Williams Silent on Fed's Rate Path Ahead of April CPI Report; Poll Finds Public Has Low Confidence in Powell

Williams Silent on Fed's Rate Path Ahead of April CPI Report; Poll Finds Public Has Low Confidence in Powell By James Christie

Good day. Comments on Tuesday by Federal Reserve Bank of New York President John Williams, a top adviser to Fed Chair Jerome Powell, left the door open for the central bank to forgo an interest rate increase at its June 13-14 policy meeting. Mr. Williams's previous remarks this year had hinted at the prospect of additional increases as the Fed tries to combat high inflation. The closely watched U.S. consumer inflation reading for April comes out today, and it could influence the Fed's rate strategy. The central bank last week said it might be done lifting rates for now, after raising its benchmark federal-funds rate by an additional quarter-percentage point to a range between 5% and 5.25%, a 16-year high. Meanwhile, Americans aren't giving Mr. Powell high marks, according to a Gallup poll. It found the Fed chair has a 36% confidence rating, the lowest since he first took office in 2018.

Now on to today's news and analysis.

Top News Williams Says Fed Will Keep Watch on Lending Conditions

A top Federal Reserve official said changes in lending conditions and their potential effects on economic activity and hiring would be a top focus as officials determine whether they have raised rates enough to bring inflation down.

In a speech Tuesday, New York Fed President John Williams cited the lag between when the Fed raises interest rates and when those actions slow down the economy in cautioning that it will take time for the central bank's rapid rate increases to slow down economic activity to combat high inflation.

Inflation Data to Be Watched as Fed Contemplates Pausing Rate Hikes

A key inflation reading Wednesday could influence the Fed's strategy over whether to pause its interest-rate increases. The consumer-price index rose 5% in March from a year earlier. Economists estimate it held to that pace in April.

Americans Losing Confidence in Fed Chair Powell, Gallup Poll Says

Most Americans appear to be unhappy with Federal Reserve Chair Jerome Powell right now, according to a Gallup poll released Tuesday. Just over a third of Americans say they have a "great deal" or "fair amount" of confidence the Fed chair will do or recommend the right thing for the U.S. economy. Mr. Powell's 36% confidence rating marks the lowest since he first took office in 2018, and the lowest among past Fed leaders since Gallup started the Fed poll in 2001. But other past central bank chairs have come close, with Janet Yellen getting a 37% rating in 2014 and Ben Bernanke receiving 39% in 2012. (Barron's)

U.S. Economy White House Debt-Ceiling Meeting Fails to Yield Breakthrough

President Biden and House Speaker Kevin McCarthy remained at loggerheads after a meeting at the White House, appearing to make little progress in averting the first-ever default by the U.S. government as soon as next month.

Home Prices Fell in a Third of the U.S. During the First Quarter

Home prices fell in more parts of the U.S. than they have in over a decade during the first quarter, when nearly a third of metro areas posted annual price declines, the National Association of Realtors said Tuesday.

Bonds Backed by Apartments Are Under Stress as Housing Market Cools Nuveen Buys Giant New York City-Focused Affordable Housing Portfolio

Decline of the Five-Day Commute Is a Boon to Suburban Retail

A growing number of retailers in city office districts are relocating their businesses to the suburbs, where visits to shopping centers are on the rise as fewer people commute to downtown workplaces.

Crisis Over Child Care Holding Back Companies, Blue-Collar Workers

More companies in the U.S. that rely on hourly shift workers are trying to fix the child-care needs of their employees by providing it themselves. So far, however, few have cracked the code.

Startups Are Scooping Up Big Tech's Cast-Off Workers Key Developments Around the World Saudi Aramco's Profit Slides as Oil Boom Cools

Saudi Arabia's national oil company posted a 19% drop in quarterly profit due to lower energy prices, but announced an additional dividend payout underscoring the kingdom's dependence on oil revenues to run its economy.

Turkey's Top Election Challenger Pledges Closer Ties to NATO and EU

Turkey's top opposition candidate for president, Kemal Kilicdaroglu, resting in a hotel suite after addressing throngs of screaming supporters, said he would steer Turkey closer to NATO and the West if he wins Sunday's election .

Financial Regulation Roundup China's New Hot Stocks Are State-Owned Banks and Brokers

While investors in the U.S. fret about bank stocks, in China banks are among the hottest trades, producing sizable gains in state-owned Bank of China, Industrial and Commercial Bank of China and Agricultural Bank of China.

Prison Term in First Cryptocurrency Insider-Trading Case

Former Coinbase employee Ishan Wahi was sentenced to two years in prison for his role in what federal prosecutors called the first-ever insider-trading case involving cryptocurrency, after pleading guilty in federal court.

Forward Guidance Wednesday (all times ET)

8:30 a.m.: U.S. consumer-price index for April

Thursday

Time N/A: ECB's Lagarde and Panetta in G7 Finance Ministers and Central Bank Governors meeting

7 a.m.: Bank of England interest-rate decision

8:30 a.m.: U.S. weekly jobless claims; U.S. producer-price index for April

Research BOE Seen Delivering at Least Two More Rate Rises

The Bank of England could raise interest rates by 25 basis points to 4.5% on Thursday followed by at least one more 25 basis point move given persistent high inflation, according to a note from Evercore ISI. Even with Thursday's potential rate rise, real inflation-adjusted rates will still be negative, the firm's analysts write in the note. They add that, "Headline inflation will come down quickly in the months ahead, but we worry that core will prove sticky at high levels as a result of weakness in U.K. aggregate supply, plus reduced contestability of labor and product markets since Brexit." There is a risk of rates being raised beyond 5% to break the inflation dynamic, triggering a recession followed by sharp rate cuts in 2024, the analysts write.

-Renae Dyer

Basis Points The IBD/TIPP Economic Optimism Index tumbled to seriously pessimistic levels in May, as increased layoffs and high interest rates, exacerbated by a bank crisis, raise the risk of a U.S. recession. The overall IBD/TIPP U.S. Economic Optimism Index plunged 5.8 points to 41.6, the lowest since November, after hitting a 16-month high in April. The index has remained in pessimistic territory, below the 50 neutral level, for 21 consecutive months. (Investor's Business Daily) Confidence among U.S. small businesses deteriorated in April as challenges associated with labor quality topped inflation to become the top problem confronting small-business owners. The National Federation of Independent Business said Tuesday its small-business optimism index fell by 1.1 points in April to 89.0, below the 89.8 consensus forecast from economists polled by The Wall Street Journal. (Dow Jones Newswires) Mexico's inflation eased in April to its slowest pace in a year and a half, led by lower food and energy costs. The country's consumer-price index slipped 0.02% on month, bringing the 12-month inflation rate down to 6.25% from 6.85% at the end of March, the National Statistics Institute said. Core CPI, which excludes energy and agricultural products but includes processed food, rose by 0.39% on month and by 7.67% from a year earlier, compared with an 8.09% annual rate in March. (DJN) Mexico produced 295,000 cars and light trucks in April, 17% more than in the same month a year earlier, statistics institute Inegi said, adding that exports rose 5% from a year earlier to 253,000 units and domestic new-car sales increased 17% to 98,000 units. (DJN) German inflation fell in April as food prices eased, though with accelerating energy prices, and core inflation holding steady at a high level, pressures are set to remain for households and businesses. (DJN) Feedback Loop

This newsletter is compiled by James Christie in San Francisco.

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

(END) Dow Jones Newswires

05-10-23 0715ET