Wall Street Today | Fed and BOE Prepare 75 Basis-Point Salvos on Inflation
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Fed and BOE Prepare 75 Basis-Point Salvos on Inflation
The Federal Reserve and the Bank of England may both unleash 75 basis-point interest-rate hikes in the coming days in a show of aggression toward inflation, even in the face of mounting recession risks.
For the Fed, the fourth such out-sized move on Wednesday will bring it to a crossroads. The damage to growth inflicted by policy tightening is no longer being masked by the buoyancy of the post-pandemic economy, while its success in taming inflation has yet to materialize.
The BOE's situation on Thursday is even less comfortable as it delivers what would be the biggest UK rate hike since 1989. Not only is the country probably already in a recession, but officials are also trying to reestablish the credibility of the UK's framework after former Prime Minister Liz Truss’s unfunded fiscal plan led to a disastrous market crisis.
Cash-Rich Consumers Could Mean Higher Interest Rates for Longer
Washington's response to the pandemic left household and business finances in unusually strong shape, with higher savings buffers and lower interest expenses. It could also make the Fed's job of taming high inflation more difficult. Some economists think the policy rate will have to go higher than 4.6%, citing in particular reduced sensitivity of spending to higher interest rates.
"The big question will be, given the resilience the economy has had to interest-rate increases so far, whether that will actually be sufficient," said former Boston Fed President Eric Rosengren. "The risks are they're going to have to do a bit more than they're suggesting.”
Pending Home Sales Fell 10% in September, Much Worse Than Expected
Pending home sales, a measure of signed contracts on existing homes, dropped a much worse-than-expected 10.2% in September from August, according to the National Association of Realtors. Economists had predicted a 4% decline. Sales were down 31% year over year.
"Persistent inflation has proven quite harmful to the housing market," said NAR Chief Economist Lawrence Yun. "The Federal Reserve has had to drastically raise interest rates to quell inflation, which has resulted in far fewer buyers and even fewer sellers."
SECTORS
Natural-Gas Prices Have Plunged Into Autumn
Natural-gas prices have fallen more than 40% since hitting shale-era highs in late August, reducing the risk of budget-busting heating bills this winter for millions of Americans and potentially easing a major cost pressure for manufacturers.
The decline is due to warm autumn weather, record domestic production and gas-storage facilities that have filled up fast since the end of air-conditioning season. Now, one of the big drivers of inflation costs roughly the same as it did a year ago.
The World's Food Security Is at Stake as Russia Exits Grain Deal
Traders are bracing for a fresh spike in grain prices after Russia's exit from a deal allowing Ukraine crops to move from the Black Sea to the countries most in need of them roils markets anew. The sudden move by Russia has left leaders scrambling to rescue the UN-and-Turkey-brokered agreement credited with saving vulnerable populations from risk of starvation.
The pact reached in July had helped temper wheat futures after they rocketed to a record high in the wake of Russia's invasion of Ukraine in late February. The latest trade setback threatens to worsen already severe inflation and deepen a global food crisis.
COMPANY
Apple Gears Up to Launch Its Next Crop of Macs Early Next Year
$Apple(AAPL.US$'s next group of Macs probably won't launch until early next year, which means it will have fewer new devices to sell in the holiday quarter. Also: The company hikes the prices of key services and confirms a USB-C iPhone.
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Twitter Is Drafting Broad Job Cuts in Whirlwind First Weekend Under Elon Musk
The proposed layoffs under consideration by Mr. Musk, who took the social-media platform $Twitter (Delisted)(TWTR.US$private on Thursday for $44 billion, are expected to reduce engineering positions as well as affect other areas at the company. Twitter has roughly 7,500 employees, according to a disclosure earlier this year. The full scale of cuts being discussed couldn't be determined.
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GM Temporarily Suspends Advertising on Twitter Following Elon Musk Takeover
The Detroit automaker, a rival to Musk-led electric vehicle maker $Tesla(TSLA.US$, said it is "pausing" advertising as it evaluates Twitter's new direction. It will continue to use the platform to interact with customers but not pay for advertising, $General Motors(GM.US$ added.
"We are engaging with Twitter to understand the direction of the platform under their new ownership. As is normal course of business with a significant change in a media platform, we have temporarily paused our paid advertising. Our customer care interactions on Twitter will continue," the company said in an emailed statement.
Source: Bloomberg, Dow Jones, CNBC
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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easygoing Penguin_34 : it would greatly behoove GM to continue their advertising on Twitter. with sales in decline, it would appear to be a prudent practice to reach as many potential customers as possible to increase the likelihood of sales.
RDK79 : NO WAY the article author knows in advance what Fed is planning!! BAD, but accepted, JOURNALISM
easygoing Penguin_34 : true: there's no way to know in advance what the FED will do, unless they tell us. Even so, they may change their mind and do something else. all we can do is predict its effects and try to plan accordingly.