U.S. Core Inflation May Have Turned a Corner; Mexico's Benchmark Rate Will Be on Hold for a While

U.S. Core Inflation May Have Turned a Corner; Mexico's Benchmark Rate Will Be on Hold for a While By James Christie

Good day. Welcome news for those who see a case for the Federal Reserve pausing its rate-raising campaign: July's consumer-price index data showed the three-month annualized rate of core inflation at 3.1%, the lowest such reading in two years, and down from 5% in May. Former Fed governor Laurence Meyer remarked, "There's absolutely no question that core inflation has turned the corner faster" than the central bank anticipated. Elsewhere, the Bank of Mexico held its benchmark interest rate steady and said the outlook remains "complicated and uncertain," so it will be necessary to keep the rate at its current 11.25% for an extended time. "Inflation is coming down, but core inflation hasn't yet fallen enough for the central bank to be close to considering rate cuts, " said Benito Berber, chief economist for the Americas at Natixis.

Now on to today's news and analysis.

Top News Cooler July Inflation Opens Door to Fed Pause on Rates

Price pressures continued cooling last month, fresh inflation figures showed, likely deterring the Federal Reserve from raising interest rates at its September meeting.

The consumer-price index, a measure of goods and services prices across the economy, rose a mild 0.2% in July, the same as in June, the Labor Department said Thursday. Core prices, which exclude volatile food and energy categories, also increased just 0.2% in both months, extending a broader slowdown in price pressures.

The figures led to 3.2% annual inflation in July, up from 3% in June. Annual core inflation ticked down to 4.7% in July from June's 4.8%.

Fed Has More Work to Do on Inflation, San Francisco Fed's Daly Says

Federal Reserve Bank of San Francisco President Mary Daly said Thursday it was premature to declare victory on inflation despite soft consumer inflation data for July. "There's still more work to do," Daly said in an interview on Yahoo Finance. July's consumer-price index data was good news for families and businesses and was consistent with inflation gradually coming down, she said, but it "is not a data point that says victory is ours." (MarketWatch)

Bank of Mexico Benchmark Rate Unchanged for Third Time in a Row

The Bank of Mexico on Thursday held its benchmark interest rate steady at 11.25% , in line with expectations, for a third consecutive meeting, reiterating that it expects to stay on hold for a prolonged period.

Pro Take: Fed Releases List of 9,000-Plus Banks With Master Accounts-and Those Wanting One By Bob Fernandez

The Federal Reserve recently disclosed for the first time the names of 9,278 financial institutions that hold so-called master accounts at the central bank, through which trillions of dollars a day pass, in addition to more than two dozen banks seeking the prized accounts.

The Fed made the once-confidential list public in June after Congress required its release by law. It shows that 28 banks are waiting for an answer on whether they will be granted a master account. Meanwhile, three banks are suing the Fed for being denied accounts. Read more .

U.S. Economy Southern California's Hot Warehousing Market Is Cooling Off

One of the tightest industrial real-estate markets in the U.S. is showing signs of loosening , as soaring rents, limited empty space and plummeting import volumes drive companies to look elsewhere for warehouses.

401(k) Hardship Withdrawals Soared in Second Quarter

The number of people making "hardship" or emergency withdrawals from their 401(k) plans is soaring despite low unemployment and rising real wages, a new report from Bank of America said. Withdrawals in the second quarter rose 36% compared with the same period a year earlier, according to the report, which cites data from company benefit plans for which Bank of America keeps records. Those plans cover 4 million participants, the report said. Withdrawals also increased 12% from the first quarter. Investment giant Vanguard previously said hardship withdrawals among its clients "hit a new high" last year after rising 42%. (MarketWatch)

Key Developments Around the World Ukraine Offers Plan to Bypass Russia's Black Sea Blockade

Ukraine said it was opening temporary routes for civilian ships to sail from its Black Sea ports in a potential challenge to Russia's attempt to blockade the country's globally important food exports.

Natural-Gas Prices Jolted by Australian Labor Dispute

A dispute between Australian energy companies and their workers has natural-gas buyers bracing for a possible curtailment of supply from one of the world's largest exporters of the fuel, a scenario particularly worrisome for Europe .

UBS Sheds Swiss Government Aid for Credit Suisse Takeover

UBS said it would no longer rely on Swiss government assistance tied to its emergency takeover of Credit Suisse in March, marking an important step in the complex and politically fraught absorption of its smaller rival.

Financial Regulation Roundup Tackling Retirement's Tricky Tax Questions

A flood of questions from readers about traditional and Roth IRAs and 401(k)s and similar plans were prompted by a recent article examining a new law requiring greater use of Roth 401(k) plans by older, higher earners.

Here's What a $5 Million Retirement Looks Like in America This Payments Company Is Winning Big After SVB Collapse

Startups and other tech companies fled Silicon Valley Bank during its final days, with some opting to store at least some of their money at Brex, a payments company better known for issuing corporate credit cards.

Forward Guidance Friday (all times ET)

8:30 a.m.: U.S. producer-price index for July

10 a.m.: University of Michigan consumer survey, preliminary for August

4:15 p.m.: Fed reports on assets and liabilities of commercial banks in U.S.

Monday

10:30 a.m.: Bank of Canada senior loan officer survey

11 a.m.: New York Fed's consumer expectations survey

Research U.S. Workers Are Beating Inflation

Americans who change jobs are beating inflation. So are those who stay put. Consumer prices rose 3.2% in July from a year earlier. Meanwhile, people who switched jobs boosted their wages by 7%, according to the Federal Reserve Bank of Atlanta's Wage Growth Tracker [https://urldefense.com/v3/__https://www.atlantafed.org/chcs/wage-growth-tracker?linkId=229314204__;!!F0Stn7g!A1frC3VmVMQfzF0hOXzVxmbY3hBhr9UFnJkjTfNdrAi6DCsrvmQETvQi6z3etRNbDsLu8Bj9BjZRja6IEreJnzmP0VvF5nReniC1G0TM$ ]. Even those that stayed in their jobs saw a 5.5% increase in income.

-Eric Wallerstein

Commentary Inflation, and Housing Costs Are Set to Turn a Corner

A letter this week from the Federal Reserve Bank of San Francisco notes all sorts of private sector indicators of rents and house prices are slowing , potentially signs that shelter costs are headed down-way down, Spencer Jakab writes.

Executive Insights

Our weekly roundup of stories from across WSJ Pro that we think you'll find useful. They are unlocked for WSJ subscribers.

WeWork revamped its board with experts in steering large corporate restructurings after raising doubts that it will survive.

Yellow competitors are reaping a windfall of business after the trucker's downfall, while customers face rising shipping costs.

Democratic lawmakers seeking more information about private equity's role in the healthcare sector have made little progress.

European governments want a secure supply of critical minerals to power the green transition, but local opposition to new mines is often strong.

Basis Points U.S. initial jobless benefit claims rose by 21,000 to 248,000 in the week ended Aug. 5, the highest level since the week ended July 1. Claims have risen for two straight weeks. (MarketWatch) The Philippine economy expanded in the second quarter from a year earlier, thanks to broad-based growth in various sectors. Gross domestic product rose 4.3% compared with the same period a year earlier, following a 6.4% expansion in the first quarter, data from the Philippine Statistics Authority showed. (Dow Jones Newswires) Pakistan is negotiating with Gulf nations to bring in billions of dollars of investment , as Islamabad seeks the foreign currency it badly needs to stabilize its economy and the oil-rich monarchies move to diversify their economies and expand their influence. China lifted restrictions on group tours to the U.S., Australia, South Korea and Japan on Thursday, a move set to boost global tourism after three years of pandemic restrictions. Chinese banks issued a smaller-than-expected amount of new loans in July, signaling that credit demand remained weak despite the government's call to lend more to businesses and households. (DJN) Singapore's economy grew at a quicker pace in the second quarter, as expansion in construction and services-producing industries outweighed a contraction in manufacturing. (DJN) The U.K. economy expanded more than expected in the second quarter of 2023, helped by growing services and industrial output, despite strikes, a series of bank holidays and continued high inflation weighing on growth. (DJN) Turkey's current-account posted its first surplus in almost two years in June, helped by bumper travel income, data from the country's central bank showed Friday. (DJN) Feedback Loop

This newsletter is compiled by James Christie in San Francisco and Perry Cleveland-Peck in Barcelona.

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08-11-23 0715ET