Wall Street Gears Up for PCE Report By Hardika Singh

The Federal Reserve has been waiting for good news on inflation all year, and now it looks like it's going to get it today with the release of the May PCE inflation report, the central bank's preferred inflation gauge. Meanwhile, cheap mortgages secured when interest rates were low are forcing millions of U.S. homeowners to stay put-that is becoming a problem well beyond the property market. And Supreme Court justices say the SEC violated the Constitution by using in-house tribunals where it has home-court advantage. Read on for this news and more.

Top News PCE Inflation Report Likely to Show Little or No Price Rises

The PCE index, the Fed's preferred U.S. inflation gauge, is forecast to show no change in May. If so, it would be the first time in six months that inflation didn't go up.

A benign PCE report was foreshadowed earlier this month by a pair of inflation reports on consumer and wholesale prices. The consumer price index was flat in May and the producer price index fell. Both of these reports feed into the PCE. ( MarketWatch )

U.S. Economy America's Frozen Housing Market Is Warping the Economy

High interest rates have had an unexpected impact on U.S. housing. Instead of triggering a fall in home prices, as happened with commercial real estate, costlier mortgages have pushed residential values higher.

Blame the "lock-in" effect of ultracheap mortgages secured when interest rates were low, which are trapping owners in their homes. It is an unforeseen consequence of years of easy money.

Financial Regulation Supreme Court Curbs SEC's Enforcement Powers

The Supreme Court on Thursday limited the ability of federal agencies to impose monetary penalties through special in-house tribunals, a blow to the Securities and Exchange Commission that could have ripple effects across the federal government.

Forward Guidance Friday (all times ET)

8:30 a.m.: PCE index

9:45 a.m.: Chicago Business Barometer

10 a.m.: Consumer sentiment

12 p.m.: Fed governor Michelle Bowman speaks at the Ronald Reagan Presidential Foundation and Institute Leadership Council Conference

Monday

9:45 a.m.: Manufacturing PMI

10 a.m.: Construction spending

10 a.m.: ISM Report On Business Manufacturing PMI

Research U.S. Shows Signs Of Economic Cooling, Struggling Consumers

U.S. 2Q GDP growth is likely to be "only 1.7%, which would cap a weak first half of the year," Capital Economics' Thomas Ryan says in a note. He says the trade balance has deteriorated and "net external demand will be a bigger drag on second-quarter GDP than we previously anticipated." Ryan also notes that durable goods data released Thursday include signs that business equipment investment this quarter could be weaker than expected. Moreover, a downward revision in 1Q real consumption growth "adds to the evidence that consumers are now struggling a little more under the weight of higher rates and prices," Ryan says. - Paulo Trevisani

Basis Points Atlanta Federal Reserve President Raphael Bostic expects the central bank's first interest-rate cut will be the first in a series of moves , and therefore wishes to be certain that inflation is heading back to target before starting the cycle. "I think my reluctance [to cut rates] and my desire to be patient is that I think we need to be absolutely certain that we're going to get back to that 2% target," Bostic told reporters Thursday. "And I don't have that confidence right now." - Nick Timiraos Banks overall saw a bigger hit on this year's Fed stress test. But it may not slow them down as much as it might have in the past. In the Fed's "severely adverse" hypothetical scenario, featuring things such as a jump in the unemployment rate and a plunge in commercial real-estate prices, the collective drop in a key capital ratio for large U.S. lenders increased from a maximum decline of 2.5 percentage points in the 2023 exam to 2.8 percentage points in the 2024 test. - Telis Demos Orders for durable goods such as autos and computers barely rose in May and underscored the ongoing weakness in the industrial side of the U.S. economy. New orders inched up 0.1% in May , the government said Thursday. Economists polled by The Wall Street Journal had forecast a 1.0% drop in durable-goods orders last month. - MarketWatch The U.S. economy's performance in the first three months of the year didn't look much better the third time around: The government's latest estimate of first-quarter annual growth was lifted slightly to a lackluster 1.4% . Previously the government reported that GDP had expanded at a 1.3% rate in the first quarter. - MarketWatch The Bank of Mexico left its benchmark interest rate unchanged Thursday in a split decision, noting market volatility in the wake of the country's elections that weakened the peso and pushed up government bond yields. The central bank's five-member board of governors voted 4-1 in favor of keeping the overnight interest-rate target at 11% in a second straight meeting on hold. - Anthony Harrup Policymakers at the European Central Bank should place less weight on data pointing to increases in measures of inflation that are likely to prove transitory given the greater reliability of economic forecasts over recent quarters, the governor of the Bank of France said Friday. - Paul Hannon The U.K. economy grew a little more than expected in the year's first quarter, offering a minor boon to the ruling Conservatives' struggling campaign ahead of parliamentary elections next week. Gross domestic product expanded 0.7% between January and March compared with the previous quarter, according to updated figures released Friday by the Office for National Statistics. Previous estimates had recorded a 0.6% increase on the quarter. - Joshua Kirby Many French voters say they have grown tired of Macron's tendency to run France like a business rather than a country. His technocratic focus on France's ability to compete in the global marketplace has done little to placate widespread anxieties over immigration and the rising cost of living. - Stacy Meichtry, Noemie Bisserbe, Chelsey Dulaney The Turkish central bank kept rates on hold for a third meeting straight, setting its stall on lower inflation in the coming months. The bank's policy committee said Thursday that it would leave its benchmark one-week repo rate at 50.00%. - Joshua Kirby Japan's Finance Minister Shunichi Suzuki said the government would take appropriate action against excessive yen moves , although he declined to comment on whether he thinks the recent weakening of the yen is excessive. - Megumi Fujikawa Executive Insights

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Finance chiefs' median pay rose nearly 8.5% last year as stock-based incentives lifted compensation.

Getting full value out of AI workplace assistants is turning out to require a heavy lift from enterprises.

Poor returns on boom-era funds are threatening to become a long-term drag on the venture-capital industry.

Listen to Rubrik co-founder and CEO Bipul Sinha discuss his journey from growing up in poverty in rural India to navigating his cybersecurity firm through a $5.6 billion IPO.

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 [hardika.singh@wsj.com].

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


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06-28-24 0717ET