Eyes Are on Fed's Dot Plot; Inflation Risk Rises as Oil Prices Surge

Eyes Are on Fed's Dot Plot; Inflation Risk Rises as Oil Prices Surge By James Christie

Good day. With the Federal Reserve having signaled it would hold interest rates steady today and make no major changes to its postmeeting policy statement, the focus will fall on the quarterly interest-rate projections made by officials and shown on the so-called "dot plot." Nick Timiraos of The Wall Street Journal writes that the median projection is likely to show officials expect to raise the Fed's benchmark federal-funds rate at least once more this year, matching their June projections when 12 officials expected that outcome and six anticipated no further increases. It is possible that fewer officials today will pencil in that added rate increase. Meanwhile, Americans can't avoid pain at the gas pump resulting from surging crude prices. They threaten to fuel inflation for other goods and services, which could prop up price pressures, a scenario that may require more rate increases by the Fed.

Now on to today's news and analysis.

Top News The Fed Debates When to Stop Raising Rates. Here's What to Watch at Wednesday's Meeting

Federal Reserve officials are set to hold interest rates steady at their meeting Wednesday while debating what it would take for them to lift borrowing costs again this year.

Their anticipated decision would mark the second time in six policy meetings this year that the Fed hasn't raised rates, slowing the pace of increases to allow more time to study their effects on the economy and inflation.

The central bank will announce its decision and release policymakers' quarterly economic projections at 2 p.m. Eastern time. Fed Chair Jerome Powell will answer questions from reporters at 2:30 p.m. Here's what to watch for .

The Fed's Next Challenge: $100 Oil

An almost uninterrupted rise in oil prices has pushed benchmark Brent crude close to $100 a barrel, posing a new challenge for central banks in their battle against inflation.

The increase is a victory for Saudi Arabia, which sought to bolster prices to fund a planned transformation of its oil-dependent economy. Russia, which depends on energy income to finance its war on Ukraine and joined Riyadh in slashing supplies, is another winner. The two countries sparked the rally early this month when they said they would restrict supplies until the end of the year.

Record levels of oil demand-fueled by unexpected economic strength-have outstripped production. As a result, traders and petroleum refiners are draining oil stockpiles at a rapid clip. Many analysts expect crude prices to keep rising, which would feed higher fuel bills, quicker inflation-and, potentially, higher interest rates.

U.S. Economy America's Biggest Landlords Can't Find Houses to Buy Either

High borrowing costs and the shortage of properties for sale have slowed home buying by Wall Street's rental giants as well, limiting their ability to grow at the same time suburban rents are climbing.

Amazon, Target to Hire Thousands Ahead of Holiday Season

E-commerce company Amazon said it would add 250,000 workers this fall , exceeding the 150,000 employee target set each of the past two years, and retailer Target said it would add 100,000 seasonal workers, in line with last year's hiring.

U.S.'s Hardest-Hit Hotel Market Primed for a Comeback

New York City's hotel recovery is checking in early as several factors drive room rates above prepandemic levels, including a surge in tourism and demand from the city for rooms to house migrants.

California's Zero-Emissions Rule Triggers a Run on Diesel Rigs

Logistics companies are loading up on diesel big rigs as California prepares to roll out a rule requiring that trucks purchased after Jan. 1, 2024, that serve the state's ports be zero-emission vehicles.

Glynn's Take: Australia's El Niño Event Could Be a Storm for the RBA By James Glynn

Raised in a country town six hours' drive from Sydney, newly installed Reserve Bank of Australia Gov. Michele Bullock may have a better appreciation for how extreme weather patterns can shape a country's economic fortunes.

A day after her arrival at the helm of the RBA this week, the country's top meteorologists declared that an El Niño event, the first in eight years, is under way.

For Bullock, it raises the risk that drought conditions will affect farmers and graziers for years. It also brings a heightened risk of wildfires, with parts of the country already subjected to danger warnings classed as potentially "catastrophic." Read more .

Key Developments Around the World Chinese Central Bank Keeps Benchmark Lending Rates Unchanged

China's benchmark lending rates were kept unchanged , as expected, following a hold of policy rates earlier this month, after a run of upbeat August data showed signs of stabilization in the world's second-largest economy.

Beijing Touts China's Economic Resilience, Hits Back at Negativity Thought the U.S. Office Market Was Bad? Try China

U.K. Inflation Falls Unexpectedly, Easing Pressure on Bank of England

The U.K.'s annual rate of inflation fell for a third straight month in August, surprising economists and increasing the likelihood that the Bank of England may soon pause a series of increases in its key interest rate.

Why Bank of England Could Join Fed in Pausing Britain's Pitch to Investors: We're Boring Now-and That's Good German Companies Defy Rising Pressure to Limit Exposure to China

The German government and European politicians in Brussels are leaning on Germany's largest companies to reduce their exposure to China. The companies are instead doubling down , trying to insulate their Chinese factories.

Ford Reaches Tentative Deal With Canadian Auto Union

Ford Motor reached a new tentative labor deal late Tuesday with Canadian labor union Unifor, avoiding what could have been a second strike at its operations in less than a week. Contract talks have been running parallel to those in the U.S.

OECD sees 'a loss of momentum in second half' as it tweaks forecasts

The Organization of Economic Cooperation and Development on Tuesday lifted its forecast for global growth in 2023, but cut its outlook for economic activity next year. The OECD forecast world growth of 3% this year, which represents a slowing from last year's 3.3% but an improvement from the group's previous estimate of 2.7% growth. The OECD however is now forecasting 2.7% growth in 2024, down from 2.9%. (MarketWatch)

Financial Regulation Roundup Cboe CEO Resigns Over Personal Relationships With Colleagues

The chief executive and chairman of Cboe Global Markets, Edward Tilly, unexpectedly resigned from the options-exchange operator after a board investigation found that he didn't disclose personal relationships with colleagues.

PCAOB Proposes Expanded Liability for Individual Auditors

The Public Company Accounting Oversight Board proposed expanding liability for individual auditors and certain accounting firms when they contribute to violations by the primary firms handling an audit.

Forward Guidance Wednesday (all times ET)

1:30 p.m.: Bank of Canada publishes monetary policy deliberations

2 p.m.: Federal Reserve interest-rate decision and FOMC statement and economic projections

2:30 p.m.: Federal Reserve's Powell post-FOMC meeting press conference

Thursday

7 a.m.: Bank of England interest-rate decision

8:30 a.m.: U.S. weekly jobless claims

10 a.m.: U.S. existing home sales for August; The Conference Board Leading Economic Index for U.S. for August; EU FCCI flash consumer confidence indicator for September

Research Canada Interest-Rate Debate Remains Live

The latest acceleration in Canadian inflation, thanks to $95 a barrel oil and a jump in gasoline prices, will continue the debate on the need for more interest-rate increases by the Bank of Canada, with one more rise priced in by the market. Still, Franklin Templeton Investment Solutions portfolio manager Michael Greenberg thinks Canada is moving from a "how high" to a "how long" conversation with respect to interest-rate policy. August data "suggests the inflation genie is not yet back in the bottle," he says, adding the central bank may be patient and allow higher rates to continue to work through the economy, as some parts are slowing while others such as the labor market remain robust.

-Robb Stewart

Commentary American Labor's Real Problem: It Isn't Productive Enough

Factory workers want more pay and less hours, but that's at odds with how U.S. manufacturers of cars, aircraft and semiconductors have lost ground, Greg Ip writes.

The Yuan and Yen Need the Fed's Help. They Might Not Get It.

China and Japan's currencies may chart different paths, especially since the yen is already down so far against the dollar over the past two years, but they could both use help from the Fed, which may not be forthcoming , Jacky Wong writes.

Basis Points The Organization of Economic Cooperation and Development on Tuesday lifted its forecast for global growth this year and cut its outlook for economic activity next year. The OECD forecast world growth of 3% this year, a slowing from last year's 3.3% but an improvement from the group's previous estimate of 2.7% growth. The OECD now forecasts 2.7% growth in 2024, down from 2.9%. (Dow Jones Newswires) Housing starts in the U.S. fell 11.3% in August to a seasonally adjusted annual rate of 1.283 million, their lowest level since June 2020, the Commerce Department said. Economists polled by The Wall Street Journal expected starts to fall 1.5% on month to 1.43 million. Starts came in 14.8% below the same month a year earlier. (DJN) Inflation in Canada accelerated at its fastest pace in four months in August as consumers paid more for gasoline and for shelter. The country's consumer-price index rose 0.4% on month and 4.0% from a year earlier, Statistics Canada said. (DJN) Japan's exports fell for a second straight month in August, dragged down by weakening demand for mineral fuels and semiconductor manufacturing equipment, data from the country's finance ministry showed. Exports fell

(MORE TO FOLLOW) Dow Jones Newswires

09-20-23 0719ET