| Investors await the Fed, the housing slump spreads globally and the crisis plaguing billionaire Gautam Adani spirals. — Kristine Aquino Federal Reserve officials look set to moderate interest-rate increases again, with Chair Jerome Powell keeping further hikes on the table while leaning against bets they will cut later this year. The policy-setting Federal Open Market Committee is widely expected to raise rates by 25 basis points to bring its benchmark to a target range of 4.5% to 4.75%. The Fed will likely push back against suggestions it will soon halt rate hikes and then start to ease policy by year's end, according to DoubleLine Capital Chief Investment Officer Jeffrey Gundlach. Property markets look shaky across much of the world, posing another risk to the global economy. Reports this week have shown the US housing slump stretched into a fifth month, China's home-sales slide continued and UK home prices are on their worst losing streak since 2008. It's a development that bond investors are watching closely, and a further downturn could give them the go-ahead to bet big on gains in sovereign debt. "The housing market is the most interest-rate sensitive part of any economy, so it's a very good lead of where the rest of the economy could be in quarters to come," said Schroders fund manager James Ringer.  | The crisis of confidence plaguing the Adani group is deepening, with the selloff triggered by Hindenburg Research's fraud allegations surpassing $93 billion. Declines accelerated after Bloomberg reported Credit Suisse has stopped accepting bonds of Adani's group of companies as collateral for margin loans to its private banking clients. "The problem is now that the dynamics are becoming a self-reinforcing negative feedback loop and investors are now just dumping the shares and asking questions later," said Peter Garnry, head of equity strategy at Saxo Bank A/S. S&P 500 futures and Nasdaq 100 contracts fell about 0.4% as of 5:46 a.m. in New York. The Bloomberg Dollar Spot Index retreated, boosting most Group-of-10 currencies. Treasuries edged higher, following gilts. Oil climbed and gold fell, while Bitcoin advanced for a second day. To catch up on the trading day in the UK and Europe, check out the latest edition of Markets Today. At 7 a.m., we'll get mortgage applications data, followed by ADP employment figures at 8:15 a.m. Fifteen minutes later, the Treasury will deliver its quarterly refunding announcement. At 10 a.m., we'll get the latest reports on ISM manufacturing reports and JOLTs job openings. The Fed will deliver its rate decision at 2 p.m., followed by a press conference by Chair Powell thirty minutes later. Earnings include Meta, Peloton and T-Mobile. Here's what caught our eye over the past 24 hours: Good morning and Happy Fed Day. At 2PM ET we get the latest FOMC decision, and it comes at an extraordinarily complicated time for the US economy. We're only one month through the year, and yet there are already three distinct macro narratives out there: - Recessionary signs emerging: The labor market is tight, but there are clear signs it's slowing down. Hints are popping up that end consumption is slowing. And business surveys are in the tank, which could be a precursor to a pullback.
- Soft landing optimism: Inflation appears to be clearly rolling over, even as the unemployment rate refuses to budget. With rent decreases set to feed into the official numbers, the deceleration will look even more complete.
- Reheating: The housing market may already be stabilizing, even with mortgage rates as high as they are. Commodities are rallying again. Gas has rallied. We're even seeing speculative froth again, between meme stocks, crypto, NFTs, and more.
We'll know more in a few hours how the Fed wants to navigate all this. In the meantime, I swear I'm not going to spend 100% of this space over the next 6 months arguing that a Trillion Dollar Coin could be a viable debt ceiling workaround. Maybe I'll just write about it 50% of the time. Nonetheless, since it's Fed day, I wanted to talk about one bad argument that you frequently hear against the coin, which is that minting it, and depositing it at the Fed would somehow be a threat to Fed independence. This is a pretty common trope, that somehow it would make the Fed subservient to the Treasury in an unfortunate way. This argument is nonsense. To the extent that "Fed independence" is an important principle in managing the economy, it simply means that monetary policy ought to be conducted outside of the normal political process, that it's good to have an independent body that can make hard decisions (like raising people's mortgages), whose members don't have to stand up and run for re-election on those choices. You can debate whether this is good or not. Or whether the existing process is actually depoliticized or not. But nonetheless, that's the idea. The coin doesn't change any of that. The Fed can keep cutting and raising rates, buying and selling assets, exactly the same as it does today, even if it has a platinum coin sitting in the same vault of the NY Fed where they keep the gold. Now of course, the Fed would be providing a banking service to the Treasury, by accepting the deposit, but... that's exactly what happens now. Nathan Tankus has been writing a lot about the Fed's fiscal agent responsibility, and how it already exists to provide a number of services to the Treasury related to deposits, spending, and even the facilitation of bond auctions. Taking a coin in deposit would be unusual. But it wouldn't be some novelty in the Treasury/Fed relationship. And it would affect the conduct of monetary policy as Powell & co. see fit. Anyway, Janet Yellen has stated last month that one problem with the coin idea is that the Fed might not accept it. So hopefully at the press conference today, one of the reporters asks Powell to weigh in. Follow Bloomberg's Joe Weisenthal on Twitter @TheStalwart | 
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