Time to Downshift
The Federal Reserve is poised to moderate its aggressive tightening on Wednesday, while signaling that interest rates will ultimately go higher than previously forecast. Consumer-price data released Tuesday suggest the worst of US inflation may have passed, making it easier for the officials to downshift to a smaller rate increase. The tricky part for Chair Jerome Powell will be convincing investors that this isn’t a dovish pivot, and that officials won’t prematurely end their assault against inflation. The decision will be announced at 2 p.m. in Washington. Powell will hold a press conference 30 minutes later.
Energy Pivot
European Union policymakers agreed to raise €20 billion ($21 billion) from the region’s carbon market to help finance the bloc’s strategy to wean itself off Russian natural gas. Under the agreement clinched on Wednesday between member states and the European Parliament, 40% of the funding will come from front-loaded government auctions of emissions allowances and 60% will be raised through sales of permits earmarked for an innovative technologies fund. Meanwhile, a decision on natural gas price cap has been postponed to next week.
Not Counting Anymore
China will stop releasing comprehensive data on new Covid cases after the dropping of mandatory testing meant the numbers no longer reflected reality. The country will only report symptomatic cases from now on because it’s hard to gauge the number of those infected without symptoms in the absence of testing, the National Health Commission said in a statement on Wednesday. The lack of testing now means there is no accurate way to gauge the rate of infection. The Covid spike also led to China delaying a closely watched economic policy meeting that was due to start this week.
Extradition Fight
Sam Bankman-Fried told a Bahamian judge at an arraignment Tuesday that he wouldn’t waive his right to an extradition hearing. A defense lawyer said the FTX founder planned to fight being sent to the US. Separately, Manhattan US Attorney Damian Williams said at a press conference that the case shows “you can commit fraud in shorts and t-shirts in the sun.” Though his office has said it will seek Bankman-Fried’s extradition, Williams declined to comment on those efforts. If Bankman-Fried does fight extradition, there may be potential for him to drag things out.
Coming Up…
European stocks are on track for a muted start as traders weigh softer US inflation data ahead of the Fed’s policy decision. The EU and Asean celebrate the 45th anniversary of their partnership at a summit in Brussels. World Cup semifinals continue in Qatar. Data include inflation from Sweden, UK, Spain and Portugal. Zara parent Inditex is expected to show strong sales when it unveils earnings. LPP and Trip.com also issue results.
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(Source: Bloomberg, Dec., 14-2022)