Bank of England and Swiss National Bank Stand Pat After Fed Holds Interest Rates Steady By James Christie
Good day. The Bank of England this morning announced a pause to its series of interest-rate increases after the U.K.'s statistics agency on Wednesday reported the annual rate of inflation fell for a third straight month in August, surprising economists. In an unexpected move, Switzerland's central bank also left its policy rate unchanged, but signaled further tightening might be needed to ensure price stability over the medium term. The BOE and the SNB's decision follows the Federal Reserve on Wednesday keeping interest rates on hold, a call Chair Jerome Powell said would give officials room to gauge how the Fed's rate-raising campaign is working. However, Powell didn't rule out future rate increases. By contrast, Brazil's central bank on Wednesday cut its benchmark rate by half a percentage point and said more cuts are on the way.
Now on to today's news and analysis.
Top News Fed Holds Rates Steady but Pencils In One More Hike This Year
Federal Reserve officials voted to hold interest rates steady at a 22-year high and revealed a divide over whether they should raise them once more this year, with most leaning toward another increase .
Fed Chair Jerome Powell said that officials didn't need to decide yet whether to lift rates again after a historically rapid series of increases over the past 18 months and as they await evidence that a recent inflation slowdown can be sustained.
Fed officials also indicated they expect to keep rates higher for longer through 2024 than they anticipated earlier this year.
Transcript: Fed Chief Powell's Postmeeting Press Conference Higher Interest Rates Not Just for Longer, but Maybe Forever Don't Buy the Fed's Rate Projections Bank of England Leaves Key Interest Rate Unchanged
The Bank of England left its key interest rate unchanged at 5.25% for the first time since November 2021 amid signs that inflation is cooling and the U.K.'s economy is teetering on the brink of contraction.
Switzerland's Central Bank Unexpectedly Holds Rates
Switzerland's central bank unexpectedly held its key interest rate steady at 1.75%, but signaled further tightening was still possible in its efforts to bring inflation to target. Economists had expected a 25 basis-point hike, but the Swiss National Bank said tightening of monetary policy over recent quarters is countering inflationary pressure. (Dow Jones Newswires)
Pro Take: Fed May Be Closer to Pulling Off Soft Landing, but Threats Abound By Bob Fernandez
The Federal Reserve projected on Wednesday that unemployment may not be as bad as previously thought in 2024, even as the central bank has slowed the economy with an aggressive campaign of interest-rate hikes.
A previous Fed forecast called for unemployment of 4.5% in 2024. The new one sees it at 4.1%, compared with 3.8% in August.
That improved outlook is a sign that economic forces are mostly moving in the Fed's direction as it aims to lower inflation without causing a recession. But Chair Jerome Powell said the economy faces a long list of threats. "Ultimately there is so much uncertainty around all these things," Powell said. Read more .
U.S. Economy How Households Got Turned Upside Down by Higher Interest Rates
A new reality has finally started to set in across American households: Higher interest rates are here to stay. These higher-for-longer rates are starting to exact a toll on households that need to borrow now, especially for major purchases. Those who have to rely on credit-card debt, where rates rise along with the market interest rates, are also feeling the bite.
UAW Urges Automakers to Cut Reliance on Temp Workers
The use of temporary workers at the Detroit car companies has long rankled the United Auto Workers union, which wants fewer of them and a faster path to full-time status. The issue is a key point of debate at the bargaining table.
Tensions in UAW Talks Flare as Ford Averts Strike in Canada Trump Tries to Siphon Off Union Voters From Biden Roughly 470,000 Venezuelan Migrants to be Offered Work Permits
The Biden administration has agreed to make roughly 470,000 Venezuelan migrants-those who arrived in the U.S. by July 31-eligible for work permits aimed at easing the financial strain on major migrant destinations.
Glynn's Take: RBA Reforms Fail Best Practice; Further Scrutiny Needed By James Glynn
Affectionately known as Big Mac by the Reserve Bank of Australia staff in the decade through 2006 that he ran the institution, Ian Macfarlane emerged this week to shine a light on the government's planned changes to how the central bank operates, warning that the reforms "are very bad policy."
In a television interview with the Australian Broadcasting Corp., Macfarlane argued that the changes outlined by Treasurer Jim Chalmers earlier this year would mean that the RBA governor, the deputy governor and the treasury secretary are outnumbered on the central bank's policy-setting board by six external part-time members. Read more .
Key Developments Around the World Brazil's Central Bank Cuts Selic to 12.75%, Signals More Cuts
Brazil's central bank cut its benchmark Selic interest rate by half a percentage point to 12.75% as expected, and reiterated it intends to make more cuts of the same size at upcoming meetings.
Iran's Oil Exports Have Soared During Quiet Diplomacy With U.S.
The U.S. backed away from some actions meant to stop Iran's oil shipments as Washington and Tehran conducted negotiations that led to Monday's release of five Americans, part of a larger step back from sanctions enforcement .
Mexican Railroad Suspends Services Because of Migrant Surge
Mexican railroad company Ferromex said it has suspended freight operations on several lines serving border cities such as Ciudad Juárez following a surge in the number of U.S.-bound migrants jumping on the trains.
Ukrainian Tactics Put Russia on the Defensive in the Black Sea
Commercial vessels have resumed using Ukraine's main port of Odesa without asking permission from Russia for the first time since the war began-showing how much the balance of power has changed in the Black Sea.
Financial Regulation Roundup Crypto Firms Are Looking Outside the U.S. for Growth
After a tough clampdown on crypto firms by U.S. regulators this year-including a high-profile case against Binance-bosses in the sector are now being forced to cook up growth plans that effectively exclude the world's largest economy.
Tether Is Lending Its Stablecoins Again
Cryptocurrency issuer Tether Holdings resumed lending out its own stablecoins to customers, less than a year after it said it would wind down the practice. Its lending represents a potential risk to the crypto world.
Goldman Sachs Is in Advanced Talks to Sell GreenSky
Goldman Sachs is in advanced discussions to sell GreenSky to a group of investment firms for much less than what it paid for the specialty lender, in a costly retreat from a key part of a failed experiment in consumer lending .
Forward Guidance Thursday (all times ET)
8:30 a.m.: U.S. weekly jobless claims
10 a.m.: U.S. existing home sales for August; The Conference Board Leading Economic Index for U.S. for August; EU FCCI flash consumer confidence indicator for September
Friday
4 a.m.: Eurozone flash PMI for September
8:50 a.m.: Fed's Cook speaks at NBER Economics of Artificial Intelligence Conference
4:15 p.m.: Assets and liabilities of commercial banks in U.S.
Research Risk of Recession in U.S. Remains Elevated
While the probability of a recession in the U.S. within the next 12 months has fallen since the beginning of the year, it remains at 30% to 35%, S&P Global Ratings says. Satyam Panday, S&P Global Ratings chief economist, U.S. and Canada, says that: "Data from the key coincident indicators shows the current expansion is in its late cycle, indicating that any further short-run cyclical boost to growth is limited by the economy's underlying growth potential." S&P also says principal leading indicators are giving mixed signals for near-term growth prospects, with the current expansion "likely to enter a period of slower-than-trend growth in the coming quarters."
-Stephen Nakrosis
Basis Points Bank of Canada officials believed that keeping its benchmark rate unchanged earlier this month was appropriate but agreed they needed to write a policy statement that dampened any expectations for near-term rate relief, according to the minutes of their deliberations this month. (Dow Jones Newswires) Norway's central bank raised its key policy rate and said that another increase is likely later in the year, depending on economic developments. Norges Bank increased its key policy rate by 25 basis points to 4.25%, in line with a Dow Jones poll before the decision. "There will likely be one additional policy rate hike, most probably in December," Governor Ida Wolden Bache said. (DJN) Sweden's central bank lifted its key policy rate to 4.00% from 3.75%, as expected, and said rates could be raised further as it continues to fight stubbornly high inflation. The Riksbank's new rate path now implies the rate will peak at around 4.10% in the third quarter of 2024, from 4.05% previously, and remain at that level until a first cut in 2025. (DJN) New car registrations in Europe rose in August and the share of fully-electric car sales exceeded 20% for the first time, the European Automobile Manufacturers' Association said. Registrations, which reflect sales, rose 21% to 787,626 in August compared with a year earlier, and increased 18% to 7.1 million for the period of January through August. Registrations, however, trail the 9 million units sold in the comparable period in 2019, before the pandemic. (DJN) Indonesia's central bank stood pat as expected at its September policy meeting to ensure inflation remains low and within target. Bank Indonesia kept its benchmark seven-day reverse repo rate at 5.75%. All seven economists polled by The Wall Street Journal had expected the decision. The central bank
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09-21-23 0725ET
