FedNow System Launching Soon; Turkey's Central Bank Raises Rates By James Christie
Good day. The Federal Reserve hopes a new, faster-payments system will let U.S. bank customers send and receive money almost instantly, but it could be years before the speedier network gains widespread traction. Elsewhere, Turkey's central bank said it raised the country's benchmark interest rate after increasing rates in June for the first time since 2021. The increase, 17.5% from 15%, was lower than expected by some analysts who have called for the bank to take aggressive action to tamp down on inflation.
Now on to today's news and analysis.
Top News Fed Wants Paychecks to Hit Bank Accounts in a Flash
The Fed this week is expected to launch its long-awaited FedNow system , which is intended to allow bill payments, paychecks and other common consumer or business transfers to be available quickly and around the clock, officials said.
But while FedNow would theoretically give consumers access to their money immediately, only 57 out of thousands of banks and financial institutions are participating from the start, the Fed said in June. Officials have said it could take a couple of years before the system gains more-widespread adoption and its capabilities are more fleshed out.
Turkish Central Bank Raises Rates In Bid to Save Troubled Economy
Turkey's central bank raised interest rates to 17.5% on Thursday, its second consecutive increase as a new team installed by President Recep Tayyip Erdogan attempts to rescue the country's troubled economy.
-Dow Jones Newswires
U.S. Economy That Extreme Heat Hasn't Budged Natural-Gas Prices
Americans are burning more natural gas than ever to stay cool this summer. Unlike the past two summers, when sweltering weather sent gas surging, the continuing heat wave has hardly moved prices for the power-generation fuel .
Benchmark natural-gas prices have stayed in a tight range that is roughly 60% lower than a year ago, when prices exploded to shale-era highs. Prices are 30% less than in July 2021.
Business and Labor Square Off Over AI's Future in U.S. Workplace
The Federal Trade Commission's probe into the ChatGPT app points to an emerging conflict over how Washington should regulate artificial intelligence, one that could pit some of America's biggest businesses against labor unions.
Key Developments Around the World After Seizing Western Assets, Russia Installs New Management
Russia has appointed Chechnya's agriculture minister as the new head of Danone's business in the country and tapped a Russian businessman to run Carlsberg's operations there, cementing control of the seized assets.
China's Grand Vision for a Vast Rail Network Transforms Neighbor
Globally, China's Belt and Road Initiative, has been in retreat, with some projects stalled or mired in controversy-at times over allegations of incurring unsustainable debts for developing countries. But in Laos it is alive and kicking .
Financial Regulation Roundup Goldman Sachs Profit Drops 58% on Consumer-Lending Pullback
Goldman Sachs on Wednesday posted sharply lower second-quarter profits, the latest fallout from the Wall Street firm's ill-fated foray into Main Street lending. The bank is pulling back on its once-ambitious consumer-lending efforts.
U.S. Sanctions 14 Iraqi Banks in Crackdown on Iran Dollar Trade
The U.S. has barred 14 Iraqi banks from conducting dollar transactions, U.S. officials said, part of a sweeping crackdown on the siphoning of U.S. currency to Iran and other sanctioned Middle East countries.
Governments in China are Propping Up Hong Kong's Ailing IPO Market
Chinese companies wanting to go public in Hong Kong have had a hard time getting international investors to buy their shares. Local governments in China are stepping up to help fill the void -and seeking more in return.
Charles Schwab Survived the Deposit Crisis. What Comes Next?
Charles Schwab is best known as the largest publicly traded U.S. brokerage firm, but it also runs a large bank that isn't quite too big to fail . Investors are behaving as if a bit of good news about that bank means this year's regional-banking crisis might be winding down.
Fed Hits Deutsche Bank With $186 Million Fine
The Federal Reserve said Wednesday it has fined Deutsche Bank $186 million for falling short in its efforts to prevent money laundering and has reached an agreement with the bank to improve its oversight.
Forward Guidance Thursday (all times ET)
8:30 a.m.: U.S. weekly jobless claims; Philadelphia Fed Manufacturing Survey
10 a.m.: The Conference Board Leading Index for June; U.S. existing home sales for June; EU FCCI Flash Consumer Confidence Indicator for July
Friday
2 a.m.: U.K. retail sales for June
8:30 a.m.: Canada retail sales for May
Research Global Inflation Prospects Remain Gloomy Despite Recent Declines
Central banks are coming to terms with the difficulty of taming inflation, after more than a year of synchronized tightening, economists at Dun & Bradstreet's Country Insight Group write in a report. Trends still suggest a glass-half-empty approach to inflation is more realistic, they write: Inflation is above target in most developed markets, core inflation remains sticky, and the decline is partly now attributable to base effects. "Simply put, lower inflation only means prices are still rising, but not as fast as they were last year, when prices went very high, very fast," the economists write. The positives only come in that monetary tightening has achieved what it was supposed to, in bringing about a peak in headline inflation, albeit with varying successes, they add.
-Ed Frankl
U.K. Inflation Outlook Remains Bleak
Markets have likely placed too much weight on Wednesday's data showing a bigger-than-expected drop in U.K. inflation as the outlook remains bleak, T. Rowe Price chief European economist Tomasz Wieladek writes in a note. The decline in U.K. headline inflation in June-to 7.9% from 8.7% in May-was mainly driven by falling food and energy prices, while domestically-generated services inflation, which is the Bank of England's main concern, only declined marginally, Wieladek writes. "Wednesday's inflation data reveal significant upstream pressures in services inflation, meaning there is still a lot more services inflation in the pipeline," he writes. "Financial markets are attaching too much weight to this one inflation print, especially because the Bank of England is concerned about medium-term inflation."
-Miriam Mukuru
U.S. Retail Sales Are in Goldilocks Zone for Soft Landing
Retail sales in the U.S. in June weren't too hot or too cold, a good sign that a soft landing is still possible, D.A. Davidson analyst Michael Baker writes in a report. He notes that June retail sales came in below economists' consensus and declined slightly from May, suggesting the Federal Reserve's tightening is slowing the economy. But the slowdown wasn't too dramatic and spending growth is in line with pre-Covid growth. That says "soft landing" to Baker.
-Ben Glickman
Commentary Team Transitory Had a Point About Inflation
What matters for policy makers is that the energy shock and supply-chain bottlenecks seem to be behind us, and inflation is falling-all without any appreciable slack in the economy, Alan S. Blinder writes. He adds that, "As Yogi Berra pointed out, 'It ain't over till it's over.' But the Fed should keep all this in mind as it contemplates raising interest rates yet higher."
Mr. Blinder, a professor of economics and public affairs at Princeton, served as vice chairman of the Federal Reserve, 1994-96, and is the author of "A Monetary and Fiscal History of the United States, 1961-2021."
Basis Points U.S. housing starts fell in June, driven by a decrease in multi-family construction, while building permits declined, according to the Commerce Department. Starts fell 8% in June to a seasonally adjusted annual rate of 1.43 million. Economists polled by The Wall Street Journal expected starts to decrease 9.3% on month to 1.48 million. Starts came in 8.1% below the same month a year earlier. (Dow Jones Newswires) A dockworkers strike across Canada's West Coast ports resumed after their union rejected a tentative four-year wage deal, agreed with employers last week. The ILWU Canada said the deal was too long and it did not offer enough job protection. The strike involves some 7,400 workers who largely work at Vancouver, Canada's biggest port, and Prince Rupert, which also serve as gateways for incoming U.S.-destined cargo. The workers went on strike on July 1 for 13 days before the tentative deal was struck. (DJN) The Asian Development Bank kept its 2023 economic growth projection for the region steady, with consumption and investment expected to help offset weakness in exports amid weak global demand. The Manila-based multilateral bank on Wednesday said it continues to expect 4.8% economic growth this year for developing Asia, a region comprising 46 of its members, including China, South Korea and India. It trimmed its 2024 forecast to 4.7% from the 4.8% projected in April. (DJN) China's benchmark lending rates were kept unchanged , as expected on Thursday, following a hold of policy rates earlier this month. However, economists say Beijing will need to ramp up support to shore up the country's sputtering economy. Confidence among French manufacturers remained at its long-term average in July, the same level as the previous month. (DJN) Exports of Swiss watches rose in June, continuing the positive trend seen in May, according to data published Thursday by the Federation of the Swiss Watch Industry, or FH. (DJN) Feedback Loop
This newsletter is compiled by James Christie in San Francisco.
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07-20-23 0732ET
