ECB Rate Decision Today; Powell and Macklem Say It Is Still Too Early to Cut Interest Rates

ECB Rate Decision Today; Powell and Macklem Say It Is Still Too Early to Cut Interest Rates By James Christie

Good day. Today, the European Central Bank issues an interest rate decision and Federal Reserve Chair Jerome Powell testifies before the Senate Banking Committee, following up on testimony Wednesday before the House Financial Services Committee. He told House lawmakers the Fed is in no rush to lower interest rates because central bank officials want more evidence inflation is slowing toward their 2% target. "We're not looking for better inflation readings than we've had. We're just looking for more of them," he said. Elsewhere on Wednesday, the Bank of Canada held its main interest rate steady, as widely expected. Bank of Canada Gov. Tiff Macklem said "It's still too early to consider lowering the policy interest rate," adding that senior officials believe headline inflation will remain close to the 3% level until midyear.

Now on to today's news and analysis.

Top News Jerome Powell Says Fed on Track to Cut Rates This Year

Brisk inflation and hiring data in January haven't altered the Federal Reserve's expectation that it will be appropriate to cut interest rates later this year, but Chair Jerome Powell said officials want more evidence that inflation is slowing.

Rate cuts won't be warranted until officials have "gained greater confidence that inflation is moving sustainably" toward the central bank's 2% goal, Powell told the House Financial Services Committee on Wednesday during the start of two days of testimony on Capitol Hill.

Bank of Canada Keeps Policy Rate at 5%

The Bank of Canada left its main interest rate unchanged on Wednesday at 5%, saying it remained premature to consider rate cuts despite encouraging signs on inflation and wage growth. At a press conference, Bank of Canada Gov. Tiff Macklem said the target for the overnight rate was at an appropriate level to push inflation down from its current 2.9% to 2%. The central bank sets interest rates in a bid to achieve and maintain 2% inflation.

U.S. Economy Beige Book Says Economy Picked Up Speed

The U.S. economy accelerated slightly in early 2024, a Federal Reserve survey found, noting the outlook for the rest of the year was "generally positive," MarketWatch reported . The latest findings by the so-called Beige Book report dovetail with comments by Fed Chair Jerome Powell on Wednesday. He told Congress a few hours before the report that "what we are seeing so far this year is continued solid growth." According to the Beige Book report, eight of the Fed's 12 regional banks reported a pickup in growth. One district found a "slight softening" in economic activity. (MarketWatch)

Flexible Hours Come to the Factory: A Look Inside Land O'Lakes' Plant

Land O'Lakes is making changes to shifts because, like many manufacturing firms, it is struggling to fill positions , even as the labor market cools-making it ever-harder to keep up with demand.

Top Companies for Employee Engagement and Development Key Developments Around the World OECD Government Borrowing Expected to Break Record This Year

Total borrowing by governments in rich countries is set to hit a record high of $15.8 trillion this year , with the cost of making interest payments rising over coming years as bonds issued before the inflation surge mature.

Chinese Officials Say Exports Are Strong but Hint at More Stimulus

Senior Chinese officials disclosed a double-digit percentage jump in exports in the first two months of the year while signaling further monetary easing was likely required to inject fresh life into China's downtrodden economy.

China's Foreign Minister Questions U.S. Confidence as World Power China's Exports Rise, Cheering Beijing-and Foreshadowing a Backlash China Intensifies Push to 'Delete America' From Its Technology U.K. Treasury Chief Announces Income-Tax Cuts Ahead of Election

The U.K. government Wednesday announced cuts in income taxes that it hopes will help revive a stagnant economy, but its budget watchdog forecast an anemic return to growth ahead of an election that is due by early next year.

Financial Regulation Roundup SEC Approves Weakened Climate Disclosure Rule

The Securities and Exchange Commission approved new requirements that public companies disclose their greenhouse-gas emissions , but dropped a key provision that was fiercely opposed by business groups.

Here's What it Means for Companies. New York Community Bancorp to Get More Than $1 Billion Investment

New York Community Bancorp is raising more than $1 billion from a group of investors including former Treasury Secretary Steven Mnuchin, in a bid to shore up confidence in the troubled regional lender.

Bitcoin Bulls Cite a Simple Reason for Its Rally: Not Enough Coins

Why did bitcoin soar to a record this week? Fans of the world's largest cryptocurrency say it is due to old-fashioned laws of supply and demand. Like the price of any commodity, bitcoin's price is sensitive to fluctuations in demand .

Forward Guidance Thursday (all times ET)

8:15 a.m.: ECB interest rate decision

8:30 a.m.: U.S. weekly jobless claims; U.S. productivity and costs, fourth quarter 2023; U.S. trade report for January; Canada trade report for January

8:45 a.m.: ECB interest rate decision press conference

10 a.m.: Fed's Powell presents Semiannual Monetary Policy Report to Congress to Senate Banking Committee; ECB Lagarde's podcast on latest monetary policy decisions

11:30 a.m.: Cleveland Fed's Mester speaks at European Economics and Financial Centre's Distinguished Speaker Series

3 p.m.: U.S. consumer credit

4:30 p.m.: Fed balance sheet

Friday

7 a.m.: New York Fed's Williams in moderated discussion at London School of Economics

8:30 a.m.: U.S. employment report for February; Canada labor force report for February

Research U.K. Budget Tax Cuts Won't Move Dial Much for BOE

Tax cuts announced by U.K. Treasury Chief Jeremy Hunt won't change the thinking of Bank of England policymakers much, only marginally adding to caution for upcoming rate cuts, Pantheon Macroeconomics chief U.K. economist Rob Wood says. The measures will add around 0.1% to gross domestic product growth over the next year, but will have little effect on long-run inflation forecasts, he writes in a note. The tax changes also will boost supply as well as demand, cutting the inflation impact of the stimulus, such as via frozen fuel and alcohol duty, Wood writes. The measures announced by Hunt "do not change the economic outlook or the [BOE] monetary policy committee's thinking very much," he adds.

-Ed Frankl

Commentary Why You Shouldn't Trust Chinese Growth Data

Western analysts and even some Chinese officials have long taken Chinese gross domestic product with a grain of salt, but as discrepancies, inconsistencies and gaps in the data have grown , so has skepticism of its integrity, Greg Ip writes.

Basis Points Hiring by U.S. private-sector employers accelerated in February, with employment in the nonfarm private sector up by 140,000 jobs, according to data from the ADP National Employment Report. Economists polled by The Wall Street Journal expected a gain of 150,000. (Dow Jones Newswires) U.S. wholesale inventories slipped in January, suggesting a slight backsliding in demand at the start of the year. Inventories at merchant wholesalers were 0.3% lower on month, adjusted figures set out by the Commerce Department showed. In December, inventories rose by 0.4%. (DJN) Germany's trade surplus widened in January, with exports and imports both rising, indicating demand for German goods could be recovering. The country booked an adjusted trade surplus of 27.5 billion euros ($29.86 billion), from EUR23.3 billion in December, according to federal statistics agency Destatis. (DJN) Labor productivity for Canadian businesses climbed in the final quarter of last year for the first time since the early months of 2022. Productivity advanced 0.4% in the fourth quarter following a fall of 0.5% the prior quarter, Statistics Canada said. (DJN) Mexico produced 318,735 cars and light trucks in February, 7.8% more than in the year-earlier month, helped by a 23% jump in exports to 282,608 units, the National Statistics Institute said. (DJN) Uganda's central bank raised its benchmark lending rate from 9.5% to 10% on Wednesday as Africa's top coffee-exporting nation seeks to calm rising inflationary pressure. (DJN) Malaysia's central bank kept its benchmark interest rate unchanged as expected, saying its monetary policy stance remains supportive of the economy as it keeps an eye on the stability of the ringgit. Feedback Loop

This newsletter is compiled by James Christie in San Francisco.

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James Christie , Perry Cleveland-Peck [mailto:[e-mail]], Nihad Ahmed , Michael Maloney

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

(END) Dow Jones Newswires

03-07-24 0723ET