U.S. Labor Market Isn’t ‘Flashing Red’; China Moves to Jolt Ailing Economy; RBA Holds Rates

Labor Market Isn’t ‘Flashing Red,’ Two Fed Officials Say; China Moves to Jolt Economy; RBA Holds Rates By Hardika Singh

Two top Federal Reserve officials on Monday said that they don’t think the labor market is weakening dangerously-but the risk of further softening called for last week’s half-point cut in the policy rate, MarketWatch reports.

“For sure, the labor market is not yet flashing red for me. That is not what the data show, nor what business leaders tell us,” Atlanta Fed President Raphael Bostic said in a speech to the European Economics and Financial Center.

In a separate essay published on his bank’s website, Minneapolis Fed President Neel Kashkari said the economy is sending “mixed signals” about its underlying strength. “While a softening labor market suggests a weakening of economic activity, other economic measures suggest ongoing strength,” he said.

But Kashkari said he heard “cautious optimism” about the underlying health of the economy from business leaders. Of course, a recession can never be ruled out, but my contacts aren’t seeing one around the corner, ” he said.

Bostic made similar comments, saying a recession wasn’t in his outlook. Looking ahead to the path of interest-rate policy, Bostic said that he now saw the Fed “normalizing” policy sooner than he thought a few months ago. That means getting rates back to neutral-a place where it is no longer necessary to slow demand to achieve the 2% inflation target.

In an interview on CNBC, Kashkari said the half-point cut in the policy rate was a “larger first step to get us going.” “As we go forward, I expect, on balance, we will probably take smaller steps, unless the data changes materially,” Kashkari said, saying he had penciled in quarter-point cuts at the Fed’s last two meetings of the year in November and December.

The Fed’s jumbo rate cut garnered support from all but one of its 12 voting members. Michelle Bowman became the first central bank governor to dissent against a policy decision favored by the Fed chair since 2005, favoring a smaller rate cut.

Top News China Unveils New Measures to Aid Ailing Economy

China’s central bank announced a blitz of measures to support China’s weakening economy and energize its moribund stock market, an unusually broad package that signals growing unease in Beijing after a run of downbeat numbers on jobs, spending and inflation.

Economists said that while the blast of support is welcome, it won’t be enough to pull China’s economy out of a low-growth rut marked by falling prices, a festering real-estate crisis and spiraling tensions over trade.

Instead, Beijing needs to get a firmer grip on the real-estate downturn and take robust steps to boost consumption if it is to spark a durable revival in the economy, many economists said.

The People’s Bank of China said Tuesday that it would cut its benchmark interest rate and lower the amount of cash that banks need to hold in reserve-a bid to free up more resources for lending. It also said it would cut the interest rate payable on existing mortgages and lower down payments for second homes. Read more .

Global Markets Rise on China Stimulus Package Top Economist in China Vanishes After Private WeChat Comments Australia’s Central Bank Keeps Rates on Hold, Defying Global Trend

Australia’s central bank kept interest rates steady on Tuesday, deepening a split with global counterparts including the Federal Reserve that are loosening policy as they grow increasingly confident that inflation is under control.

Glynn’s Take: Moves to Reform RBA Board Descend Into Farce BOJ Ueda’s Cautious Comments Damp Speculation of October Hike

Bank of Japan Gov. Kazuo Ueda reiterated his cautious tone on Tuesday and said the central bank can wait to act until economic uncertainties become clearer, dampening speculation over another rate increase in October.

BOE’s Bailey Sees Key Interest Rate On Gradual Downward Path

The Bank of England is likely to continue to cut its key interest rate, but is not in a rush to do so, Governor Andrew Bailey said in an interview published Tuesday. The BOE left its key rate unchanged Thursday.

Hannon’s Take: For the ECB, A Soft Landing Is Now in Peril By Paul Hannon

The eurozone economy is faltering again, putting a soft landing from the Putin shock in peril.

When the European Central Bank first lowered its key interest rate in June, it seemed likely that inflation would return to its 2% target without a large drop in output or big increase in unemployment.

That is still possible, and would be a signal achievement given the force of the blow that Russian President Vladimir Putin sought to deliver when he cut off exports of natural gas to the European countries that opposed his invasion of Ukraine. Read more .

U.S. Economy U.S. Economy Stabilized in August, Chicago Fed Says

Economic growth rebounded a little last month in the U.S. , according to a monthly index set out Monday, though the broader trend remains weak amid high borrowing costs and political uncertainty.

U.S. Business Activity Remained Solid in September

U.S. business activity stayed strong in September but ticked slightly lower, S&P Global surveys showed. Services remained stronger than manufacturing , which has been weakening. The report appeared to reinforce the soft-landing narrative that U.S. equity investors have latched on to.

Trump Issues Fresh Trade Threats, Targeting Deere

Donald Trump threatened to slap hefty tariffs on farm-equipment maker Deere & Co. in a reprise of his tactics as president. At a campaign event in Pennsylvania Monday the presidential nominee said, if he were elected, Deere would face tariffs of 200% if it sold made-in-Mexico equipment previously made in the U.S.

Financial Regulation The Hefty Hidden Costs of Options Trading on Robinhood

Robinhood Markets advertises rock-bottom fees for options trading-but a new study finds that its customers face hidden costs far higher than those of other brokers.

A Star FTX Witness Turned Romance Novelist Learns Her Fate

Caroline Ellison, the star witness in FTX founder Sam Bankman-Fried’s fraud trial, helped put her former boyfriend and boss in prison for 25 years . Since then, she has written an Edwardian romance novella, unsuccessfully hunted for work and dated a guy a former colleague called a “vast improvement over her ex.”

Italy’s UniCredit Trades Blows With Berlin Over Commerzbank

The battle for Germany’s Commerzbank heated up Monday , with German leader Olaf Scholz and his government rallying to the bank’s defense after Italian suitor UniCredit moved to speed along a possible takeover.

Forward Guidance Tuesday (all times ET)

9 a.m.: U.S. monthly house price index

10 a.m.: S&P CoreLogic Case-Shiller Indices

10 a.m.: Richmond Fed Business Activity Survey

10 a.m.: Consumer confidence index

Wednesday

10 a.m.: New home sales

4 p.m.: Fed governor Adriana Kugler speaks

Research U.S. PMI Suggests Sluggish Payrolls, Cooling Inflation

U.S. PMI data suggest “another sluggish increase in payrolls in September,” Pantheon’s Samuel Tombs says in a note, as S&P Global says U.S. PMI Composite Output Index reached a two-month low, falling to 54.4 from August’s 54.6. Tombs calls attention to a decline in the future activity index to 59.9, the lowest since October 2022. “This loss of confidence resulted in slightly more businesses reducing employment than increasing it for a second straight month, consistent with another sluggish increase in overall payrolls,” Tombs says. The PMI data also point to cooling inflation, he says. – Paulo Trevisani

Basis Points Congressional leaders on Sunday backed a bipartisan spending deal that would avoid a government shutdown before Nov. 5 vote while also giving the Secret Service $231 million to help protect election candidates. For many Americans, the drive to and from work requires enduring slow-moving, soul-draining traffic. But in certain cities, driving during rush hour is a breeze . Haitian immigrants have become a political flashpoint in the presidential election, but JBS, the world’s largest meatpacking company, has welcomed them in Greeley. German companies are feeling ever less confident , adding to concerns that a moribund manufacturing sector could pull Europe’s most important economy back into recession. For years, Argentina imposed one of the world’s strictest rent-control laws. Now, the country’s new president, Javier Milei, has scrapped the rental law , along with most government price controls. 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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09-24-24 0715ET