All Eyes on July CPI Report

All Eyes on July CPI Report By Vicky Ge Huang

Investors and policymakers are keeping a close eye on the consumer-price index this morning for more insights on the Federal Reserve's interest-rate policy. July's consumer-price index is expected to show the inflation rate held steady on an annual basis. Meanwhile, soaring home prices and smart investments have helped boost a generation once considered perpetually behind. And investors are buckling up for more turbulence after last week's global drama interrupted an unusually calm period. Elsewhere, New Zealand's central bank lowered its benchmark interest rate by a quarter percentage point and sharply revised down its forecast for year-end CPI inflation to 2.3%, from 2.9% previously. Read on for this news and more.

Top News What the July CPI May Mean for the Fed

On the eve of the Federal Reserve's last meeting, it looked like the July consumer-price index report, due at 8:30 a.m. ET, might serve as one final hurdle to clear ahead of a September rate cut. But weaker-than-expected labor-market data since then suggests a cut is probably likely even if the CPI report is on the firm side. Economists forecast that the consumer-price index will show prices rose 3% in July from a year earlier, as it did in June.

New Zealand Central Bank Joins Global Rush to Cut Interest Rates

The Reserve Bank of New Zealand cut its official cash rate by 25 basis points to 5.25% at a policy meeting Wednesday, saying inflation is now on track to sustainably return to the desired target band, while its forecasts suggest further cuts are likely before the end of the year.

Glynn's Take: RBNZ's Move to Cut Rates Tinged With Emotion By James Glynn

The governor of the Reserve Bank of New Zealand admitted to feeling "borderline emotional" about the central bank's decision to join a growing number of its global peers in finally starting interest rate cuts.

For a moment, the highly pragmatic Adrian Orr showed the more human side of being a central banker charged with squeezing the life out of an economy over a sustained period in the hope of arresting surging prices.

U.S. Economy The Dramatic Turnaround in Millennials' Finances

Millennials are now wealthier than previous generations were at their age. They can't believe it either.

The median household net worth of older millennials, born in the 1980s, rose to $130,000 in 2022 from $60,000 in 2019, according to inflation-adjusted data from the Federal Reserve Bank of St. Louis. Median wealth more than quadrupled to $41,000 for Americans born in the 1990s, which includes the generation's youngest members, born in 1996.

The turnaround has been so dramatic that millennials-mocked at times for being perpetually behind in building wealth, buying homes, getting married and having children-now find themselves ahead.

Financial Regulation Market Volatility Is Back. Will It Last?

Volatility is back in the stock market after a roughly 18-month slumber . Turbulence has mounted since mid-July, culminating last week with the S&P 500 logging both its best and worst days since 2022. Traders have wound down some investments that thrived in calm conditions and pulled back from bets that the sideways action would persist.

Forward Guidance Wednesday (all times ET)

2 a.m.: CPI (GB)

5 a.m.: Flash Estimate GDP (EU)

7 a.m.: MBA Weekly Mortgage Applications Survey (US)

8:30 a.m.: CPI (US)

8:30 a.m.: Real Earnings (US)

8:00 pm.: 1st Preliminary Quarterly GDP Estimates (JP)

Thursday

2 a.m.: First quarterly estimate of GDP (GB)

2 a.m.: Monthly GDP estimates (GB)

8:30 a.m.: Import & Export Price Indexes (US)

8:30 a.m.: Empire State Manufacturing Survey (US)

8:30 a.m.: Advance Monthly Sales for Retail & Food Services (US)

8:30 a.m.: Philadelphia Fed Business Outlook Survey (US)

8:30 a.m.: Unemployment Insurance Weekly Claims Report - Initial Claims (US)

8:30 a.m.: Federal Reserve Bank of St. Louis President Alberto Musalem speaks at Greater Louisville Inc event (US)

9:15 a.m.: Industrial Production and Capacity Utilization (US)

10 a.m.: NAHB Housing Market Index (US)

10 a.m.: Manufacturing & Trade: Inventories & Sales (US)

1 p.m.: Belgium: Assumption Day (BE)

1 p.m.: Switzerland: Assumption Day (CH)

1 p.m.: France: Assumption Day (FR)

1 p.m.: Germany: Assumption Day in Saarland and Bavaria (DE)

1 p.m.: Italy: Assumption Day. Financial markets closed (IT)

2 p.m.: U.S. Securities and Exchange Commission Closed Meeting (US)

4 p.m.: Treasury International Capital Data (US)

4:30 p.m.: Federal Discount Window Borrowings (US)

4:30 p.m.: Foreign Central Bank Holdings (US)

Research July PPI Report Boosts Odds of September Fed Rate Cut

The idea of the Federal Reserve cutting interest rates in September gained further support from the July PPI report, which in turn is putting Treasury note yields under pressure. "July's PPI data are good enough for the Fed to start easing in September," says Pantheon Macroeconomics in a note. The firm attributes the unchanged reading on the core index to the 1.3% fall in the trade services component, which it expects to continue through 2H 2024 but at a slower rate. "We expect gross margins to fall over the coming months as growth in consumers' spending continues to slow, but July's rapid rate of decline is unsustainable," the firm says. - Kirk Maltais

Basis Points Atlanta Federal Reserve Bank President Raphael Bostic said Tuesday he expects the U.S. economy will be in a place to lower interest rates within the next several months, adding he doesn't currently see a recession on the horizon. "I'm hopeful that in the next several months, we'll be at a place where we have an economy that's pretty much fully normalized," Bostic said at the Conference of African American Financial Professionals. - Barron's Tuesday's milder-than-expected reading on producer prices in July was translating into fading concerns about inflation by many market participants and reinforcing traders' expectations for multiple rate cuts from the Federal Reserve into mid-2025. Fed-funds futures traders were gravitating toward the likelihood of two full percentage points of rate cuts by July of next year, which would take the Fed's main interest-rate target down to around 3.25% to 3.5%, from a current level between 5.25% and 5.5%, according to the CME FedWatch Tool. - MarketWatch The health of the American consumer is in the spotlight this week with several large retailers set to report in the coming days, including Walmart. The earnings serve as a barometer for consumer spending, which the market fears is slowing down as recession looms. Brokerage Jefferies, however, sees signs that consumer spending remains healthy. Jefferies noted its Consumer Health Index (CHI), which measures consumers' ability to spend, swung higher in June. - Barron's Weakening consumer demand is helping to tame inflation by forcing sellers to bring down prices, says Comerica Chief Economist Bill Adams. July's PPI showed a rise of 0.1% versus a forecast of a 0.2% increase. As GDP and employment growth slow, sellers are being forced to bring back discounting and accept smaller margins, causing prices in industries like machinery and vehicle wholesaling and food and alcohol retailing to drop significantly, Adams says. - Victor Swezey The U.S. shadow banking sector, which involves nonbank financial intermediaries, has been ranked as the most likely cause of a global credit crisis by 29% of investors, the Bank of America global fund manager survey for August shows. U.S. shadow banking entails financial services offered by non-bank institutions such as insurance firms, microloan firms, hedge funds and pension funds. "U.S. commercial real estate (which was June's number one response) remains the second most likely source for a systemic credit event at 21%, followed by the Japanese yen at 19%," BofA says. - Miriam Mukuru To get one of the hottest jobs in tech, Deborah Martinez Castellanos didn't need a bachelor's degree. She needed a flair with a screwdriver-and a high tolerance for artificial lighting. Demand for data-center technicians like Martinez Castellanos is booming, as companies such as Microsoft and Google pour billions into data centers to power everything from AI chatbots to the trillions of photos and emails stored in the cloud. They embody the rise of a class of careers that defy traditional blue- and white-collar distinctions. - Te-Ping Chen The Republican party used to be synonymous with a pro-business mindset, while the Democrats were known as the party of the working class and labor unions. Those alliances have been muddled since the rise of Trump-and particularly after his selection of Sen. JD Vance (R., Ohio) as his running mate. Now, some business and financial leaders say they want lower taxes, lighter regulation and less antitrust scrutiny . They are in favor of free trade and concerned about social and geopolitical instability amid growing movements toward populism and isolationism. Many lean left on social issues such as abortion. - Miriam Gottfried Shortly after President Biden announced his decision to drop out of the race, an informal group of economic advisers began quietly discussing how to best articulate Vice President Kamala Harris's economic vision. Their challenge: differentiating the candidate from her unpopular boss without abandoning his policies. Harris's team is now crafting a policy framework focused on making housing more affordable, lowering costs for families, taking on corporate excess and boosting small businesses, according to people involved in the discussions. - Andrew Restuccia, Tarini Parti and Emily Glazer Inflation rebounded in the U.K. last month but a slowdown in services prices makes it likely that the Bank of England will move to lower its key interest rate again over the coming months. Consumer prices were up 2.2% from a year earlier in July, rising a little from June. But prices in the services sector eased to 5.2%; the services inflation rate was last lower in May 2022. The BOE and many economists expect services prices, a

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August 14, 2024 07:16 ET (11:16 GMT)

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