Fed Chair Powell Says Defeating Inflation More Important Than Staving Off Recession… In a panel discussion with European bankers, Powell identified price stability as the biggest threat to the U.S. economy.
What it means— Hello, recession. Powell said that it would be difficult to engineer an economic soft landing, but it would be a risk worth taking. This week, Cleveland Federal Reserve Bank President Loretta Mester said that she would favor a 75-basis point hike in July if economic conditions remain the same as they are today. The combination of Powell’s views and Mester’s comments sent the equity markets lower, as investors priced in an economic downturn. The same comments drove long interest rates as well as mortgage rates lower.
Fed’s Preferred Inflationary Measure, Personal Consumption Expenditures Index (PCE), Steady in May at 6.3%… Core PCE dipped from 4.9% to 4.7%.
What it means— Steady is good, but declining is better. The PCE adjusts to changing consumer spending habits more quickly than the Consumer Price Index (CPI), which likely explains why PCE eased in May whereas CPI marched higher. Fed officials know this, of course, which is why they want to see PCE fall dramatically before they change course. Nothing in the numbers suggested that the Fed would rescind implementing a 75-basis point hike in July.
Initial Jobless Claims Essentially Flat, at 231,000… The previous week’s total was revised higher, from 229,000 to 233,000. The current level is just above the 2019 weekly average of 219,000.
What it means— As noted last week, it’s time to pay attention to jobless claims, which are the leading indicator of broad unemployment. As long as Americans remain employed, the economy should be able to weather the technical recession without tremendous damage. If jobless claims rise above 250,000, then we’re likely to feel more economic pain.
OPEC+ Pumps 2.79 Million Barrels per Day Less Than Quotas in May… The oil cartel reported that several countries, including Russia, Nigeria, and Angola, pumped far less than their allotments.
What it means— It’s hard to see how raising production quotas will help meet oil demand when producing nations can’t pump that much oil. Russia is running about one million barrels below its quota, which is expected, but the other nations are plagued by production inefficiencies and theft. With China easing COVID restrictions, the oil and refining crunch will get worse before it gets better. Unfortunately, the cure could be around the corner. If the U.S. and other large nations enter recessions, oil demand should ease. The cure might be worse than the disease.
Hamsters Without Sex Receptor Become Very, Very Angry… When it comes to social organization and stress responses, hamsters react in ways very similar to humans, which is why researchers study hamsters. Previously, researchers found that if they increased a certain hormone, male hamsters became more aggressive and marked their territory more often, whereas female hamsters became less aggressive. When researchers decreased the hormone, the opposite happened. Through CRISPR gene editing, researchers recently removed the hormone altogether from some hamsters, with the expectation that these rodents would be less aggressive than normal. They were wrong. Instead, hamsters of both sexes became much more aggressive, marking territory, biting, and pinning other hamsters. It turns out that taking away a sex hormone makes hamsters crazy. In some areas of life, it looks like it’s best not to mess with Mother Nature.
Data supplied by HS Dent Research
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