💡Quote of the week
“Inflation has moderated somewhat since the middle of last year, nonetheless inflation pressures continue to run high and the process of getting inflation back down to 2% has a long way to go.” Fed Chair Jerome Powell
🇺🇸 🏦 The end is near. The Fed approved its 10th interest rate hike in just a little over a year and dropped a hint that the current tightening cycle might be coming to an end. (CNBC)
The Federal Open Market Committee raised the benchmark borrowing rate by 0.25 percentage points, as markets expected.
🇪🇺 🏦 Too high for too long. As it continues to fight a surge in consumer prices, the European Central Bank raised its benchmark rate by 25 basis points on Thursday. (CNBC)
“The inflation outlook continues to be too high for too long,” the ECB said in a statement. As of May 10, the bank's benchmark rate will be 3.25%.
⭐ Gold flirts with all-time highs. The gold price accelerated toward record highs on Thursday due to banking concerns, which boosted a flight to safe-haven assets, and amid bets for a pause in U.S. rate hikes.
Gold is approaching a new record high amid renewed Chinese demand and worries over the ongoing banking crisis in the U.S. that have contributed to the six-month rally in the precious metal.
Spot gold increased by 0.4% at $2,047.60 per ounce, after hitting $2,072.19, shy of a record high of $2,072.49.
📉 Shrinking savings. A growing number of European savers are pulling their money out of banks, seeking a better deal as lenders refuse to pay up for deposits. (Reuters)
A slow, but noticeable outflow of customer funds emerged as some of the region's biggest lenders announced a profitable start to the year.
"Traditional banks need to decide whether to maximise their return by keeping rates on deposits as low as possible, or to prioritise their liquidity and stability by increasing rates and retaining customers' funds," Nicola Marinelli, assistant professor of finance at Regent's University London, said.
🌪️ Banking turmoil. Regulators seized First Republic Bank and sold its assets to JPMorgan Chase & Co on Monday in an attempt to resolve the biggest U.S. bank failure since the 2008 financial crisis. (Reuters)
As a result of the collapse of two other midsized banks in March, depositors fled en masse from smaller banks to giants like JPMorgan and First Republic was among the most affected banks.
Other banks could follow, with regional U.S. bank PacWest saying it was exploring potential sales to secure its future.
🇺🇸 Debt crisis. U.S. Treasury Secretary Janet Yellen warned Monday that the government might run out of ways to pay its debt obligations by June 1, earlier than Wall Street economists were expecting. (CNBC)
Yellen told House Speaker Kevin McCarthy that new data on tax receipts forced the department to move up its estimate of when the Treasury Department "will be unable to keep satisfying all the government's obligations" to as early as June 1, if Congress doesn't raise or suspend the debt limit by then.
💵 A surprise job growth. Hiring at private U.S. companies surged unexpectedly in April, defying expectations that the job market would cool, according to payroll processing firm ADP. (CNBC)
In April, U.S. private payrolls rose by 296,000, much higher than the downwardly revised 142,000 in March and well above the 133,000 estimate.
ADP counts 800,000 new jobs this year, despite efforts by the Federal Reserve to slow economic growth. Labor market imbalances have created strong wage gains, that are reflected in persistent inflation pressures.
📸 Image of the week
🤔 Slowing the pace of monetary tightening. ECB's hiking cycle may not be over, but it's certainly coming to an end. (Bloomberg Opinion)
“While the ECB probably isn’t done yet, it clearly didn’t feel sufficiently confident to continue blazing away with a bigger move today when the Fed is probably pausing (its rate hikes) for the foreseeable future,” Bloomberg’s Marcus Ashworth writes.
What else is happening
🇷🇺 Who attacked the Kremlin? Russia said on Thursday that the U.S. was behind an alleged drone attack on the Kremlin aiming to kill President Vladimir Putin. Washington rejected the accusations saying that the Kremlin was “just lying”. (Reuters)
"Attempts to disown this (attack on the Kremlin), both in Kyiv and in Washington, are, of course, absolutely ridiculous. We know very well that decisions about such actions, about such terrorist attacks, are made not in Kyiv but in Washington," Russian presidential spokesman Dmitry Peskov told reporters.
According to media reports, this could be a “false flag” attack plotted by the Kremlin.
🪖 NATO foray into Asia. China urged “high vigilance” over NATO's "eastward expansion" following a media report the alliance is setting up an office in Japan to facilitate consultations with allies. (Reuters)
Nikkei Asia reported Wednesday, citing Japanese and NATO officials, that NATO plans to open its first liaison office in Asia, in Japan, to facilitate talks with security partners such as South Korea, Australia, and New Zealand.
🐆 A new ambitious genome project shows how humans fit in with other mammals. The researchers identified genomic elements - 4,552 in total - that were pretty much the same across all mammals and were identical in at least 235 of the 240 species, including people. (Reuters)
"We're taking advantage of the fact that there's this massive biodiversity on this planet to actually understand ourselves and make new discoveries that are relevant to treating human diseases," said Elinor Karlsson, director of the Vertebrate Genomics Group at the Broad Institute of MIT.
See you next week!