Fed's Response To 'No Landing' Worries Markets; Barkin Supports Steady Rate Hikes

There are growing concerns among investors that a "no landing" scenario could emerge in the U.S. economy. In anticipation of a sharp downturn, they fear that if the economy remains too hot, the Federal Reserve will have to increase interest rates higher and hold them higher for longer than anticipated. As a result, the markets will likely suffer more pain. To support the central bank's plans, Richmond Fed President Tom Barkin said he thought inflation would return to 2%, which is the Fed's target. As recent wages and price data have exceeded expectations, the Reserve Bank of Australia discussed raising rates by 50 basis points in its latest policy meeting minutes published Tuesday. In the case that it persists, significant costs would be incurred.

‍

The news and analysis for today are below.

‍

A more aggressive Fed rate path could be prompted by an economic downturn, investors worry

‍

In recent months, Wall Street has been hopeful that the Federal Reserve would be able to prevent a major recession. Stocks and bonds saw a big rise to begin the year thanks to signs of the economy's resilience, as well as signs that inflation has moderated.

‍

Investors, however, are concerned that a "no landing" may occur as a result of recent hot data.

‍

Interest-rate increases should be measured by Fed's Barkin

‍

Tom Barkin, president of the Richmond Fed, said Friday after a speech that he prefers the 25 basis-point path because it allows us to adjust to changing economic conditions.

‍

At its February meeting, the Reserve Bank debated raising its cash rate by 50 basis points

‍

According to the Reserve Bank of Australia's meeting minutes from Feb. 7, the argument for a 50-basis-point hike stems from the concern about incoming prices and wages exceeding expectations.

‍

There are challenges in implementing backup plans in the U.S. economy due to the debt ceiling standoff

‍

All possible alternatives to addressing the borrowing limit face hurdles, underlining doubts about any fallback plan, including simply ignoring it and minting a trillion-dollar coin.

‍

The consumer credit system is being exposed by an increase in late payments

‍

A recent analysis by Moody's Analytics found a 9.3% increase in auto loans extended to people with low credit scores that were 30 or more days past due at the end of last year, the highest share since 2010.

‍

A nine-year low is reached in venture capital fundraising

‍

Preqin Ltd., a firm that tracks venture-fund data, reported that venture firms raised $20.6 billion in new funds in the fourth quarter, down 65% from the year-ago period.

‍

Defaults by office landlords are on the rise

‍

In a new development, it appears that more developers believe that remote and hybrid working habits have permanently impaired the office market, as evidenced by the rise in defaults by big office landlords.

‍

Despite profit squeeze, stocks rally

‍

An unexpected feature of this year's stock rally is that fewer dollars are making it to the bottom line of big U.S. companies. A peak net profit margin of 13% was achieved by the S&P 500 in 2021, but it has fallen to 11.3% now.

‍

Several major developments have taken place around the world over the past year after the war in Ukraine has ended

‍

As Russia's war on Ukraine is poised to enter its second year, business activity has been booming, a boon for the global economy as well as a sign of the region's resilience in the face of Russia's war on Ukraine.

‍

Inflation Hasn't Increased Workers' Pay Globally

‍

Advanced economies are experiencing a plateauing of wage growth or a decline from previous highs. It is good news for central banks: There is no evidence that wages will push up prices, which will lead to further wage increases.

‍

Rates for benchmark loans in China remain unchanged

‍

It was announced on Monday that the People's Bank of China left the benchmark lending rate at 3.65% over one year and 4.3% over five years.

‍

A weaker Russia prompts China's state-owned property developers to reconsider doing business with private companies.

‍

Satellite images reveal a rebound in North Korean-Russian trade

‍

As the Ukraine war deepens economic ties between Russia and North Korea, trade at the main rail crossing between the two has rebounded recently to prepandemic levels.

‍

U.S., Allies to Boost Sanctions Efforts Against Russia

‍

Adeyemo will address the U.S. Senate later this week and is expected to call for broader export controls or the sanctioning of Russian companies helping the military effort.

‍

A $577 million nickel upset blamed on a financial regulation roundup

‍

There were already some people deciding to steer clear of Prateek Gupta - the businessman Trafigura claims is responsible for phony nickel shipments - and the company he acquired before the company said the phony nickel shipment problem could cost the company $577 million.

‍

Chinese regulators release rules on overseas listing

‍

A long-awaited set of regulations on international listings has been released by China's Securities Regulatory Commission, which is removing one of the biggest barriers to internet companies selling shares overseas.

‍

A proposed crypto rule in Hong Kong seeks to protect investors and deposits Some FTX customers have received their money back-at least in Japan

‍

According to Tokyo regulators, the short turnaround of FTX's Japanese subsidiary, which now allows customers to withdraw their assets, is the result of the stringent crypto laws in the country.

‍

A rate rise is forecast by Research Bank of America for June

‍

According to Bank of America's benchmark interest rate forecast, the Federal Reserve will increase interest rates in June by 25 basis points. Initially, the bank anticipated 25 basis point rate increases in March and May, followed by a pause. According to the agency, the risks to that outlook are too one-sided because of resurgent inflation and solid employment growth. Boosting rates in March and May seems very likely, and if inflation, job growth, and consumer demand do not slow, the Fed may have to raise rates further. The bank will increase the terminal rate in June by 25 basis points, which will push it up to 5.25%-5.5% after that. According to Bank of America, the first rate cut is expected to occur in March 2024.

‍

U.S. could enter recession due to hawkish pressures

‍

In a note, chief U.S. economist Steven Blitz of TS Lombard writes that the U.S. economy is "a slow dance toward recession." The move toward recession, he writes, "is looking normal-mixed signals on spending but with a softer bias while still strong inflation and employment keep the Fed on course, raising rates." He goes on to say that with the prospect of a significant 50-basis point rate increase in March, "financial conditions become less easy and weaker equities will, in turn, weaken the economy."

‍

An angry retirement age in China is a symptom of deeper problems

‍

In this article, Jacky Wong writes about Chinese retirees protesting over healthcare benefits, which suggest a complex web of interrelated problems entangling the country: an aging population, strained local government finances, a weak social safety net, and heavy debt.

‍

Rather than a recession, it's a richcession. The Playbook for Investing.

‍

As Justin Lahart, Spencer Jakab, Jinjoo Lee, Laura Forman and Telis Demos write, the U.S. is already in a richcession, or a period when the wealthy feel the bite of economic uncertainty more strongly.

‍

Crackdowns, chinchillas, and crypto

‍

After the Securities and Exchange Commission's action on stablecoins, Telis Demos writes that a possible future for cryptocurrencies can be found in the history of chinchillas.

‍

Following a 0.8% decrease in December, The Conference Board's Leading Economic Index declined 0.3% in January to 110.3, which matched economists' expectations. During the past ten months, the index that measures U.S. business cycles has decreased. For a seventh consecutive month, U.S. import prices declined in January due to lower fuel costs. Compared with December, import prices dropped 0.2% in January, following a 0.1% drop for the previous month. From an initial estimate of 0.4% growth, December's reading has been revised downward. As a result of the recovery of the previous two months' declines, producer prices rose in Canada in January. Compared to December, the industrial product price index increased 0.4% at Statistics Canada. According to the producer price index, January's price increase was 5.4% over the past 12 months. According to DJN, the Bank of Japan is offering to buy Japanese government bonds maturing in more than 25 years outright on February 21. In a similar maturity range, the bank has previously completed an operation worth Y200.0 billion. During its rate-setting meeting on Thursday, the Bank of Korea is expected to stay the course. It's expected that after raising the policy rate for the seventh time this year, the central bank will keep it unchanged at 3.50%, according to all 23 analysts surveyed by Trade Algo.