speaks at Vienna monetary policy conference
10:50 a.m.: Richmond Fed’s Barkin and Atlanta Fed’s Bostic on panel at Technology-Enabled Disruption Conference
11:05 a.m.: San Francisco Fed’s Daly speaks at National Association for Business Economics /Banque de France International Economic Symposium
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Time N/A: Hungarian National Bank releases policy statement; Central Bank of Nigeria releases policy statement
3:15 a.m.: European Central Bank’s de Guindos speaks at European Financial Integration Conference in Frankfurt
4 a.m.: Eurozone Flash PMI for May
6:25 a.m.: European Central Bank’s Enria speaks at European Financial Integration Conference in Frankfurt
8:30 a.m.: Philadelphia Fed Non-Manufacturing Survey
9 a.m.: Dallas Fed’s Logan speaks at Technology-Enabled Disruption conference
10 a.m.: Richmond Fed Survey of Manufacturing Activity; U.S. new-home sales for April
10 p.m.: Reserve Bank of New Zealand interest rate decision
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Imports at some of the nation’s busiest container ports have been falling at a double-digit annual pace for several months. Yet business has been increasing month to month at many of the big gateways, and for many of the ports exceeds box volumes of 2019, before pandemic-driven buying sent shipping demand on a roller coaster.
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A sputtering recovery in China has dragged copper prices to a five-month low, delaying one of the most widely anticipated bull runs in commodity markets.
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Singapore's consumer-price index likely rose 5.5% on year in April, according to the median estimate of 11 economists in a poll by The Wall Street Journal. (DJN)
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The Bank of Korea is tipped to stand pat at its May 25 rate-decision meeting. All 27 economists surveyed by The Wall Street Journal expect the central bank to keep the base rate unchanged at 3.50% for a third straight policy decision. (DJN)
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Greece's governing center-right resoundingly beat its left-leaning opponents in national elections Sunday, as voters rewarded Prime Minister Kyriakos Mitsotakis for a robust recent economic performance.
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This newsletter was compiled by Michael Maloney in New York and Perry Cleveland-Peck in Barcelona.
Send us your tips, suggestions and feedback. Write to:
James Christie, Jon Hilsenrath, Nell Henderson, Nick Timiraos, Paul Hannon, Tom Fairless, Megumi Fujikawa, Perry Cleveland-Peck, Nihad Ahmed, Michael Maloney, Paul Kiernan, James Glynn
Follow us on Twitter:
@WSJCentralBanks, @NHendersonWSJ, @NickTimiraos, @PaulHannon29, @TomFairless, @megumifujikawa, @pkwsj, @JamesGlynnWSJ, @cleveland_peck
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