Powell Signals Rate Cuts Ahead but Declines to Say When

Powell Signals Rate Cuts Ahead but Declines to Say When By Vicky Ge Huang

Federal Reserve Chair Jerome Powell signals that rate cuts are in sight, with inflation and economic activity cooling, in line with the Fed's expectations. Meanwhile, more women than ever have entered the American workforce, yet they are still on the hook for most family responsibilities. And an IRS program to catch cryptocurrency tax cheats has recorded few achievements other than drumming up business for government contractors, the agency's inspector general found. Read on for this news and more.

Top News Powell Signals Rate Cut Coming Into View but Declines to Say When

Federal Reserve Chair Jerome Powell declined to change expectations Monday that the central bank would hold interest rates steady at its meeting in two weeks as officials look ahead toward potential rate cuts after that.

Powell said inflation and economic activity had slowed broadly in line with the central bank's expectation. Data on price pressures between April and June "do add somewhat to confidence" that inflation will return to the Fed's target after inflation readings failed to provide such confidence earlier this year, he said during a question-and-answer session in Washington on Monday.

But Powell declined to say whether that would justify lowering interest rates at policymakers' meeting later this month, on July 30-31. Investors broadly expect the central bank to start reducing rates at its following gathering in September.

U.S. Economy More Women Are Working Than Ever. But They're Doing Two Jobs.

More women than ever have entered the American workforce. Heady demand for employees combined with more opportunities for remote work and a surge in female entrepreneurs are sending a flood of women into the labor market .

Women now hold a record 79 million jobs, and the share of women in their prime working years who are employed or seeking work now stands at 77.9%, up from 75.8% five years ago.

But it's not time for a victory lap just yet.

Financial Regulation IRS Program Fails To Uncover 'Hidden Treasure'

An Internal Revenue Service program to catch cryptocurrency tax cheats has recorded few achievements other than drumming up business for government contractors, the agency's inspector general found.

The program, dubbed "Operation Hidden Treasure," was launched in 2021 with the goal of identifying people who omit crypto from their tax returns. However, the initiative has "lacked any enforcement deliverables," the Treasury inspector general for tax administration wrote in a report last week.

Forward Guidance Tuesday (all times ET)

4:00 a.m.: CPI (IT)

8:30 a.m.: CPI (CA)

8:30 a.m.: Import & Export Price Indexes (US)

8:30 a.m.: Advance Monthly Sales for Retail & Food Services (US)

9:00 a.m.: Johnson Redbook Retail Sales Index (US)

10 a.m.: Manufacturing & Trade: Inventories & Sales (US)

10 a.m.: NAHB Housing Market Index (US)

Wednesday

2:00 a.m.: CPI (GB)

5:00 a.m.: Harmonised CPI (EU)

7:00 a.m.: MBA Weekly Mortgage Applications Survey (US)

8:30 a.m.: New Residential Construction - Housing Starts and Building Permits (US)

9:00 a.m.: Federal Reserve Bank of Richmond President Thomas Barkin speaks at Greater Prince George's Business Roundtable event (US)

9:15 a.m.: Industrial Production and Capacity Utilization (US)

9: 45 a.m.: Federal Reserve Bank of Kansas City event with Federal Reserve Governor Christopher Waller and FRB Kansas City President Jeffrey Schmid (US)

2:00 p.m.: U.S. Federal Reserve Beige Book (US)

Research Bitcoin Jumps on Increased Prospects of Trump Presidency

Bitcoin jumped on increased expectations of Trump winning the U.S. presidential election after this weekend's assassination attempt. The cryptocurrency is "worth watching, as it seems to have had the biggest reaction to Trump's shooting," XTB Research director Kathleen Brooks says in a note. Bitcoin's surge raises the question of whether a Trump victory could increase the attractiveness of alternative assets, she says. "Does the increased chances of a Trump win lead to fears about the future independence of the Federal Reserve, which also feeds into demand for crypto assets?" Bitcoin rose immediately after the news broke over the weekend and has extended gains since, she says. It recently traded up 6% at $63,453.35, according to Dow Jones Market Data. - Miriam Mukuru

Basis Points The U.S. fiscal outlook is deteriorating. Wall Street doesn't seem bothered. U.S. government bonds rallied this past month on the same day that the Congressional Budget Office said that it expects the fiscal 2024 budget deficit to reach $1.9 trillion-up from $1.7 trillion last year and its previous estimate of $1.5 trillion. A broader rally has pulled Treasury yields well off their highs from 2023, despite a series of jumbo-sized debt sales needed to fill the gap between the government's spending and revenue. - Sam Goldfar The New York Fed's Empire State business conditions index, a gauge of manufacturing activity in the state, slipped 0.6 points in July to negative 6.6, the regional Fed bank said Monday. Economists had expected the index to remain unchanged at a negative 6 reading, according to a survey by the Wall Street Journal. - MarketWatch Japan likely carried out yen-buying intervention on Friday, according to a calculation based on data from the Bank of Japan and private money brokers. In a daily projection released Tuesday, the BOJ said that commercial banks' deposits at the central bank would likely drop by 2.74 trillion yen ($17.34 billion) on Wednesday due to fiscal factors. That compared with the decline of Y600 billion expected by money-market brokers in predictions issued earlier this month. - Megumi Fujikawa Canadian business owners have a dour sales outlook and say they plan to sharply scale back pay increases over the next year, according to a quarterly survey issued Monday by the Bank of Canada. The results from the business-outlook survey reflect subdued economic activity and a softening of upward price pressures, leading economists to predict a second straight quarter-point rate cut from the Bank of Canada next week-so long as inflation data for June, out on Tuesday, doesn't surprise on the upside. - Paul Vieira Firearm-related stocks unsurprisingly soared Monday, reversing what had been a sluggish market this year before Saturday. It's a familiar pattern following other high-profile shooting incidents. Smith & Wesson, the only large listed firearms maker, and bullet maker Ammo were both up double digits. FBI background checks, a proxy for sales, fell 10% in June from a year earlier. Summer is generally a slow sales period, and Smith & Wesson said last month it was discounting to shift some units ahead of an expected surge in sales closer to the general election. - Doug Cameron U.S. investment-grade and high-yield credit spreads are expected to widen slightly as the Federal Reserve potentially starts lowering interest rates in the coming months, CreditSights analysts said in a note. "We continue to expect spreads to drift wider in the near term with a year-end target of 100bps for investment grade and 350bps for high yield," they said. The analysts expect a modest correction in credit valuations as economic growth and consumer spending slow. "If the Fed is willing and able to begin proactively easing policy, as they did in 1998 and 2019, we see a greater likelihood of generally modest spread widening." - Miriam Mukuru Chinese leader Xi Jinping wants to fashion China into a manufacturing colossus that leads the world in technological innovation. His pursuit of that vision is increasingly weighing on China's economy. Growth is slowing and becoming more unbalanced, propped up by exports and a gusher of investment into factories, while much of the rest of the economy languishes. Expectations are low for Xi to make a significant course correction at a Communist Party conclave this week. - Jason Douglas and Rebecca Feng A stream of data showing continued weakness in China's economy has sparked a flurry of growth forecast cuts by global banks, adding to the chorus of calls for policy makers to step up stimulus. The downgrades to China's growth outlook come after it reported a sharper-than-expected slowdown in the second quarter of the year. The world's second-largest economy expanded 4.7% from a year ago in the April-June period, missing consensus views and decelerating from the 5.3% increase recorded in the first quarter. - Dow Jones Newswires As American tech giants pull ahead in the artificial-intelligence race, China is turning to an old playbook to compete: putting the vast resources of the state behind Chinese companies. But the heavy hand of China's government is also threatening to hobble its AI ambitions, as Beijing puts its companies through a rigorous regulatory regime to ensure they adhere to the country's tight restrictions on political speech. - Liza Lin 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 V icky Ge Huan g 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

07-16-24 0715ET