Podcast Summary
Fed's Consideration of Interest Rate Hike Amid Inflation Concerns and Potential Risks: Experts warn of potential risks from Fed's interest rate hike, including a regional banking crisis and derailing US growth. Inflation remains a concern in Europe and Middle East, while QuickBooks Money offers higher yields for small business accounts.
While the Federal Reserve is considering raising interest rates due to inflation concerns, economists and experts warn of potential risks, including a possible regional banking crisis and derailing US growth. Meanwhile, inflation remains a concern in Europe, with the UK experiencing higher-than-expected inflation despite a decrease from previous months. In the Middle East, tensions continue between Israel and Iran, with the international community expressing support for Israel in response to recent attacks. In business news, QuickBooks Money now offers a 5% annual percentage yield on business accounts, helping small business owners make their money work harder.
Middle East tensions de-escalate, Trump criminal case progresses, and major job cuts announced: Leaders call for peace in the Middle East, the criminal case against Trump advances, Toshiba and Morgan Stanley plan job cuts, AI transformation in banking may lead to job losses, ASML misses new orders estimate, and United Airlines forecasts better profits
Tensions in the Middle East may de-escalate as leaders call for self-restraint, and the criminal case against Donald Trump is making progress with the seating of the first 7 jurors. In company news, Toshiba and Morgan Stanley are reportedly planning significant job cuts, with Toshiba focusing on infrastructure and digital technology operations, and Morgan Stanley making reductions in the Asia Pacific region. Morgan Stanley's CEO, Jamie Dimon, believes that artificial intelligence will transform banking but will also lead to job losses. Shares of ASML Holding are down after missing analyst estimates for new orders, while United Airlines is up after forecasting better than expected profits. These developments underscore the ongoing challenges and opportunities in the global economy and legal system. Stay tuned for more updates.
Boeing's Safety Record Under Scrutiny in Senate Hearings: Whistleblower's claims of poor assembly processes and shortcomings in Boeing's 787 Dreamliner program under investigation, with Boeing executives, including CEO Dave Calhoun, expected to testify later.
Boeing's safety record is under scrutiny today as the Senate holds two separate hearings regarding a whistleblower's claims of poor assembly processes and shortcomings in the 787 Dreamliner program. A Boeing engineer and safety experts from NASA and academia will testify, while Boeing executives, including CEO Dave Calhoun, are expected to appear at a later date. Meanwhile, President Biden is proposing higher tariffs on Chinese steel and aluminum to protect the American steel sector and win over voters, and a newly unsealed court document suggests US Senator Bob Menendez may blame his wife for withholding information during his bribery trial. In other news, there have been shootings in the Bronx and the death of former US Senator and Florida Governor Bob Graham. On a positive note, the Qatar Economic Forum powered by Bloomberg will bring together 1000 global leaders from May 14th to 16th, and the Yankees and Mets have had notable starts to the baseball season.
Fed signaling more aggressive stance on interest rates: The Fed's shift to a more aggressive stance on interest rates has caused market expectations for potential rate cuts to be delayed, raising questions about the tool's effectiveness against inflation.
The Federal Reserve, led by Chairman Jerome Powell, is now signaling a more aggressive stance on interest rates to combat persistent inflation. This shift in messaging, which Powell described as "higher for even longer," has caused market expectations for potential rate cuts to be pushed back from 2024 to potentially beyond that. The credibility of this tool to effectively tackle inflation is now a major question at hand. Meanwhile, in sports, the Yankees suffered their third consecutive loss, while the Lakers secured the 7th seed in the NBA playoffs and will face the Denver Nuggets. In baseball, the Orioles are now just half a game behind the Yankees, while the Rangers found out they'll face the Washington Capitals in the Stanley Cup playoffs. The NASDAQ, Dow, and S&P 500 futures all saw gains, while the 10-year treasury yield stood at 4.63%.
The Relevance of the 2% Inflation Target: Despite the Fed's efforts, market conditions and financial conditions make the 2% inflation target less relevant, with only a slight chance of rate cuts in the near future
There is growing debate about the relevance of the 2% inflation target in the current economic climate. The Federal Reserve's actions, such as rate cuts, have been matched or even surpassed by market conditions, making the Fed's job more challenging. Commodity prices, like oil and gas, are contributing to inflation, and financial conditions, such as the stock market rally and dollar rally, have tightened, reducing the need for Fed intervention. The bond market, on the other hand, is pushing yields up, making rate cuts less likely. Market pricing suggests only a 47% chance of a rate cut in September and 48% in December. Thorsten Slock of Apollo Management's prediction of no rate cuts this year might be accurate, given the current market conditions. Additionally, these financial conditions are incentivizing capital markets activity, as Slock has correctly predicted before.
Fed's Interest Rate Cuts Dependent on Inflation Direction: The Fed's ability to cut interest rates before the election hinges on inflation trends, which have shown three consecutive hot prints in CPI, PPI, and PCE. Overseas easing and potential ECB rate cuts create a divergence, potentially impacting bond and forex markets. This trend might not last, but any changes could significantly alter the financial landscape.
The Fed's ability to cut interest rates before the election depends on the direction of inflation, which has shown three consecutive hot prints in CPI, PPI, and PCE. The overseas easing of inflation and potential ECB rate cuts create a divergence that could impact the bond and forex markets. This trend might not last long, but any changes to this narrative could significantly impact the financial landscape. For now, the consensus is that this divergence is not a major concern. Listen to Bloomberg Daybreak every morning on various platforms for the latest financial news. Join Bloomberg in San Francisco or virtually on May 7th for the Future Investor event series to explore how data is transforming investment decisions and constructing innovative enterprises. Sponsored by Invesco QQQ. Register at BloombergLive.com/futureinvestor/radio.
