Powell: Fed is no longer forecasting U.S. recession
More than 140 million Americans from coast-to-coast are under heat alerts today. Parts of the Northeast will see their highest temperatures this year while temperatures in the Midwest will be up to 20 degrees above normal. The extreme weather has also gripped the country's southern tier from Southern California to Florida since June.
As Urals crude has been consistently trading at or above $60 for a period exceeding two weeks, the Biden administration may communicate privately with its Western allies, urging them to adhere to the price ceiling on Russian oil shipped exports. This approach will likely be a silent enforcement effort to avoid the potential disruption that overtly strict measures might cause in the energy markets.
This acceleration was spearheaded by an upswing in capital equipment which experienced a significant rebound to 10.8%, compared to a -8.9% decrease in the previous quarter. Intellectual property products also increased to 3.9% from 3.1%. Another contributing factor to this growth was an increase in private inventories contributing 0.14 percentage points, significantly improving compared to their deduction of -2.14 percentage points in Q1.
The Fed as expected raised its federal funds rate by 25 basis points, increasing the rate to 5.25% to 5.5%, which is the highest mark in 22 years. The primary reason for this increase is the persistently high inflation, which the Fed characterizes as "elevated.” This increase is aimed at controlling and bringing down the inflation rate.
Interestingly, Powell did not see Russia's exit from the Black Sea Grain Initiative driving up food prices or significantly contributing to the U.S. inflation rate, though they will monitor the situation closely. It's too soon to say if the Fed is done raising rates. Powell acknowledged that “we've come a long way” in bringing down headline inflation from last summer's peak of about 9%. But he added that it was still well above the central bank's target.
• Tour finds U.S. spring wheat yields down from last year but above average. Crop scouts on Day 2 of the Wheat Quality Council's HRS tour found an average yield of 45.7 bu. per acre in north-central and northwest North Dakota, down from 47.7 bu. in those areas last year but above the five-year average of 38 bu. per acre. On Day 1, the tour's average yield was 48.1 bu. per acre in southern and east-central North Dakota, down from 48.9 bu. last year but above the five-year average of 40.
• Ag trade: Taiwan purchased 108,000 MT of U.S. milling wheat. Algeria purchased an unspecified volume of Brazilian or Argentine corn from a tender for up to 120,000 MT. Bangladesh tendered to buy a nominal 50,000 MT of optional origin milling wheat. — Putin nixes return to Black Sea grain deal. Russian President Vladimir Putin stated at the Russia-Africa Economic and Humanitarian Forum that Russia will not rejoin a U.N.-brokered pact, known as the Black Sea grain deal, aimed at preventing famine in the developing world. The decision is a result of Russia's ongoing conflict in Ukraine.
The African Union pleaded earlier on Thursday for the reinstatement of the Black Sea grain deal, which ensured Ukrainian and Russian agricultural products could reach international markets despite the ongoing war affecting Black Sea shipping routes. This strategy debilitates Ukraine's economy, the article observes, as a large portion of their export earnings come from food products. The resultant decrease in earnings for Ukrainian farmers may affect their ability to replant fields, threatening future harvests and deepening this economic crisis.
— U.S. mulls ‘soft enforcement' as Russia oil prices top G7 cap. Due to Russian oil prices surpassing the $60-per-barrel cap set by the G7 countries in December on ocean-going exports of Russian crude, the Biden administration is planning to use"soft enforcement" methods to encourage compliance. Early indications suggest that the U.S. will not take a severe approach to the matter with tankers and tanker owners, opting instead for subtle methods such as letters and phone calls.
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