| I'm Chris Anstey, a senior editor in Boston, and today we're looking at Fed Chair Powell's latest signal on interest rates. Send us feedback and tips to ecodaily@bloomberg.net or get in touch on X via @economics. And if you aren't yet signed up to receive this newsletter, you can do so here. - The Federal Reserve held rates and said it will shrink its balance sheet at a slower place beginning in June. Read more on the decision below.
- The Bank of Japan likely conducted its second currency intervention this week, though the yen's top forecaster still sees weakening.
- The world's economic outlook is perking up with more resilient growth and inflation set to cool faster than previously expected, the OECD said.
Investors' biggest risk event this week, in the view of one equity strategist, was reporters "popping the question" to Fed Chair Jerome Powell: Will you entertain the idea of raising interest rates, given faster-than-expected inflation and continuing economic strength? And indeed that question was popped — as Evercore ISI's Julian Emanuel put it — in Powell's briefing on Wednesday. "He was unequivocal," Seth Carpenter, chief global economist at Morgan Stanley, said on Bloomberg TV. "The market discussion was about should we start pricing in rate hikes? And he was quite clear that that is not where they are."  Jerome Powell. Photographer: Al Drago/Bloomberg Powell spoke after Fed policymakers kept their benchmark at a target range of 5.25% to 5.5% — the highest in more than two decades. Policymakers believe that, "over time" that level "will be sufficiently restrictive" to get inflation back to the Fed's 2% target, the Fed chief said. The Fed's preferred measure of core inflation, which strips out food and energy costs, most recently came in at 2.8%. "Of course we're not satisfied with 3% inflation," Powell said. "3% can't end a sentence with satisfied. So we will return inflation to 2% over time. And we think our policy stance is appropriate to do that." He also said, "My expectation is that we will, over the course of this year, see inflation move back down. That's my forecast." He noted that his confidence in that outlook is lower than it had been, due to the string of disappointing figures on consumer prices. But even so, "evidence shows pretty clearly that policy is restrictive and is weighing on demand." He highlighted data out earlier Wednesday showing that US job openings fell to a three-year low, and that high borrowing costs have weighed on investment spending. Treasuries climbed during Powell's briefing, as did stocks — before a late-day reversal that had no immediate trigger. The initial reaction was appropriate given Powell's messaging, former New York Fed President Bill Dudley said. The rally ironically amounts to an easing in financial conditions that supports the economy, Dudley, a Bloomberg Opinion columnist, pointed out. Time will tell if Powell is right that policy has effectively done the job and now it's just a waiting game. But for now, Powell's argument is "we've got it," Dudley said. - Pandemic-era funding led to a boom in Black-owned US businesses, but such entrepreneurs still face barriers to capital.
- Intel is spending $28 billion to make Ohio a chip hub. Read the BigTake.
- Bank of England policymakers appear the most divided since they brought their hiking cycle to a close last year.
- Swiss inflation jumped more than economists anticipated to a four-month high.
- Thousands of Russians who fled abroad after the invasion of Ukraine are returning home, aiding President Vladimir Putin's war economy.
- Czech policymakers may cut rates today by a half point. Economists reckon India's central bank won't ease until later this year.
Japan is likely to have intervened in the foreign-exchange market on Monday, when the yen tumbled to its weakest against the dollar since 1990. It's also likely to have realized some profits from the operation, former US Treasury official Brad Setser estimates. Setser estimated Monday the Japanese government and its pension investment fund have bought around $1.2 trillion worth of dollars and euros since 2000. "Japan issued yen to buy dollars back when you could get a dollar for 80 yen — and now you can sell that dollar for 155," Setser said in an interview. "Financially speaking, reserves have gone a lot up and so it makes sense to take some gains," Setser said. "The accounting of reserves is always complex, but there are clear financial gains." Former UK central banker takes a new job in the cricket world: Read more reactions on X Qatar Economic Forum: On May 14-16, join heads of state, global business leaders and technology innovators in Doha to identify solutions to the major issues driving global boardroom conversations. Learn more here. | 
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