Consumer Price Report on Tap

Consumer Price Report on Tap By Hardika Singh

Investors will get a fresh look at the inflation picture today, with the release of the consumer-price index at 8:30 a.m. ET. Economists polled by The Wall Street Journal expect the overall index rose 0.2% month over month in August.

In recent months, the Federal Reserve has started paying greater attention to the jobs market. But the inflation report still needs to signal a slowdown in higher prices to reaffirm officials' view that inflation is continuing to move closer to the Fed's target.

On Thursday, the release of the producer-price index will provide further clarity on inflation.

Top News Fed Backpedals on Plan to Increase Big Bank Capital

The Fed is walking back a plan to raise the amount of capital America's biggest banks are required to hold, after intense pushback from the banking industry.

The regulator plans to require big banks to increase the reserves they hold against losses by 9%, the Fed's Vice Chair, Michael Barr, said in a speech Tuesday. Earlier proposals, which came after three major banks collapsed last year, would have increased them by an estimated 20%.

U.K. Economy Fails to Grow in Test of Bank of England Caution

The U.K. economy flatlined in July, a snag for the Bank of England as it attempts to nail a soft landing from the inflation shock caused by Russia's full-scale invasion of Ukraine.

The country's economic output was no higher in July , continuing the stagnation booked in June, official figures showed Wednesday. That defied economists' expectations for a return to growth over the month, and raises doubts over the economy's course over the rest of this year, after a first half that saw it grow more rapidly than the U.S. and most of its European peers.

U.S. Economy U.S. Incomes Climbed Last Year, Census Bureau Says

Household incomes rose last year for the first time since the Covid-19 pandemic began , reflecting the effects of easing inflation and a strong job market.

The new data from the U.S. Census Bureau on Tuesday signaled an improvement in 2023 after inflation that spiked to a 40-year-high the prior year swallowed up household income gains.

Sunbelt Manufacturing Boom Lures Property Investors

American and overseas companies have committed nearly half a trillion dollars to build new factories for electric vehicles, semiconductors and other products in the U.S., according to real estate analytics firm Green Street.

Investors are planning to acquire or build warehouses, hotels, office buildings and apartments near coming factories across the Sunbelt and Rust Belt, where most of these so-called onshoring projects are under way. They are wagering that as new manufacturing hubs come online and create jobs they will produce a "multiplier effect," with growing employment increasing demand for homes, shopping and more.

JPMorgan, Goldman Sachs Shares Move Sharply Lower on Solomon's Deal Comments, Revised Capital Requirements

JPMorgan Chase and Goldman Sachs's shares led sharp losses for bank stocks Tuesday, after Goldman Chief Executive David Solomon noted a drop in dealmaking activity.

Additionally, JPMorgan CEO Jamie Dimon said he wouldn't rule out "stagflation" for the U.S. economy down the road, while consumer-finance company Ally Financial warned of pressure on its credit quality as consumers continue to struggle with inflation. - MarketWatch

Financial Regulation Goldman's Credit-Card Exit Hampered by Lax Lending Standards

Behind Goldman Sachs's messy departure from credit-card lending: lax underwriting standards. The bank is facing mounting losses-including a roughly $400 million pre-tax hit disclosed Monday-as it tries to offload the remaining pieces of its Main Street lending business.

Goldman Chief Executive David Solomon said Monday the bank expects to incur the loss on the eventual sale of its General Motors credit-card business and a smaller, unrelated business.

Forward Guidance Wednesday (all times ET)

8:30 a.m.: Consumer-price index

Thursday

8:15 a.m.: European Central Bank interest-rate announcement

8:30 a.m.: Initial jobless claims

8:30 a.m.: Producer-price index

9:30 a.m.: IMF regular press briefing with Strategic Communications Director Julie Kozack

2 p.m.: Monthly U.S. federal budget

7 p.m.: Bank of England Deputy Governor Sarah Breeden participates in Wharton-IMF Transatlantic Dialogue event

Research ECB May Have Held Rates Too High for Too Long

The ECB may have left interest rates too high for too long, Patrick Barbe, head of European investment grade fixed income at Neuberger Berman, says in a note. The process of negotiating wages with unions in most eurozone countries involves a delay after the inflation rate has risen, which has led the ECB to wait until summer before starting rate cuts, he says. "There is therefore a risk that the ECB has pursued too aggressive a policy for too long." It may therefore have to cut more quickly than expected in order to reach its neutral rate earlier, probably below 2.5%. However, with services inflation still above 4%, the ECB continues to reduce rates cautiously, he says. - Emese Bartha

Basis Points Bank of Japan policy board member Junko Nakagawa on Wednesday repeated the bank's stance of pursuing more rate increases, sending the yen to its strongest level in eight months. Nakagawa echoed the view previously offered by Gov. Kazuo Ueda and other officials that the bank would adjust the degree of monetary accommodation, depending on price, economic and financial conditions.- Megumi Fujikawa A recession signal is flashing red. Or is it? Two years ago, the inversion of the yield curve-shorter-dated Treasurys yielding more than longer-dated bonds-was taken by investors as a surefire sign of recession. Now Wall Street worriers have a new concern : The yield curve is back to normal, a surefire sign of recession. It might seem odd, but both yield-curve moves are indeed good signs of recession, though not foolproof ones. What really matters is why Treasurys move as they do, and in this case it comes down to the Federal Reserve. - James Mackintosh The Reserve Bank of Australia said it continues to anticipate the unemployment rate to rise only gradually over the coming months and for conditions in the job market to remain relatively tight. "Conditions in the labor market have eased since late 2022, but our assessment is that the labor market is still tight relative to full employment," Sarah Hunter, RBA's chief economist and Assistant Gov., told a financial markets conference Wednesday. - James Glynn Deeper interest-rate cuts in Canada could be warranted should growth weaken further, says Bank of Canada Gov. Tiff Macklem-a scenario some economists believe will unfold in the coming months. His remarks in London, after a speech on trade, left the door open for a half-point cut in October, and Macklem acknowledged recent data measuring employment and gross domestic product have been weak. - Paul Vieira U.S. bankruptcy filings spiked in August after a slowdown in July , propelling the total for the first eight months of the year to the highest level since 2020 and second-highest since 2010, S&P Global Market Intelligence said Monday. There were 452 filings in the year through end August, which compares with 466 in the same period in 2020, when the pandemic was still in full swing, and 604 in the same period in 2010. - MarketWatch 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

September 11, 2024 07:15 ET (11:15 GMT)

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