Bank of Japan Holds Off on Rate Increase; Fed Aims to Buck History; A Dreary U.S. Housing Market By James Christie
Good day. Bank of Japan this morning kept its main interest-rate targets unchanged after a regular policy meeting, including a cap on the yield of 10-year Japanese government bonds at 1%. BOJ Gov. Kazuo Ueda, defying speculation about a near-term rise in interest rates, said Japan couldn't yet be confident of sustainable inflation backed by strong wage growth, although prices are currently rising faster than the central bank's 2% target. Turning to the Federal Reserve, history suggests the way the central bank anticipates it can rein in inflation without hurting the economy, or not hurting it much, isn't likely to work, James Mackintosh of The Wall Street Journal writes. He notes that, "Almost every interest-rate cycle ends with rapid rate cuts, and never before has there been such a drawn-out series of rate cuts as the Fed now forecasts." Meanwhile, home sales in the U.S. declined again in August, intensifying the worst housing slump in more than a decade. The housing market is where the Fed's campaign of interest-rate increases has hit Americans hardest, locking many out of buying homes.
Now on to today's news and analysis.
Top News BOJ Waits on Rate Increases, Although Inflation Runs Above Target
The Federal Reserve is weighing its 12th rate increase since 2022. Japan still isn't ready for its first.
Bank of Japan Gov. Kazuo Ueda, defying speculation about a near-term rise in interest rates, said Japan couldn't yet be confident of sustainable inflation backed by strong wage growth, although prices are currently rising faster than the central bank's 2% target. He said he planned to keep a benchmark short-term interest rate in negative territory for now-the same place it has been since 2016.
The Bank of Japan kept its main interest-rate targets unchanged after a regular policy meeting, including a cap on the yield of 10-year Japanese government bonds at 1%. The cap was raised from 0.5% at the previous meeting in July.
Consumer prices-excluding volatile fresh food and energy prices-rose 4.3% from a year earlier in August, according to government data released Friday morning.
Higher Rates Are Supercharging Japan's Banks When Rates Drops, They Usually Plunge. The Fed Thinks Differently.
The Federal Reserve is hoping for something it has never managed before: Not merely the softest of soft landings for the economy, but the slowest rate-cutting cycle in its history.
The Fed spelled out in its "dot plot" of forecasts on Wednesday its ambition to conquer inflation while doing little to no damage to the economy, predicting stronger growth and lower unemployment. Read more .
U.S. Economy August Home Sales Declined to Slowest Pace Since January
Existing-home sales, which make up most of the housing market, decreased 0.7% in August from the prior month to a seasonally adjusted annual rate of 4.04 million , and fell 15.3% from a year earlier.
Mortgage Rates Hold Above 7%
The average rate on the standard 30-year fixed mortgage edged up to 7.19% from 7.18% a week earlier, compared with around 6% a year earlier and less than 3% two years earlier, according to a survey of lenders.
UAW's Demand for 32-Hour Workweek Takes Back Seat in Talks
Wage increases, cost-of-living adjustments and higher pay for entry-level workers are taking priority in negotiations, as a limited strike of General Motors, Ford Motor and Jeep maker Stellantis continues.
For Many Striking Actors and Writers, Side Hustles Take Center Stage
A monthslong strike affecting writers and actors has upended careers of thousands of Hollywood workers, forcing some to lean into their side hustles and others to wonder if they want to stay in the industry at all.
Top New York State Crypto Regulator to Depart
The head of the virtual currency unit at the New York State Department of Financial Services is leaving. Peter Marton, who joined NYDFS in late 2021 as deputy superintendent of virtual currency, will depart at the end of the month.
Key Developments Around the World RBA Review Panelist Says Reforms Won't Undermine Governor
One of the architects of a recent review of the Reserve Bank of Australia's operations said proposed changes won't undermine the power of the central bank governor in response to claims external members would have too much power.
China's Economic Worries Spur a Different Kind of Shopping Spree
China's economy is struggling, but one line of business is booming : selling insurance in Hong Kong to travelers from mainland China. Mainland customers use the insurance policies to diversify away from investments in yuan.
Forward Guidance Friday (all times ET)
8:50 a.m.: Fed's Cook speaks at NBER Economics of Artificial Intelligence Conference
1 p.m.: San Francisco Fed's Daly speaks at Greater Phoenix Leadership fireside chat; Minneapolis Fed's Kashkari speaks at Economic Club of Minnesota virtual fireside chat
4:15 p.m.: Assets and liabilities of commercial banks in U.S.
Monday
6 p.m.: Minneapolis Fed's Kashkari speaks at Wharton Central Banking Club event
Research BOE Could Be Among First Major Central Banks to Cut Rates
The Bank of England is likely to be among the first central banks in advanced economies to lower interest rates, "such has been the scale of the slowdown domestically in recent months," says Tim Graf, head of macro Strategy for EMEA at State Street Global Markets. The BOE left rates unchanged on Thursday, which he says is "understandable, if still a bit of a surprise," after Wednesday's below-forecast inflation data. "Domestic activity is slowing markedly and a previously hot labor market is now showing signs that typically appear ahead of pronounced recessions," Graf says. However, he notes that wage growth is still robust and could drive some second-round effects in inflation.
-Emese Bartha
Commentary Did Poverty Soar Last Year? It Depends How You Measure It
Last week, it was widely reported that poverty had soared in 2022 after dropping sharply in 2021. The child poverty rate had fallen by half in 2021, before surging back to 12.4% in 2022. But did poverty in fact go up that much, a reading that was based on the U.S. Census Bureau's Supplemental Policy Measure? Divergent indicators on income, food insecurity and health show how difficult it is to capture the rate with a single number, Josh Zumbrun writes.
How China Could Veto $100 Oil
There are two key reasons why markets might be overestimating the likely extent of Chinese demand and its impact on global benchmarks such as Brent oil in late 2023, Nathaniel Taplin writes.
A Tax Break Worth the Hassles
Ever since the tax overhaul of 2017, millions haven't gotten key tax breaks for giving to charity. But a growing group of seniors can still reap remarkable benefits from donations-if they put up with hassles, Laura Saunders writes.
Executive Insights
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The bid to free private-equity managers from regulatory oversight may not be a long shot.
Thanks to disaster relief offered by the IRS, companies in California have been allowed to put off this year's federal tax payments until October. It's helped plump some balance sheets.
Small-time crypto traders who invested with Celsius Network have been going toe-to-toe with legal and financial heavyweights in the platform's bankruptcy case-and notching some unlikely victories .
Basis Points Applications for U.S. unemployment benefits last week fell by 20,000 to an eight-month low of 201,000, reflecting the reluctance of businesses to lay off workers amid acute labor shortages. (MarketWatch) The Conference Board's Leading Economic Index fell 0.4% to 105.4 in August after declining 0.3% in July, suggesting the underlying components of the gauge of U.S. business cycles weakened at a faster pace. (Dow Jones Newswires) Manufacturing activity in the Philadelphia area contracted this month, as the Federal Reserve Bank of Philadelphia's index for current general activity sank from a positive reading of 12 in August to minus 13.5, marking the index's 14th negative reading in the past 16 months. (DJN) China's economy is struggling, but one line of business is booming: selling insurance in Hong Kong to travelers from mainland China . In recent months, mainland tourists have packed the offices of Hong Kong insurance agents and formed long lines at banks. Sales of investment-focused insurance policies have roared back to life after Beijing ended strict pandemic controls. Business activity in the eurozone contracted again September, albeit at a slower pace, as new orders dropped at the fastest pace in almost three years, data from a purchasing managers' survey showed. The HCOB Flash Eurozone Composite PMI Output Index-a gauge of activity in the manufacturing and services sectors-rose to a two-month high of 47.1 from 46.7 in August, beating expectations. (DJN) U.K. retail sales rose in August, after food stores bounced back following wet weather in the prior month that subdued sales. Retail-sales volumes ticked up 0.4% on month, swinging from the 1.1% decrease in July, data from the Office for National Statistics showed. A poll by The Wall Street Journal had expected a 0.5% increase. (DJN) Consumer confidence in the U.K. improved in September to the most optimistic level in more than a year and a half, rising four points to minus 21 this month, according to an index compiled by consumer-research firm GfK. (DJN) The South African Reserve Bank held its main repo rate at 8.25% in an effort to keep inflation in check amid a persistent electricity crisis, a weak currency and elevated prices for food and fuel. (DJN) Turkey's
(MORE TO FOLLOW) Dow Jones Newswires
09-22-23 0715ET
