Daily Outlook: The Fed expects two interest rate hikes by the end of 2023

The Fed expects two interest rate hikes by the end of 2023:

Amid optimism about the labour market and concerns about inflation, Fed officials expect policy tightening to be faster than previously predicted. Federal Reserve Chairman Jerome Powell said at a news conference on Wednesday that officials would start talking about scaling back their bond purchases. Officials expect interest rates to rise twice by the end of 2023-faster than many thought, and they have raised their inflation forecasts for the next three years, according to the latest Fed forecast. “the economy has clearly made progress.” Powell said. “if you like, you can think of this meeting as a discussion (minus code).”

Yellen believes that the increase in capital gains tax from April 2021 does not count as a retrospective tax increase:

Janet Yellen, the US Treasury Secretary, told a Senate panel that it would not be a retrospective tax increase if Congress passed a bill to raise capital gains tax and took effect from April 2021. Asked about the Biden administration’s tax proposal at a meeting of the Senate Finance Committee on Wednesday, Ms Yellen said: “I don’t think potential rule changes related to future capital gains taxation are retrospective.”

Biden and Putin concluded their meeting earlier than expected and agreed to lay the foundation for future arms control and risk reduction:

U.S. president Joe Biden said he mentioned human rights violations in Russia during a meeting with Russian President Vladimir Putin on Wednesday, including the imprisonment of opposition leaders and the detention of two Americans. “I told him, as president of the United States, how could I not talk about human rights violations,” Biden said at a news conference. “that’s why we have to express our concern about cases such as Alexey Navalny.” Both men agreed that US-Russian relations had reached their most tense situation in years and tried to ease relations between the two countries through the meeting.

Yellen said the US economy was recovering from the COVID-19 epidemic and urged Congress to support the Biden spending plan:

Us Treasury Secretary Yellen said that the US economy is recovering strongly from the impact of the COVID-19 epidemic and urged members of Congress to start solving the long-term problems that have plagued the economy. Yellen told the Senate Finance Committee hearing on Wednesday that her hope when she took office was to help Americans “get through the crisis.” “thanks to Congress and its passage of the relief plan for the United States-I believe we are moving smoothly towards that goal.” This refers to the $1.9 trillion bailout bill enacted in March.

Brazil’s central bank raised interest rates by 75 basis points to 4.25% to curb soaring inflation expectations:

Brazil’s central bank has raised benchmark interest rates for the third time in a row in an effort to curb inflation expectations that have further exceeded targets this year and next. Brazil’s central bank voted unanimously on Wednesday to raise its benchmark interest rate by 75 basis points to 4.25%, in line with forecasts made by 38 respondents in a Bloomberg survey and in line with the central bank’s own guidelines. Since March this year, Brazil’s central bank has raised interest rates by 225 basis points, making it the largest interest rate hike in the G-20. Brazil’s central bank is expected to raise interest rates by another 75 basis points in August.

The European Central Bank is extending bank capital relief measures for nine months:

The ECB is extending a key anti-epidemic relief measure for banks for nine months to ensure that banks can continue to provide credit to the real economy, according to people familiar with the matter. The ECB’s supervisory board plans to allow banks to continue to exclude central bank deposits when calculating leverage until March, according to people familiar with the matter, who spoke on condition of anonymity because of the anonymity. The plan still needs to be approved by the ECB’s governing council before it can take effect, according to people familiar with the matter.

The chief economist of the World Bank says inflation and debt levels are at risk of rising:

Carmen Reinhart, Group Vice President and Chief Economist of the World Bank, was interviewed by Bloomberg. “what is worrying is that inflation is not just a temporary phenomenon. The risks of the financial sector are now masked by very low interest rates and highly loose policies during the epidemic,” he said. We do face the risk of significant policy tightening. Many balance sheet problems that went unnoticed before will jump back into the immediate picture of rising inflation, which could lead to higher interest rates and make the situation difficult for policy makers to control.

Saudi Energy Minister: underinvestment in exploration and production may trigger an oil supercycle:

Saudi Arabia’s energy minister said a lack of new investment in exploration and production could trigger a new supercycle in global oil prices. Prince Abdulaziz bin Salman of Saudi Arabia said at a Robin Hood investor conference on Wednesday that his job was to prevent such a supercycle, according to people familiar with the matter. He used to warn speculators about the dangers of shorting. The speech marked an attempt to speak directly to Wall Street, a rare speech to a hedge fund audience by members of the Saudi royal family.

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