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The US Federal Reserve indicated on Wednesday that it will cut its key interest rate just once this year despite a modest easing in inflation, which slowed to 3.3 per cent in May, though still above its 2 per cent target.
The Fed announced its interest rate decision after a two-day Federal Open Market Committee meeting, which left its benchmark interest rates unchanged at 5.25 to 5.5 per cent.
“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 per cent,” the FOMC said in a statement.
Fed chair Jerome Powell said only “modest” progress had been made toward the inflation goal, noting the need for consistently “good inflation readings” before interest rate cuts could be made.
Initially expected by traders and market analysts to make two cuts by the end of 2024, the Fed’s revised outlook now predicts only one quarter-point cut before the end of 2024.
Monetary authorities in other major economies, such as the European Central Bank and the Bank of Canada, have reduced interest rates. However, both the US and the UK have yet to follow suit. The Bank of England, which is meeting next week, is widely expected to maintain interest rates at 5.25 per cent, their highest level in 16 years.
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The Moscow Exchange, which it says is the country’s leading market place, has immediately suspended dollar and euro trading after new US sanctions have been introduced. The sanctions are aimed at curbing funds for Russia’s war in Ukraine.
“Due to the introduction of restrictive measures by the United States against the Moscow Exchange Group, exchange trading and settlements of deliverable instruments in US dollars and euros are suspended,” the Russian central bank said in a statement on Wednesday.
The suspension means that banks, companies and investors can no longer trade dollars or euros on the central exchange, losing benefits of liquidity, clearing and oversight. Instead, they will have to revert to over-the-counter trading, where deals are conducted directly between two parties with the central bank using OTC data to set official exchange rates.
The US Treasury said it was “targeting the architecture of Russia’s financial system, which has been reoriented to facilitate investment into its defence industry and acquisition of goods needed to further its aggression against Ukraine” and attract capital from “friendly countries”.
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The White House is set to nominate Christy Goldsmith Romero, a Democratic commissioner at the Commodity Futures Trading Commission, as the new Federal Deposit Insurance Corporation chair. As reported by Reuters, citing an unnamed source with knowledge of the matter, the week of July 8 has been targeted for her first hearing.
Goldsmith Romero will replace Martin Gruenberg, who is stepping down following a probe that uncovered widespread sexual harassment and misconduct at the FDIC.
According to the Reuters report, the White House is rushing to fill the role as part of a push to advance President Joe Biden’s regulatory agenda, which includes significant increases to bank capital requirements under the incoming “Basel III Endgame” rules, which are expected to be implemented from mid-next year.
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The National Bank of Canada has agreed to acquire Alberta-based Canadian Western Bank for C$5bn ($3.6bn), merging the country’s sixth- and eighth-largest lenders.
The acquisition will expand National Bank’s retail presence significantly in Alberta and British Columbia, where Canadian Western Bank operates most of its 39 branches, serving 65,000 clients and managing a loan portfolio of C$37bn.
The deal, expected to close by the end of 2025 pending shareholder and regulatory approval, includes a C$500mn investment from Canada’s second-largest pension fund, Caisse de dépôt et placement du Québec, a move that would make it National Bank’s second-largest shareholder.
