Powell and Lagarde Speeches on Tap at Jackson Hole; U.S. Mortgage Rates Hit Highest Level Since 2001

Powell and Lagarde Speeches on Tap at Jackson Hole; U.S. Mortgage Rates Hit Highest Level Since 2001 By Michael Maloney

Good day. The Kansas City Fed's Jackson Hole conference gets into full swing today, with Fed Chair Jerome Powell set to speak shortly after 10 a.m. ET on the economic outlook. European Central Bank President Christine Lagarde is scheduled to give a speech at 3 p.m. on structural shifts in the global economy. Meanwhile, U.S. mortgage rates pushed to a fresh two-decade high of 7.23% this week, making it tougher for the housing market to emerge from its stark slowdown.

Now on to today's news and analysis.

Top News Mortgage Rates Hit 7.23%, Highest Since 2001

The average 30-year fixed mortgage came with an interest rate of 7.23% , according to data published Thursday by Freddie Mac. Some borrowers are paying even loftier rates. The rate was 7.09% a week ago, its first time above 7% since last fall. The new high is a turnabout from two years earlier, when borrowing rates were below 3%, near record lows. Millions of people were rushing to buy homes and refinance. Now, financing a typical home purchase costs hundreds of thousands of dollars more in interest.

Inside the Most Expensive ZIP Code in America Rising Insurance Costs Start to Hit Home Sales Harker Says Fed Has Probably Done Enough to Curb Inflation

The president of the Philadelphia Fed said he thinks the U.S. central bank has raised interest rates high enough to bring inflation down over the next few years to prepandemic levels of around 2%. "Right now, we've probably done enough," Patrick Harker said in an interview on CNBC from Jackson Hole, MarketWatch reports.

Fed Can Take Time With Rate Decisions, Collins Says

Boston Fed President Susan Collins said the central bank has earned the right to take its time in making decisions , in an interview with MarketWatch in Jackson Hole.

Taking more time doesn't mean that the Fed is less committed to bringing inflation down and that there won't be further rate hikes, she stressed. One thing is clear, Collins said: Rates will need to stay high, or "restrictive," for some time. "People should not expect these rates to come down anytime soon," Collins said.

Key Developments Around the World Turkey's Central Bank Raises Rates More Quickly Than Expected

Turkey's central bank raised its key interest rate by 7.5 percentage points , a higher than expected increase, as it attempts to correct years of easy-money policies imposed by President Recep Tayyip Erdogan that left Turkey with major financial imbalances.

Bank of Mexico Still Far From Cutting Rates, Minutes Show

Mexican central bankers stressed persistent risks to inflation as they agreed earlier this month to leave rates unchanged, saying the reference rate should stay at its current level for a prolonged time, minutes to the meeting showed Thursday.

China's Crisis of Confidence in Six Charts

What ails China? There are plenty of answers, from demographics to geopolitics to trade. But the key problem might boil down to household finances and, just as important, everyday citizens' deeply shaken confidence that their lives will keep improving following China's Covid-19 emergency.

Financial Regulation Morgan Stanley Fined by U.K. Regulator Over WhatsApp Uses

Morgan Stanley agreed to pay 5.41 million British pounds, equivalent to about $6.82 million, to the U.K.'s energy markets regulator to settle an investigation over its traders' use of banned messaging apps that breached requirements to retain written communications.

Forward Guidance Friday (all times ET)

Time N/A: Federal Reserve Bank of Kansas City's Jackson Hole Economic Policy Symposium

10 a.m.: University of Michigan consumer survey, final for August

10:05 a.m.: Fed's Powell speaks at Federal Reserve Bank of Kansas City's Jackson Hole Economic Policy Symposium

3 p.m.: European Central Bank's Lagarde speaks at Kansas City Fed's Jackson Hole Economic Policy Symposium

Saturday

Time N/A: Federal Reserve Bank of Kansas City's Jackson Hole Economic Policy Symposium

Commentary Real Rates Aren't Your Real Friends

Recent evidence-including this year's slow fall in inflation-suggests that consumer prices are less sensitive to monetary policy than previously thought, which means central banks have a lot of power to dictate the "real" cost of borrowing when setting interest rates, even over the long term, writes WSJ's Jon Sindreu . This is why many investors are now dreading the possibility of policy makers at Jackson Hole implicitly raising their estimate of r-star, or the interest rate required by an economy with stable inflation and low unemployment.

Basis Points U.S. economic growth picked up pace in July as production activity increased, data from the Chicago Fed showed. The Chicago Fed National Activity Index rose to 0.12 in July from minus 0.33 in June. A reading above zero suggests economic activity grew ahead of its average historical trend. (Dow Jones Newswires) Manufacturing activity in the central U.S. was unchanged in August from the previous month, while expectations for future activity improved a little. The Kansas City Fed said that the Tenth District manufacturing survey's composite index was 0 in August. Any reading below zero suggests activity contracted from the previous month. (DJN) Orders for long-lasting goods rose in July for the third month in a row if recent ups and downs at Boeing are set aside, suggesting the struggling industrial side of the U.S. economy may have stabilized. (MarketWatch) Malaysia's consumer-price growth slowed in July, mainly due to lower food prices. The July consumer-price index rose 2.0% from a year earlier, the slowest growth so far in 2023, the country's Department of Statistics said Friday. That compares with a 2.4% rise in June and the median forecast for a 2.1% increase taken from a survey of six economists by The Wall Street Journal. (DJN) Business sentiment in Germany weakened in August for the fourth month in a row, and by more than expected, as the economic outlook turns gloomier in Europe's largest economy, according to a survey of companies. (DJN) Consumer confidence in the U.K. unexpectedly improved in August, nearly reversing July's drop, a signal that pressures on household spending may be easing as inflation ticks down, according to a survey published Friday. (DJN) Executive Edition

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Uncertainty can help and hurt when it comes to the sale of private-market assets. Secondary dealmaking has been hampered this year, but the outlook is rosier for the rest of 2023 [https://urldefense.com/v3/__https://privateequity.wsj.net/?selDate=20230723__;!!F0Stn7g!Fp091hVHFQ3mZISctNz0tCX6vFEJObctHFJPy8B4PJps1Yw2_W2RvEAdrN5oR-9xmldena3zTttOo9NmbBDp7giyEJCA9A2-pfve3rOt$ ]. When deal activity picks up, the laws of supply and demand stand to favor secondary buyers.

Deceptive pricing practices are on the rise as struggling retailers try to appeal to price-conscious consumers.

Uptake of agtech tools has been tepid, and even many farmers who do use them struggle with the software and a flood of data from their farms.

Companies including PayPal, MetLife and Booking Holdings have started disclosing the midyear impacts of the 1% tax on share repurchases.

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This newsletter was compiled by Michael Maloney in New York and Perry Cleveland-Peck in Barcelona.

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

(END) Dow Jones Newswires

08-25-23 0715ET