Fed Lifts Rates by Quarter Point, BOE is Expected to Follow Suit By James Christie
Good day. Federal Reserve Chair Jerome Powell said yesterday that officials had considered skipping a rate hike after banking stress intensified last week. And he hinted that Wednesday's increase could be their last one for now depending on the extent of any lending pullback that follows a bank run earlier this month. The Fed in its policy statement said it was too soon to tell how much recent banking stress would slow the economy, but it noted turmoil in the sector likely would result in tighter credit conditions and weigh on economic activity. Today, the Bank of England is expected to raise its key interest rate by a quarter point as the annual pace of price increases in the U.K. remains in double digits, giving Governor Andrew Bailey and policy makers reason to tighten policy further. Price increases last month picked up to 10.4% from 10.1% in January as the cost of food rose at the fastest pace since records began in 1989.
Now on to today's news and analysis.
Top News Fed Raises Rates, Nods to Greater Uncertainty After Banking Stress
The Federal Reserve approved another quarter-percentage-point interest-rate increase but signaled that banking-system turmoil might end its rate-rise campaign sooner than seemed likely two weeks ago.
The decision Wednesday marked the Fed's ninth consecutive rate increase aimed at battling inflation over the past year. It will bring its benchmark federal-funds rate to a range between 4.75% and 5%, the highest level since September 2007.
Transcript: Fed Chief Powell's Postmeeting Press Conference Parsing the Fed: How the March Statement Changed Read the Fed's Latest Statement Here Capital Account: Fed Walks Tightrope -but for How Long?
Yellen: Treasury Isn't Considering Guaranteeing All Bank Deposits
Treasury Secretary Janet Yellen said at a Senate hearing Wednesday that she wasn't considering ways to guarantee all bank deposits, as some lawmakers and banks explore overhauling deposit insurance .
Bank Failures Train Spotlight on Shortcomings in Risk Management Pro Take: The Fed Hits Inflation With Ninth Rate Hike as Banks Reel By Bob Fernandez
The Federal Reserve on Wednesday stuck with its inflation fight as banks and regulators sort out the Silicon Valley Bank mess that has spread fear throughout the banking sector.
Its quarter-percentage-point interest-rate increase, though smaller than most of the hikes seen over the last year, feels like it packs more of a punch amid worries about the health of banks. But Fed Chairman Jerome Powell made clear that the Fed, even though it considered a pause, isn't bowing out of its inflation battle. Read more .
U.S. Economy In Green Energy, Billions Hinge on Meaning of 'Made in America'
What qualifies as made in America is one of the biggest questions still hanging over the Inflation Reduction Act , legislation passed in August that offers billions of dollars in tax credits and other incentives for clean-energy projects.
Freight Rebound Hopes Are Fading Under an Inventory Glut
Freight companies are dialing back expectations that demand will recover strongly in the second half of the year amid growing economic uncertainty and signs retailers are growing more guarded about placing big orders in 2023.
Key Developments Around the World SNB, Norges Central Banks Lifte Rates; BOE Expected to Follow Suit
Switzerland's central bank raised its key interest rate by a half-percentage point to 1.5% and said the country's bank crisis had ended, the latest sign that policy makers are determined to press down on inflation despite strains in the banking system.
Norway's central bank also raised its key rate Thursday, by a quarter-percentage point to 3%. The Bank of England is set to announce its latest policy decision later today.
It Wasn't Just Credit Suisse. Switzerland Itself Needed Rescuing.
The chairman of Switzerland's largest bank received an urgent call last week: On the other end, three top Swiss officials delivered an ultimatum dressed up as a proposal . UBS Group AG needed to rescue Credit Suisse Group AG.
China Is Starting to Act Like a Global Power
Long reluctant to inject itself into conflicts far from its shores, Beijing is showing a new assertiveness as Xi Jinping begins his third term as the country's head of state, positioning China to draw like-minded countries to its side.
Biden's Push to Counter China Steers EV Investments to Canada
Canada is benefiting from a push by the U.S. and its allies to reduce their dependence on China for critical minerals used in electric-vehicle batteries and military equipment, with more than $11 billion slated in EV-related projects last year.
Macron Proposes Bonus for Workers to Calm Pension Protests
President Emmanuel Macron stood by his overhaul of France's pension system on Wednesday but proposed several measures for workers in a bid to calm an escalating protest movement against his government.
Financial Regulation Roundup SEC Plans Lawsuit Against Coinbase, According to Exchange
The Securities and Exchange Commission told Coinbase Global Inc. it plans to take enforcement action against the company, escalating a crackdown on digital-currency firms by targeting the biggest U.S. crypto exchange.
Celebrities Illegally Touted Crypto Assets, SEC Says
Regulators clawed back money actress Lindsay Lohan and boxer Jake Paul earned by promoting cryptocurrencies, continuing a campaign of making examples of celebrities who tout digital assets in violation of investor-protection laws.
Chubb Demands Energy Producers Cut Methane Emissions
Chubb Ltd., a top-10 insurer in the worldwide oil-and-gas market by premium volume, is tightening requirements on insurance policies for oil-and- gas producers, demanding they cut emissions of methane, a potent greenhouse gas.
'Greenwashing' Targeted in Latest European Regulatory Push
European officials rolled out proposals to force companies to back up environmental and sustainability claims over consumer products with scientific evidence, part of a regulatory push that could set precedents elsewhere .
Forward Guidance Thursday (all times ET)
8 a.m.: Bank of England interest-rate decision
8:30 a.m.: U.S. weekly jobless claims
10 a.m.: U.S. new home sales for February
11 a.m.: ECB's Lane on panel on 'Post-1973 Currency Regime and Inflation Experiences' at 'Floating Exchange Rates at Fifty' conference at Peterson Institute for International Economics
Friday
5 a.m.: Eurozone flash PMI for March
8:30 a.m.: U.S. durable goods advance report for February
Research Banking Stress Likely to Have Modest Effects on Economic Activity
Despite the current crisis in banking, Citi economists expect stresses in the banking industry to subside gradually, though unevenly, through the spring, with relatively modest effects on economic activity. "The financial system is better regulated and capitalized than it was during the 2008 crisis and the policy response so far has been significant," the economists write in a note. Against this backdrop, the economists write they expect the Federal Reserve, the European Central Bank and other central banks to continue to tighten policy as needed to fight "still intense inflationary pressures." Last year, global headline inflation was running at just over 7%, the economists write, and they expect only modest improvement at 5.9% this year and 3.9% next year. All told, they expect the Fed to raise the fed-funds rate to 5.5%-5.75% and the ECB to lift rates to 4%.
-Patrick Sheridan
U.S. Home Buying Conditions May Improve Despite Costlier Financing
Even if financing costs remain elevated, home buying conditions in the U.S. may improve in the near term, says Charlie Dougherty, a senior economist at Wells Fargo. Mortgage rates are just one large factor in the affordability equation, and lower home prices, sturdy income gains and easing inflation pressures could help improve buying conditions, Mr. Dougherty says. Finding a home to purchase is another hurdle to clear for buyers. Inventories of homes for sale remain near record lows as the spring selling season gets under way. Still, elevated mortgage rates, tighter lending practices and a growing risk of a recession in the wake of recent financial stability concerns are likely to weigh heavily on home sales in the months ahead.
-Veronica Dagher
Commentary Fed Hiked and So Did Silicon Valley Bank
Fed policy makers are at least attuned to the possibility they might not need to raise rates any more, and as a result they might adopt a bit of a wait-and-see attitude , leaving rates unchanged at their next meeting, Justin Lahart writes.
The Fed's Policies Haunt Financial Markets
Normalization after the pandemic might have fundamentally changed the landscape for lenders even as it confounded the Federal Reserve's operating model, and this may explain why financial conditions began improving in the last two months of 2022 despite the Fed's tightening , Judy Shelton writes.
Ms. Shelton, a monetary economist, is a senior fellow at the Independent Institute and author of "Money Meltdown."
Basis Points Consumer spending posted its biggest decline in the week ended March 18 since the pandemic began, according to Citi's proprietary credit card data. Spending fell 10.3% that week, compared with the same week in 2022, driven by a high single-digit percentage decline in transactions. (Dow Jones Newswires)
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03-23-23 0715ET
