June 12 - Welcome to double-whammy Wednesday, where we get to digest a new Fed outlook and CPI data all in the space of a few hours. The headline, of course, is THEY DID IT! The Federal Reserve marked down its outlook for rate cuts this year. Officials now project only a single quarter-point cut, which could come as late as December.
Markets are holding their early gains on the back of unexpectedly flat CPI. Investors are clinging to signs that the Fed's policy rate will fall fast next year and continue through 2026.
The central bank clearly acknowledged "modest further progress" towards its 2% inflation target - an upgrade from its May 1 statement. The latest CPI numbers released earlier in the U.S. morning added to confidence that the Fed is reining in inflation. Cheaper gasoline helped prices remain flat in May. But they are still too high for the cuts to start to flow. After scouring the Fed's statement and the new Summary of Economic Projections, our Fed team Howard Schneider and Ann Saphir write that the central bank is "wrestling over how to respond to data that many read as pointing to slower inflation ... but also to steady growth and job creation."
The chance of a rate cut before the Nov. 5 election has faded fast for incumbent Joe Biden.
On the other side of the pond, the Bank of England is now expected to cut rates in August, according to the latest Reuters poll of economists. That's well after the UK election.
Meanwhile in China, the latest CPI also held steady in May, suggesting Beijing will need to do even more to prop up domestic demand.
Overall, the outlook for global growth in 2024 remains well below pre-pandemic levels, even as the World Bank lifted its forecast based on stronger-than-expected U.S. GDP.
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The headlines
* In their own words: Analyst reaction to Fed statement
* US expands Russia sanctions, targets chips sent via China
* Europe's automakers fret as tariff fears become reality
* In charts: What EU election results mean for markets
The podcast
This week's podcast takes a hard look at the first six months of Javier Milei's rule in Argentina to examine how his version of "neoliberalism" is playing out in that troubled economy. Join me and bureau chief Adam Jourdan as we get into the history of free-market leaders and some costly Argentinian steak.
“If he can revitalize the economy, then people might forgive him... the six months of hardship, or more. But if they don't, this country could be a tinderbox.” --
Adam Jourdan
on Episode 5 of my podcast
The chart A 5-year snapshot of the fight against inflation by Reuters staff
The real world
* Doha: When the Saudi Crown Prince visited Qatar in 2021 it not only helped bury a bitter feud, it ignited a rise in business ties that has gathered pace ever since.
* Australia: Wine exports are on track for bumper sales after China lifted tariffs that had collapsed trade between the two nations.
* Washington D.C.: Chris Kirkham takes us inside the industry concessions that allowed Biden's emissions rules to go soft on hybrid trucks and SUVs.
* Beijing: Breakingviews columnist Katrina Hamlin argues Chinese EV makers will drive around EU tariffs.
The week ahead
* June 13: Argentina's CPI due
* June 14: Bank of Japan press conference after monetary policy statement
* June 17: ECB chief economist Philip Lane at Reuters Newsmaker
* June 18: U.S. retail sales
(Editing by Rod Nickel)
