Top Official Suggests Fed Is Closer-But Not Yet Ready--to Cut

Top Official Suggests Fed Is Closer-But Not Yet Ready-to Cut By Vicky Ge Huang

New York Fed President John Williams in an interview Tuesday suggested a rate cut is unlikely at the Federal Reserve's July 30-31 meeting even if one or two officials push for it. Instead, his remarks indicate the central bank could consider lowering its benchmark short-term interest rate when officials meet again in mid-September, provided there aren't big economic surprises. Meanwhile, retail sales data released yesterday showed American shoppers' spending was flat last month, defying economists' expectations for a decline. And the SEC has said the first U.S. exchange-traded funds holding ether could launch next Tuesday. Read on for this news and more.

Top News Top Official Suggests Fed Is Closer-But Not Yet Ready-to Cut

A top Federal Reserve official suggested an interest-rate cut could be warranted in the coming months -though not at the central bank's meeting in two weeks-if a recent inflation slowdown continues.

Together with signs that U.S. labor-market conditions are cooling gradually, the last three months of inflation data are "getting us closer to a disinflationary trend that we're looking for," said New York Fed President John Williams in an interview Tuesday. "These are positive signs. I would like to see more data to gain further confidence inflation is moving sustainably to our 2% goal."

Transcript: New York Fed President Discusses the Interest-Rate Outlook

U.S. Economy Retail Sales Hold Up in June, Defying Forecasts of a Decline

Retail sales were unchanged in June from the prior month, the Commerce Department said. Economists expected a 0.4% decline. Spending in May was revised up to a 0.3% rise from a 0.1% gain previously.

Financial Regulation Spot Ether ETFs Are Likely to Start Trading Next Week

The Securities and Exchange Commission has told several asset managers that the first U.S. exchange-traded funds holding ether could launch next Tuesday , July 23, people familiar with the matter said.

The agency is expected to declare fund-registration statements effective next Monday, the people said, after asset managers submit a final round of filings this week. Once the statements are effective, the sale of ETF shares can begin.

Forward Guidance Wednesday (all times ET)

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)

Thursday

2:00 a.m.: UK monthly unemployment figures (GB)

8:15 a.m.: ECB interest rate announcement (EU)

8:30 a.m.: Philadelphia Fed Business Outlook Survey (US)

8:30 a.m.: Unemployment Insurance Weekly Claims Report - Initial Claims (US)

10:00 a.m.: Leading Indicators (US)

2:00 p.m.: U.S. Securities and Exchange Commission Closed Meeting (US)

4:00 p.m.: Treasury International Capital Data (US)

4:30 p.m.: Federal Discount Window Borrowings (US)

4:30 p.m.: Foreign Central Bank Holdings (US)

Research U.S. Expected to Have Tough China Policy Regardless of Election Outcome

The U.S. government's competitive stance toward China is expected to remain after this year's elections in the U.S., regardless of any party shifts in the White House or Congress, TD Cowen analysts say in a research note. A tough China policy remains one of the few, if not only, bipartisan areas of agreement in Washington, the analysts say. Decoupling from China on technology and critical supply chains while promoting U.S. manufacturing and industrial independence will remain a focus, they say. - Dean Seal

Basis Points A fresh wave of tariffs could revive inflation and pressure central banks to keep their key interest rates high, the International Monetary Fund warned Tuesday. In its latest report on the outlook for the global economy, the Fund said borrowing costs could also be pushed higher by a series of elections that may lead to a surge in already high levels of government borrowing. "Upside risks to inflation have thus increased, raising the prospect of higher-for-even-longer interest rates, in the context of escalating trade tensions and increased policy uncertainty," the IMF said. - Paul Hannon Federal Reserve Gov. Adriana Kugler said Tuesday that progress on reducing inflation and signs of growing softness in the U.S. labor market would pave the way for interest-rate reductions later in 2024. After a bumpy start to 2024, the rate of inflation has resumed its downward trend in recent months. Kugler attributed the deceleration to the unwinding of pandemic-era supply-chain snarls, while higher interest rates and dwindling excess savings have weighed on consumer demand. - Barron's The American consumer "is far from dead," but spending "has definitely moderated" this year, Santander's Stephen Stanley says in a note about the retail sales report. Overall, sales declined from May, but were stronger than expected. Stanley highlights a 0.8% growth in sales ex-auto and gasoline, up from an upward revised 0.3% in May. He adds that the June reading is up 2.1% annualized pace from December. "That compares with a 5.9% advance in the 12 months of 2023," he says. Stanley sees spending declining this year and into 2025 "before the effects of Fed rate cuts beginning late this year have a chance to fully kick in." - Paulo Trevisani Fixed income is the asset class most in demand this year among central bank reserve managers, according to a survey of 73 central banks by the Official Monetary and Financial Institutions Forum. A net 20% are looking to increase their allocation to quasi-government and corporate bonds over the next two years, and this trend is even more pronounced among those looking to increase risk, the survey finds. A net 25% of reserve managers are moving out of cash and short-duration bills, while 44% of respondents expect to increase duration by moving into 2-year to 5-year government bonds. Net demand for lower-grade government debt-A to BBB-rated-rose to 13% from 0% last year. - Emese Bartha In a nation obsessed with supersizing, American houses keep ballooning . Now, local officials are scrambling to curb mansion bloat. Towns from Aspen to Martha's Vineyard are in a big-house brouhaha. Critics say mushrooming mansions cramp scenic vistas and local charm, consume excessive energy and inflate prices. - E.B. Solomont Entrepreneur Sheldon Kimber is part of a nationwide race to profit from battery storage, which helps stabilize the outdated power grid and smooth out intermittent electricity sources such as wind and solar. It is a rapidly growing sector that is being fueled by a boom in solar energy and billions of dollars from Washington and Wall Street. - Amrith Ramkumar Donald Trump's presidential campaign will begin accepting donations in cryptocurrency , his campaign said Tuesday. Trump has increasingly positioned himself as a crypto-friendly candidate. Asked earlier this month what he would do to stop crypto companies from leaving the U.S., he said "if we are going to embrace it, then we have to let them be here." - Caitlin Ostroff Canada inflation cools to 2.7% in June, resuming slowing trend . Canadian inflation returned to a downward path in June despite some lingering price pressures on consumers, shortening the odds of further rate relief from the central bank next week. - Paul Vieira The U.K.'s rate of inflation was unchanged at the Bank of England's target in June, leaving the door open for an interest-rate cut at its August meeting, despite concerns about rapid rises in services prices. Consumer prices were 2.0% higher in June than the same month of last year, data from the Office for National Statistics showed Wednesday. - Ed Frankl Inflation in New Zealand softened by more than expected in the three months through June, raising the prospect that the official cash rate could be cut as soon as next month. Consumer prices rose by 0.4% in the second quarter of this year, and by 3.3% from the same period a year earlier, Stats NZ said Wednesday. - David Winning Asia's economies seem to be on track for a solid year, as growth holds steady and inflation slows, even with risks tilted to the downside, the Asian Development Bank said in its latest report. Resilient demand at home and strong exports are helping offset risks from trade and geopolitical tensions for Asia's developing economies, the multilateral bank said Wednesday. - Rthvika Su varna and Fabiana Negrin Ochoa China's youth unemployment rate declined in June , a positive sign at odds with the weak economic momentum shown in recent downbeat data that spurred a flurry of growth forecast cuts by global banks. - Dow Jones Newswires 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 Vicky Ge Huang 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

07-17-24 0717ET