Firm Inflation Challenges the Idea of Rate Cuts This Year

Firm Inflation Challenges the Idea of Rate Cuts This Year By Hardika Singh

Fed Chair Jerome Powell's remarks Tuesday weakened the case for pre-emptive rate reductions. Meanwhile, the International Monetary Fund expects global economic output to expand 3.2% this year after previously predicting 2.9%. And China's excess capacity could be damaging to itself. Read on for this news and more.

Top News Powell Dials Back Expectations on Rate Cuts

The Fed chair said firm inflation during the first quarter had introduced new uncertainty over whether the central bank would be able to lower interest rates this year without signs of an economic slowdown.

His remarks indicated a clear shift in the Fed's outlook following a third consecutive month of stronger-than-anticipated inflation readings, which appears to have derailed hopes that the central bank might be able to lower interest rates pre-emptively.

Where Are Growth, Inflation and Interest Rates Headed? Economy Global Economy Is Picking Up Steam, but Poorest Countries Are Falling Behind, IMF Says

The world economy is outpacing expectations this year, but the prospects for longer-term growth are less rosy. Global economic output is likely to expand 3.2% in 2024, the International Monetary Fund said Tuesday, up from an October forecast for 2.9% growth.

Financial Regulation China's Overcapacity Is Already Backfiring

In the "China Shock 2.0" narrative, not only is China a security threat and a low-end factory competitor, but it is also angling to swamp the West with cut-rate high-tech goods. There has been less focus on the downsides of such a strategy for China itself.

Forward Guidance Wednesday (all times ET)

2 a.m.: U.K. consumer-price and producer-price indexes for March

5 a.m.: EU harmonized consumer-price index for March

7:15 a.m.: Bank of England's Breeden speaks at Innovate Global Finance Summit 2024

12:45 p.m.: ECB's Schnabel speaks at International Research Forum on Monetary Policy in Washington, D.C.

2 p.m.: Fed Beige Book

5:30 p.m.: Cleveland Fed's Mester speaks at South Franklin Circle Dialogues Series

7:15 p.m.: Fed's Bowman in fireside chat at Institute for International Finance Global Outlook Forum

Thursday

8:30 a.m.: U.S. weekly jobless claims

9:05 a.m.: Fed's Bowman opening remarks at 2024 New York Fed Regional and Community Banking Conference

9:15 a.m.: New York Fed's Williams in moderated discussion at Semafor World Economy Summit

10 a.m.: U.S. existing home sales for March

11 a.m.: Atlanta Fed's Bostic in armchair chat at Prosperity Partnership Fort Lauderdale Meeting

2:30 p.m.: ECB's Schnabel speaks at 2024 EU-US Symposium in Washington, D.C.

5:45 p.m: Atlanta Fed's Bostic speaks in armchair chat at the University of Miami Herbert Business School

Research Global Corporate Defaults Slow in March, But Still High Historically

Global defaults fall to eight in March from 15 in February, but are still above 10-year averages, S&P Global Ratings says in a report. Across the globe, corporate defaults stand at 37, "three fewer than at this time last year but still well above the 10-year average of 27," according to S&P. Europe is the only region where year-to-date defaults are above their 2023 pace. "The quarterly rise primarily reflects companies needing to restructure their debt obligations, with the media and entertainment and consumer product sectors accounting for about 36% of total European defaults," S&P Global Ratings credit analyst Ekaterina Tolstova says. - Stephen Nakrosis

Basis Points America's biggest banks reported stronger-than-expected earnings in the first quarter, highlighting how a resilient economy is helping power everything from Main Street to Wall Street. JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, Goldman Sachs and Morgan Stanley all reported revenue and earnings that beat or met analysts' expectations. - Alexander Saeedy, AnnaMaria Andriotis and Justin Baer Canadian inflation heated up last month as prices at the pump jumped, yet expectations that a first rate cut could come as soon as June are undimmed after closely watched measures of underlying price pressures eased each month this year. - Robb M. Stewart Canada said its bond issuance over the next 12 months would be among the largest for a one-year period outside of the pandemic, with an increased focus on selling longer-term debt. It also said it would raise capital-gain taxes on corporations and wealthy individuals to finance multibillion-dollar spending measures aimed at addressing rising disillusionment among younger Canadians about their financial prospects. - Paul Vieira The U.K.'s annual rate of inflation cooled to a two-and-a-half year low in March, a contrast with hotter-than-expected recent prints in the U.S. that makes it likely that the Bank of England will lower its key interest rate later this year. - Ed Frankl Japan's exports grew for a fourth straight month in March, propelled by heightened demand for autos and semiconductors. - Yang Jie New Zealand's consumer prices rose by less than expected in the first three months of this year, giving the country's central bank more latitude to join global counterparts which have either cut interest rates or are considering doing so. - David Winning About Us

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ's global team of reporters and editors. This newsletter was compiled by markets reporter Hardika Singh in New York. Send your tips, suggestions and feedback to [hardika.singh@wsj.com].

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

(END) Dow Jones Newswires

April 17, 2024 07:15 ET (11:15 GMT)

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