Closing post
Time for a recap.
Pressure is building on the US central bank to cut interest rates next month, following comments from several Federal Reserve officials.
Mary Daly, San Francisco Federal Reserve Bank president, got the ball rolling by telling the Financial Times that it is time to consider adjusting borrowing costs.
She told the Financial Times that it was “prudent” to take a gradual approach to monetary policy, adding that the labor market, while slowing, was “not weak.”
Daly explained:
“After the first quarter of this year, inflation has just been making gradual progress towards 2%.
We are not there yet, but it’s clearly giving me more confidence that we are on our way to price stability.”
Minneapolis Fed president Neel Kashkari weighed in too, saying it was appropriate to consider a rate cut in September as “The balance of risks has shifted”.
Speaking to the Wall Street Journal, Kashkari cited the weak US jobs report for July, saying:
“I’m still unclear how tight policy is, but the balance of risks in my view have shifted more towards the labor market and away from the inflation side of our dual mandate.”
The U.S. Federal Reserve will cut interest rates by 25 basis points at each of the remaining three meetings of 2024, one more reduction than predicted last month, according to a slim majority of economists polled by Reuters.
Goldman Sachs has cut the odds of a US recession in the next 12 months, from 25% to 20%, due to recent stronger data.
Elsewhere today…
The tech entrepreneur Mike Lynch is among those missing after a superyacht with 22 people onboard sank off the coast of Sicily during a violent storm
Cosmetics company Estée Lauder has reported a 2% drop in sales in the last financial year, due to weak demand in China.
Gold is trading near a record high, having hit $2,500/ounce for the first time on Friday.
The housebuilder Barratt is pushing ahead with its £2.5bn takeover of rival Redrow this week despite concerns raised by the government’s competition watchdog.
Shares in European defence companies have dropped following a report that Germany will not agreed to more military aid to Ukraine.
Energy bills across Great Britain could rise by 9% from October to an average of £1,714 a year for the typical household’s gas and electricity, according to forecasts.
Updated
Over in Washington DC, Federal Reserve governor Christopher Waller has just opened a workshop on Money, Banking, Payments, and Finance.
However, Waller does not offer any new insights into monetary policy – disappointing those who were hoping for fresh guidance on the interest rate outlook.
When you wait all day for comments from Fed's Waller and he doesn't comment on monetary policy pic.twitter.com/bb0xQSbONK
— Newsquawk (@Newsquawk) August 19, 2024
Instead, Waller points out that broader financial stability issues is very important.
Waller says:
Financial stability vulnerabilities, such as run risk, excessive leverage, and bubbly valuations, could amplify the effect of adverse shocks, potentially resulting in big economic losses and a slowdown in economic activity.
Understanding the mechanisms that allow these vulnerabilities to grow and transmit stress to the rest of the financial system requires rigorous theoretical research and solid micro-foundations
