Get Ready For Fed Minutes

Get Ready For Fed Minutes By Hardika Singh

The release of the Federal Reserve minutes this afternoon could shed light on different policymakers' outlook on where interest rates are headed. Fed Chair Jerome Powell remarks at Sintra underscored a sense of cautious optimism. He alternately said the economy had made "significant progress," "real progress" and "quite a bit of progress" toward cooler inflation with stable growth. Meanwhile, the demand for workers picked up in May, with the number of job openings rebounding in the month. And a Texas-based regional bank with heavy commercial real-estate exposure has raised $228 million from a group of investors, signaling the increasing pressure on banks that lend to that sector. Read on for this news and more.

Note to readers: The Pro Central Banking newsletter will be off tomorrow in observance of the Fourth of July holiday. We'll be back Friday.

Top News Powell Talks Up Progress, Putting Rate Cuts Back Into View

Federal Reserve Chair Jerome Powell said he was pleased with how inflation had resumed a downtrend following a rebound at the start of the year but said it was too soon to say whether the central bank might be able to lower interest rates by the end of the summer, as investors increasingly anticipate.

Hannon's Take: A Cautious ECB Ties Decision Points to Projections By Paul Hannon

The European Central Bank is charting a path toward an ever lower key interest rate, and it involves a great deal of caution.

The eurozone's central bank lowered its key rate for the first time in almost five years on June 6, but didn't give the impression it was in a hurry to follow that up with further reductions. However, during the central bank's annual off-site in Sintra, Portugal, the outlines of a road map have been drawn .

U.S. Economy Job openings rebound and show labor market is still pretty warm

The number of job openings in the U.S. rebounded in May after falling to a more than three-year low, indicating there's still plenty of demand for labor. Job postings rose to 8.1 million in May from 7.9 million in April, the government said Tuesday. ( MarketWatch )

Financial Regulation Investors Give Lifeline to Texas Bank Confronting Real-Estate Risks

A Texas-based regional bank with heavy commercial real-estate exposure is raising $228 million from a group of investors led by Fortress Investment Group, the latest sign of the mounting pressure on banks that lend to that sector.

The commercial real-estate market has come under threat since higher interest rates and the rise of remote work have triggered widespread declines in property values. That has increasingly threatened to stick banks with big losses , especially the smaller institutions that hold higher concentrations of loans in that sector.

Forward Guidance Wednesday (all times ET)

6:30 a.m.: New York Fed president John Williams speech in Portugal

8:15 a.m.: ADP employment report

8:30 a.m.: Initial jobless claims

8:30 a.m.: U.S. trade deficit

9:45 a.m.: S&P final U.S. services PMI

10 a.m.: Factory orders

10 a.m.: ISM services

2 p.m.: Minutes of Fed's June FOMC meeting

Friday

8:30 a.m.: Jobs report

Research Euro Credit Looks More Attractive Than Dollar Credit, BlackRock Says

Euro-denominated credit offers better compensation for risk compared to dollar credit, making it more attractive, BlackRock strategists say in a note. "We prefer European longer-term credit over the U.S.," they say. "Spreads in Europe are not as tight relative to the U.S. or to their own history." U.S. investment grade credit spreads are already tight, making the bonds less appealing, BlackRock says. "We prefer the income from short- and intermediate-term bonds and pockets that compensate investors for risk-taking," the strategists say. - Miriam Mukuru

Basis Points Chicago Fed President Austan Goolsbee on Tuesday made the case for a cut in interest rates in coming months, saying that maintaining the current level of the policy rate as inflation keeps falling means that policy will put more downward pressure on demand. - MarketWatch The increasing likelihood of a second Trump administration has helped spark a steep selloff in U.S. government bonds , with investors betting policies including tax cuts could drive up deficits and inflation. Treasury yields, which rise when bond prices fall, started surging June 28, a day after a debate between President Biden and former President Donald Trump that Wall Street viewed as delivering a major blow to Biden's re-election chances. - Sam Goldfarb The tariff plan proposed by former President Donald Trump would lead to five extra interest rate hikes from the Federal Reserve, according to Goldman Sachs's chief economist. Jan Hatzius, at the European Central Bank annual conference in Sintra, Portugal, outlined the impact from Trump's proposal of a 10% tariff on all imports. - MarketWatch Last week's presidential debate put the age issue front and center in the U.S. campaign. But there is a different age issue playing out across many Western democracies: a growing bloc of older voters demanding that their needs be met. Older voters loom large in elections this year in the U.S., U.K. and France. Not only do they turn out to vote more reliably than the young, but they also account for a growing share of the electorate. - David Luhnow and Richard Rubin By Friday, British Prime Minister Rishi Sunak will almost certainly be drummed out of Downing Street and his ruling Conservative Party facing its deepest hole in more than a century. Polls ahead of Thursday's U.K. election show the opposition Labour Party and its leader Keir Starmer on course to win by a margin of about 20 percentage points, ending 14 years of government by the ruling Tories. - Max Colchester and David Luhnow Australian retail sales growth was twice as strong as expected by economists in May, adding fuel to arguments that the Reserve Bank of Australia could raise interest rates as early as August. Retail turnover rose 0.6% in May, the Australian Bureau of Statistics said Wednesday. Economists had expected a rise of 0.3%. - James Glynn The rate of expansion in Australia's services industry activity eased in June in line with a broad slowing in the economy, with input price inflation falling to its lowest level in 33 months. The seasonally adjusted Judo Bank Australia Services Purchasing Managers Index fell to 51.2 in June, down from 52.5 in May. The latest reading signaled a fifth successive monthly expansion in services activity, though at the slowest pace in the current sequence. - James Glynn A private gauge of China's services sector signaled the slowest pace of activity growth in eight months in June, reflecting the trend seen in official data.The Caixin services purchasing managers index dropped to 51.2 in June from 54.0 in May, its lowest level since October 2023, Caixin Media Co. and S&P Global said Wednesday. - Dow Jones Newswires South Korea's government has raised its gross domestic product forecast for this year, reflecting brisk exports and solid growth in the first quarter. Asia's fourth-largest economy is forecast to expand 2.6% in 2024, compared with a projection in January for 2.2% growth, the Ministry of Economy and Finance said in a semiannual outlook released Wednesday. - Kwanwoo Jun Saudi Arabia's sovereign-wealth fund swung to a profit last year-but the bills from its megaproject spending spree grew faster . The Public Investment Fund posted a $17 billion profit for 2023 in results published Monday, up from a $3.9 billion loss in 2022. At the same time, the fund disclosed a massive surge in financial commitments. - Eliot Brown About Us

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ's global team of reporters and editors. This newsletter was compiled by markets reporter Hardika Singh in New York. Send your tips, suggestions and feedback to [[e-mail]].

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

07-03-24 0715ET