Crypto News: Economics Daily: Federal Reserve special

Hello, I'm Chris Anstey, a senior editor for economic policy in Boston. Today we're looking at the upcoming Federal Reserve meeting and a potential game-changer for Indian economic policy. Send us feedback and tips to ecodaily@blooomberg.net or tweet to @economics. And if you aren't yet signed up to receive this newsletter, you can do so here.

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Federal Reserve policymakers were unanimous in raising interest rates in March even after the biggest US bank failure since the global financial crisis. But with a tightening of credit now looming, things may be different this week.

Agreement among the voters on the rate-setting Federal Open Market Committee is going to be a lot tougher to maintain than it has been up to now through the year-long tightening cycle, Steve Matthews and Rich Miller report here.

With inflation as high as 9% in the past year, Chair Jerome Powell colleagues were all-in on the fight to curb price pressure. That consensus is showing signs of splintering, amid inflation that remains too high while Fed staff — and many private economists — see a recession coming.

Economists and futures traders alike do see another 25 basis-point rate hike coming on Wednesday. But many are on watch for potential dissenting votes.

For one thing, the likely move by banks to restrain lending after the recent turmoil is likely to amount to the equivalent of another half-point hike or more in the Fed's target rate, according to economists surveyed by Bloomberg.

For another, some policymakers are expressing skepticism about the degree to which inflation is under pressure from rising wages. Fed district-bank Presidents Austan Goolsbee of Chicago — who's taken a dovish stance in recent weeks — and leading hawk James Bullard of St. Louis have played down their significance to the price outlook.

Another big uncertainty is the partisan standoff in Washington over raising the US debt ceiling.

It all means that the forward guidance from the Fed at the May 2-3 meeting could be a subject of intense debate. The Fed's forecasts in Marchshow only seven of the 18 FOMC participants favored at least one more hike beyond the move expected this Wednesday.

"This could be a pivotal meeting," said Diane Swonk, chief economist at KPMG LLP. "We are getting close to the hardest mile for the Fed in this marathon — the part where backlash to rate hikes will intensify, in ways no one on the Fed has had to weather."

It's not just decision time at the Fed this week. Elsewhere, rate increases in the euro zone and Norway, and pauses in Brazil and Australia, will be among key monetary decisions due around the world.

See here for the rest of the week's economic events.

China's economic recovery remains patchy, with latest indicators pointing to a contraction in manufacturing.
Global labor markets are poised for an era of turbulence as technologies like artificial intelligence accelerate the decline of clerical work, while simultaneously increasing demand for technology and cybersecurity specialists.
Australia's central bank is set to extend a pause in interest-rate increases on Tuesday following a deceleration in inflation.
France's credit rating was cut by Fitch Ratings in another blow to President Emmanuel Macron as he tries to bolster the country's public finances with unpopular overhauls.
President Luiz Inacio Lula da Silva announced an increase in Brazil's monthly minimum wage.
The extra bank holiday for King Charles III's coronation is set to drag down what otherwise may be gathering momentum in the UK economy.

One of the side-effects of Russia's invasion of Ukraine could be a real "gamer changer" for India's economic policy, according to Charles Gave, founder of research group Gavekal.

With few domestic energy sources, India's current-account widens when the economy picks up steam and draws in more imports of oil and gas denominated in dollars. That's meant repeated brushes with balance-of-payments crises over the decades. But if India pays in rupees for Russian energy — as Moscow cannot receive dollars — that changes everything.

In time this should help stabilize the rupee, encouraging global capital flows toward India's infrastructure build-out. Long-term interest rates should go down, "growth stocks and real estate should boom" and as the bond market gets more liquid, that will pull in yet more capital. "Talk about unintended effects," Gave wrote in an April 27 note.

Age of inflation...