Hello. Today we look at questions revolving around the Federal Reserve, the big events in the world economy this week and whether the US jobs gap is tied to working moms.
a communication challenge
Federal Reserve Chairman Jerome Powell has something to explain.
Ten months after the central bank changed its strategy to gain broad and inclusive gains in the labor market, investors are asking whether it will do so after last week’s decision to raise inflation forecasts and accelerate the pace of projected interest rate hikes. How dedicated is the work?
Powell gets a chance to cordon off when he appears before lawmakers on Tuesday. Colleagues including New York Fed Chairman John Williams and Boston’s Eric Rosengren are among several officials speaking this week who may provide more clarity.
- What’s up with the dot plot? Fed policymakers median two possible rate hikes in 2023 after they did not submit them in March.
Deutsche Bank senior economist Brett Ryan observes that “Powell acknowledged that we want to be a little more balanced in our inflation communication than blankly dismiss everything as fleeting.”
- Is inflation still fleeting? Powell and most Fed officials have bet that it will be resolved soon when the economy reopens, arguing supply bottlenecks. But showing they are aware of inflation risks provides them with some insurance and can help moderate inflation expectations.
- Is full employment really achievable? The Fed’s defensiveness on inflation also raised questions about its optimistic forecasts for hiring, which wants to be as broad as possible.
“The low-hanging fruit has already been picked up and we are now facing the hassle of rehiring millions of people,” said Constance Hunter, chief economist at KPMG.
A bright spot for Powell is that his communications over the past week have helped push The 30-year Treasury yield is below 2% for the first time since February. As Craig and Caterina have noted, in times of rising prices and public inflationary expectations, a central banker may want to see a similar outcome.
The Bank of England’s chief economist is set to sound alarm bells on inflation before leaving the building. Andy Haldane, attending his final Monetary Policy Committee decision on Thursday, is likely to emphasize the risk of price growth spiraling out of control. He has been the only advocate on the panel to reduce the incentives.
Elsewhere, central bankers in Hungary and the Czech Republic are set to raise interest rates. The Flash Purchasing Managers’ Indexes provide a snapshot of the state of the economy around the world.
For full details of the coming week, Click here.
Must read today
- Hidden Problems | China’s unemployment rate has fallen since the peak of last year’s epidemic, although a lack of jobs for graduates and a shortage of skilled construction workers point to imbalances.
- never going back? | A survey showed that nearly half of London companies whose employees can work from home are expected to do so five days a week.
- see red Australia will appeal to the World Trade Organization about China’s imposition of anti-dumping duties on the country’s wine, the latest move in a dispute that has strained relations.
- Kuwaiti Cash | A $600 billion sovereign wealth fund has been caught in the crosshairs of a political power struggle since its board’s term ended two months ago.
- Belvedere | South Korea’s exports are set to climb into double digits again in June as the global economy shakes up the impact of the pandemic, though the slow pace from recent months suggests the days of outlandish gains are over.
- Emerging Markets | Currencies affected by the hawkish Fed could resume their record run against the dollar at bats that developing central banks could push their US counterpart to tighten policy.
Need to know research
Nearly all of the reduction in US jobs related to the coronavirus is due to broader issues rather than specific challenges for working parents, according to one The new paper, co-authored by Jason Furman of Harvard University, a former adviser to President Barack Obama. Research nonetheless confirms that mothers with young children experienced a larger decline in employment than other adults.
The European Central Bank is still working on it Strategy overhaul.
Look to the future. Wednesday, June 30 for Bloomberg New Economy Catalyst, a global 6-hour virtual event that celebrates innovators, visionaries, scientists, policy makers and entrepreneurs who accelerate solutions to today’s biggest problems. The conversation will explore what matters, what’s next, and what-ifs in climate, agriculture, biotech, digital money, e-commerce, and space through the imaginations and stories of these ascendant leaders. register here.
Enjoy reading New Economy daily?
Click here for more economic stories
Tune in to the Stephanomics Podcast
Subscribe here for our daily Supply Lines newsletter, here for our weekly Beyond Brexit newsletter
- follow us @Economics
4th Annual Bloomberg New Economy Forum On November 16-19, Singapore will convene the world’s most influential leaders to mobilize efforts to build a sustainable and inclusive global economy. Learn more here.