Rising Rents Pose Threat to Fed's Inflation Fight By Hardika Singh

Rising rents complicate the inflation picture and could make it challenging for the Federal Reserve to ease interest rates. Meanwhile, U.S. retail sales data, due today at 8:30 a.m., will shed light on the strength of consumers. Markets are unusually calm-and that's making Wall Street nervous. And a real-estate billionaire's life-insurance policies set off an eight-year battle over the payout. Read on for this news and more.

Clarification: The U.S. corporate tax rate is 21%. Yesterday's newsletter intro omitted that the 21% rate refers to the federal corporate tax rate.

Note: The Central Banking newsletter won't be published Wednesday in observance of the Juneteenth holiday in the U.S. We will be back Thursday.

Top News Rent Hikes Loom, Posing Threat to Inflation Fight

Labor Department data showed that inflation was cooler than expected last month, but the prospect of more apartment owners raising rents could offset lower prices in other areas. Shelter inflation, mostly a measure of rents that lags behind real market conditions by many months, was still running hot in May, with an annual rate of 5.4%, according to the Bureau of Labor Statistics. "The housing situation is a complicated one," Federal Reserve Chairman Jerome Powell said last week. "The best thing we can do for the housing market is to bring inflation down so that we can bring rates down."

Pro Take: Latin America Cools Off on Rate Cuts as the Fed Holds Steady

The Federal Reserve's decision to hold off on reducing interest rates is putting pressure on central banks in Latin America to slow or halt their rate cuts. Inflation has cooled throughout the region, but concern about straying too far from the Fed as it keeps rates higher for longer could already be putting the brakes on some monetary policy easing. Read more .

U.S. Economy Investors Fear Long Stretch of Calm in Markets Can't Last

Investors look sanguine, and analysts say they have good reason. The economy has remained stronger than almost anyone predicted after the Fed began raising interest rates. Corporate profits are rising again. Inflation cooled more than expected in last week's consumer prices report, and Fed officials signaled that they expect to cut benchmark rates later this year.

Financial Regulation The Mega Commission That Got Away From a Veteran Insurance Agent

Commissions are what drives sales of life insurance. Few are a big as the one from a more than $400 million policy sold to New York real estate mogul Joseph Moinian. Richard Reda, a Massachusetts Mutual Life Insurance agent who sold the policy, has been fighting over his share of the commission for years.

One surprising recipient was Moinian's synagogue, which got $2.1 million at his insistence. That might be illegal .

Forward Guidance Tuesday (all times ET)

8:30 a.m.: Retail sales

1 p.m.: Fed Bank of St. Louis President Alberto Musalem speaks at CFA Society St. Louis luncheon

1 p.m.: Fed Governor Adriana Kugler delivers remarks on economic outlook and monetary policy

1 p.m.: Fed Bank of Dallas President Lorie Logan speaks at Headliners Club Speaker Series event

Wednesday

10 a.m.: Home builder confidence index

Research Bank of Canada Expected to Test the Limits of Divergence from Fed

The Bank of Canada is likely to test the limits of how much it can cut while the Fed is on hold, says the fixed-income team at CIBC Capital Markets. Gov. Tiff Macklem has said there are limits to diverging but BOC is "nowhere" close to that threshold. "This is an important step in communicating that the BOC's easing cycle will have depth," CIBC says. CIBC believes traders will pull forward expected rate cuts that they anticipate in 2026 into next year. CIBC expects BOC to cut aggressively given a rising share of mortgage renewals at much higher rates that are in the pipeline. BOC wants to "get ahead of forces that could unduly weaken the economy," CIBC says. - Paul Vieira

Basis Points The Reserve Bank of Australia continued to warn about ongoing inflation risks at its policy meeting on Tuesday, leaving open the potential for a further interest-rate increase if price pressures remain stubbornly high over coming months. As expected, the board of the RBA chose to keep the official cash rate steady at 4.35%, where it has sat since November. - James Glynn Bank of Japan Gov. Kazuo Ueda reiterated Tuesday that the bank would raise interest rates if it becomes more confident about achieving its inflation target. However, "we are still not fully confident that it will definitely come true," Ueda told a parliamentary committee. The bank's decision on bond purchases and rate increases are two separate matters, Ueda said. He added that the bank could, in theory, raise interest rates next month, depending on economic data. - Megumi Fujikawa Central banks around the world expect global reserves of gold to increase over the next year , while pessimism toward the U.S. dollar has grown, according to a new report. More than four in five respondents expect reserve managers to increase global holdings of bullion, the highest proportion on record since the annual survey began, the World Gold Council's report said. Nearly 30% of the banks plan to add to their own reserves within the next year, including 13% of banks in advanced economies. - Joseph Hoppe The Biden administration is hoisting barriers to Chinese clean-energy imports to protect domestic industries as the presidential election nears. But the trade restrictions also threaten another of Biden's priorities : building out renewable-energy generation. - Phred Dvorak An Oregon freight-forwarder was hit with an export ban in what officials said was a warning to companies to heed restrictions on the shipment of sensitive technologies to countries the U.S. considers threats to national security. - Dylan Tokar A top U.S. banking regulator is preparing to hand Citigroup a failing grade on its living-will plan , the latest rebuke for the megabank that has struggled to stay in the government's good graces. - Justin Baer and Andrew Ackerman America's biggest bank has a thing for midsize companies. Known for financing and advising megamergers, JPMorgan Chase is spending more of its resources on doing deals for companies valued at $2 billion or less. - Miriam Gottfried and Alexander Saeedy U.K. governments have long imposed limits on their own behavior that are designed to stop a steady rise in their debt. Despite the failure of those fiscal rules to achieve that goal, the U.K.'s next government seems set to do the same . - Paul Hannon Hong Kong will allow trading on its exchanges during severe weather conditions, as part of its efforts to maintain the financial center hub's appeal to investors. - Amanda Lee and Kimberley Kao Clarification

In Monday's newsletter, the rate referred to in the introduction was the corporate tax rate. The section should read as followed:

Meanwhile, Democrats and Republicans are vying to turn the 21% corporate tax rate in opposite directions-with each percentage point worth more than $130 billion over a decade in tax revenue.

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.


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06-18-24 0716ET