Aurelia Butler

WASHINGTON (Reuters) – U.S. Federal Reserve officials say they are confident housing inflation will finally cool in coming months, a key and long-awaited component of their effort to control overall price increases and secure their turn to interest rate cuts. The real challenge on that front, however, may be just over the horizon when a pipeline of new apartments starts to run dry while the stock of single-family homes remains short, a recipe for future price pressure in a category accounting for about a third of the Consumer Price Index.Though their 2% inflation target uses an index that is less sensitive to shelter costs, Fed officials still see housing and rent dynamics as an important, unresolved part of their inflation battle, one that could highlight one of the inherent tensions in today’s tight-credit policy stance.Fed officials acknowledge the difficulty of finding a rate setting that keeps overall demand in check without choking off the supply of new homes and apartments, but some argue that policymakers already have leaned against the economy too hard. “You think you can snap your fingers and housing can be created…The reality is that is not the case,” said Jay Lybik, national director of multifamily analytics for real estate data firm CoStar. After a surge of building boosted apartment supply, CoStar’s data signals new unit volumes in sharp decline by early next year, falling to perhaps 50,000 or 60,000 per month versus the estimated 100,000 needed to keep pace with demand. “We risk a real acceleration in terms of rents that will make things worse come 2025 and 2026,” Lybik said.’LONGER-RUN PROBLEMS’Housing affordability concerns intensified during the pandemic, with median home prices jumping 50% from its onset through the end of 2022 – though they have since eased – and apartment construction tilted towards higher-end units. Members of Congress have called on the Fed to cut rates both to bring down mortgage costs for consumers and encourage construction; states are toying with rent-control measures and programs to boost supply. The issues are far bigger than the Fed.”We have longer-run problems with the availability of housing,” Fed Chair Jerome Powell said at a press conference following the central bank’s January meeting. “There hasn’t been enough housing built,” Powell said, but “these are not things that we have any tools to address.”Housing markets vary widely across the country, shaped by local zoning rules, politics and land prices. Still, financing costs heavily influenced by the Fed are key to the investment decisions being made today that will determine future housing supply. For the Fed’s immediate purposes, a coming “disinflation” in overall shelter costs seems almost certain as the record pandemic-era jump in rents and home prices fades into the past, but nonetheless essential to gaining the necessary confidence in declining inflation to begin rate cuts. After rapid rate hikes beginning in March 2022, the policy rate has been held at 5.25%-to-5.50% since July.’BUILT-IN’ INFLATIONARY PRESSUREWhile inflation has fallen from 40-year highs, recent progress has been “bumpy” Fed officials acknowledge, with shelter inflation in particular remaining higher for longer than anticipated. A surprise jump in CPI last month was largely driven by shelter costs still rising by 6% year-over-year versus 4% typically seen before the pandemic when overall inflation was near or below the Fed’s target. Rent measures assembled in closer to real time aiming to capture current market prices instead of the slow-moving averages in official data indicate price increases have been slowing. For example, an index from online real estate firm Zillow (NASDAQ:ZG) closely watched by Fed officials was rising at a 3.4% annual rate as of January.”We know it’s coming,” Arben Skivjani, deputy chief economist for property management and analytics firm RealPage, said of housing inflation’s decline in a recent National Association for Business Economics presentation. After rising nearly 16% annually in early 2022, asking rents have shown virtually no increase since last summer, RealPage data shows. Supply constraints, though, may risk secularly faster inflation. “We have not built enough homes, we’ve not built enough shelter for at least a decade…You’re short supply of a good that everybody still wants,” Mark Fleming, chief economist at First American bank, said at an NABE discussion of housing inflation. “What’s going to happen to the price?…Long run, there’s definitely built-in inflationary pressure.”MISSING ‘PUZZLE PIECE’ Shelter inflation peaked at an 8.32% annual rate in March 2023, the fastest since the early 1980s. The median home price surged nearly 50% from $322,000 in 2020’s second quarter as the pandemic began to a peak of $479,000 at the end of 2022, Census data shows, the fastest run-up since the early 1960s.The median price has since edged back to $417,000, a side effect of Fed rate hikes that at one point pushed the average interest rate on a 30-year home mortgage to nearly 8%, the highest in a quarter century.But some indexes of more recent home sales show prices rising again, leaving Fed officials hunting for data on home sales and construction to show evidence that demand and supply might move toward better balance. New Cleveland Fed research on the stark supply-demand imbalance that has powered pandemic-era home price appreciation is one example of the focus on it.Chicago Fed President Austan Goolsbee called housing a missing “puzzle piece” in the Fed’s hope for broadly lower inflation, while Richmond Fed President Thomas Barkin has made analysis of building patterns in his district, comparing communities able to keep pace in new home construction with those that are constrained, a staple of his recent speeches.EY Chief Economist Gregory Daco said shelter inflation’s near-term path was clear. It is headed down, and could over the next couple of months make a substantial contribution to lower headline inflation, a fact he argues is so clear he feels “increasingly frustrated” by the Fed’s reluctance to act on it.Next year, he said, is another story.”Rent inflation has slowed quite tremendously. That has yet to appear fully” in the data the Fed watches most closely, he said. “Fast forward another six to 12 months…and it may actually move the other direction…That’s where the lack of supply comes in.” More

WASHINGTON (Reuters) – The U.S. Congress on Wednesday has three days to avert a partial government shutdown, as disagreements between the two parties and within the fractious House Republican majority delay lawmakers in their duty of funding federal agencies. The two chambers’ top Democrats and Republicans had emerged from what they described as an intense Tuesday meeting with President Joe Biden vowing to avert a shutdown, but without agreement on how to do so – whether by reaching a deal covering the fiscal year that began Oct. 1, or by passing a fourth short-term stopgap.Senate Democratic leader Chuck Schumer and House of Representatives’ speaker, Republican Mike Johnson, have traded blame despite an agreement reached last month on $1.59 trillion in discretionary spending for the fiscal year.”We believe that we can get to agreement on these issues and prevent a government shutdown. And that’s our first responsibility,” Johnson told reporters on Tuesday.Hardliners within his thin Republican majority have sought spending cuts and policy changes, including some related to abortion and food aid, on the funding bills, which Democrats have balked at. Failure to reach an agreement will trigger a partial government shutdown beginning Saturday.A second deadline on a larger group of federal agencies that would run out of funding on March 8 also looms.Schumer told reporters on Tuesday lawmakers had made progress on talks to fund the government but had not finalized anything yet.”There is no reason for a shutdown, not if both sides in both chambers cooperate in a bipartisan way,” Patty Murray, the Democratic chair of the Senate Appropriations Committee, said on Tuesday. The impasse comes as the current national debt stands at $34.3 trillion and is rapidly rising. Rating agency Moody’ssaid in September a government shutdown would hurt the country’s credit rating.In addition to the government funding bills, Congress is also struggling to pass a $95 billion national security funding bill, including new aid for Ukraine and Israel, that Biden has urged. The Senate passed a bill, but it has been held up in the House. More

WASHINGTON (Reuters) – President Joe Biden’s administration on Wednesday unveiled an executive order aimed at protecting American personal data by restricting its transfer to China, Russia and other countries, senior U.S. officials said, citing national security concerns.The order, first reported by Reuters, will curb bulk transfers of Americans’ geolocation, biometric, health and financial information by data brokers and others to specific “countries of concern,” the officials said.It will also bar the transfer of any volume of data on U.S. government personnel, they added, to such countries, which also include Iran, North Korea, Cuba and Venezuela.”China and Russia are buying American sensitive personal data from data brokers” and leveraging it “to engage in a variety of nefarious activities including malicious cyber-enabled activities, espionage and blackmail,” the officials said.”Buying data through data brokers is currently legal in the United States. That reflects a gap in our national security toolkit,” they added, saying Wednesday’s order aimed to fill that gap.The order is the latest bid by Washington to stem the flow of American data to China, which is locked in a years-long trade and technology war with the United States.The U.S. Congress is considering legislation to ban federal agencies from contracting with China’s BGI Group and Wuxi APPTEC, part of an effort to keep China from accessing American genetic data and personal health information.In 2018, a U.S. panel that reviews foreign investments for potential national security threats rejected a plan by China’s Ant Financial to acquire U.S. money transfer company MoneyGram International because the companies could not assuage concerns over the safety of data that can be used to identify U.S. citizens.The officials said on Wednesday that transactions with data brokers who know that the information will end up in “countries of concern” will be banned, as will all genomic data transfers. Transfers of other classes of data – from biometric to financial – would only be banned if they met certain volume thresholds and were being sent to those countries, one official said.To allay concerns that the new rules would unnecessarily hamper economic activity, certain types of data including corporate payroll and compliance are exempted, they added. Certain transactions such as cloud service, employment and investment agreements would also be permitted, subject to some security requirements such as encryption and anonymization.The order also directs the Department of Justice to give industry ample opportunity to comment on proposals before they go into effect.The White House says companies are collecting more of Americans’ data than ever before. That data is often legally sold and resold through data brokers who can then transfer it to foreign intelligence services, militaries, or companies controlled by foreign governments. More

HONG KONG (Reuters) -Hong Kong announced major measures on Wednesday to bolster its flagging real estate market by scrapping all tightening measures for residential properties, aimed at helping the city’s economy which is expected to grow at a tepid 2.5%-3.5% this year.The financial hub will cancel all additional stamp duties on transactions imposed in the past decade in a bid to boost the city’s depressed real estate market, Financial Secretary Paul Chan told lawmakers in his annual budget.Noting challenges including high interest rates, a complex geopolitical environment as well as ballooning recent budget deficits, Chan announced a mix of measures spanning property, tourism and financial services to lure back capital, businesses and visitors to the city, as well as restore fiscal balance.On property, long a key pillar of the economy, Chan said all demand-side management measures for residential properties would be scrapped with immediate effect.”We consider that the relevant measures are no longer necessary amidst the current economic and market conditions,” Chan said.These include cutting all additional stamp duties for foreign buyers and those for the purchase of second properties, as well as on those selling flats within two years of buying them, that had been imposed in the decade prior to the current slump to try to cool one of the world’s priciest property markets.In a parallel move, the Hong Kong’s Monetary Authority (HKMA) adjusted measures for property mortgage loans, including raising the maximum amount homebuyers and investors can borrow for some purchases. Ricky Wong, vice-chairman at developer Wheelock Properties, said the moves can “stimulate locals and overseas people to buy homes for their own use and attract investors to re-enter the property investment market.” The group would actively prepare for the launch of its new projects, he added. Hong Kong’s housing prices have plunged 20% since their 2021 peak given both economic and political headwinds, including a national security clampdown that stoked an emigration wave from the city and a slowing Chinese economy impacting potential Chinese home buyers — long a driver of the market.PROPERTY AGENCY STOCKS SURGEHong Kong’s property sub-index rose more than 2% on the news before closing down 0.6%, compared with a 1.5% drop in the benchmark index. Shares of Midland Realty, a real estate agency, surged as much as 44.6%, while smaller rival Legend Upstar jumped as much as 16.5%. “It is believed that in the short term, it will stimulate the trading volume, promote the recovery of the property market, restore market confidence, and stabilize property prices,” said Martin Wong, Greater China head of research and consultancy at Knight Frank.In a bid to curb smoking, the government increased tobacco taxes to HK$0.80 per cigarette, bringing the cost of a pack to about HK$94 ($12). On Hong Kong’s ballooning fiscal deficits, with the city running up deficits for four of the past five years, Chan pledged to “adopt a fiscal consolidation strategy to narrow our fiscal deficit progressively towards achieving the goal of restoring fiscal balance,” though he didn’t specify a timeframe.Hong Kong posted a consolidated deficit of HK$101.6 billion for fiscal 2023‑24, in line with market expectations, and a deficit of HK$48.1 billion is forecast for the coming 2024/25, Chan said. In fiscal 2022/23 Hong Kong posted a budget deficit of HK$122.3 billion ($15.63 billion) after taking into account the proceeds of HK$66 billion received from issuance of green bonds. The ratio of government debt to GDP will be in the range of 9-13% from 2024‑25 to 2028‑29, Chan said.The economy expanded by a sluggish 3.2% in 2023, hampered by geopolitical tensions between China and the United States, while capital flight turned the Hong Kong stock market into the worst performing major index last year. The government will roll out more than HK$1 billion ($127 million) in support measures for its beleaguered tourism industry, to help offset the impact from the struggling Chinese economy, which has resulted in fewer visitors from the mainland.The city will stage more than 80 “mega events” in the first half of the year to boost tourism, including a monthly fireworks and drone show at its panoramic Victoria Harbour.($1 = 7.8260 Hong Kong dollars) More

1. Futures edge lowerStock futures on Wall Street pointed lower, as investors awaited a raft of incoming U.S. economic data that could impact the timing of potential Federal Reserve interest rate cuts this year.By 03:12 ET (08:12 GMT), the Dow futures contract had shed 60 points or 0.2%, S&P 500 futures had dipped by 7 points or 0.1%, and Nasdaq 100 futures had lost 47 points or 0.3%.The main averages were mixed in the prior session, with attention turning in particular to the publication on Thursday of the January personal consumption expenditures price index (PCE), a key inflation gauge.Traders have been monitoring on a stock market rally powered by soaring enthusiasm for the applications of artificial intelligence that has pushed the S&P 500 and Dow Jones Industrial Average up to record levels. But with a stream of corporate earnings ebbing, the focus is returning to economic figures and the possible path ahead for U.S. borrowing costs.While the overall economy has remained resilient in the face of elevated interest rates, a cooldown in price pressures has showed signs of stalling — a trend that has led several Fed officials to indicate that there is no rush to cut rates down from more than two-decade highs.2. Salesforce aheadAfter a series of blockbuster reports from some of the biggest names in corporate America in recent weeks, the quarterly earnings season is gradually slowing.Wednesday’s releases will be highlighted by software group Salesforce, who is set to unveil its latest returns after the closing bell. Revenue is expected to have jumped by 10% to $9.22 billion in the fourth quarter, helping lift the California-based company back into profit after it posted a loss due to restructuring charges in the year-ago period.Salesforce’s data cloud unit could also be in the spotlight, with analysts keen to find out if a push to increasingly incorporate AI into its products and services has supported customer demand.Elsewhere, low-cost department store chain TJX Companies (NYSE:TJX) and pharmaceutical group Viatris are due to report prior to the market open.3. Next-generation Tesla Roadster to ship in 2025 – MuskTesla (NASDAQ:TSLA) Chief Executive Elon Musk said on Wednesday that the firm had completed production design on a long-planned update to its Roadster electric sportscar, adding that it was likely to ship starting next year. In a series of posts on the social media site X, which Musk also owns, he said that Tesla was aiming to unveil the Roadster by end-2024. Musk said that Tesla had “radically increased the design goals” for the upcoming model, which was originally due to be launched in 2020. He also said the new vehicle was being developed in collaboration with SpaceX. 4. Country Garden faces liquidation petitionHong Kong-listed Chinese property stocks fell on Wednesday, coming under pressure from renewed concerns over a real estate meltdown after Country Garden (HK:2007) was slapped with a liquidation petition.The embattled developer was the worst performer among its peers, sliding 6.7% and further into penny stock territory after Ever Credit Ltd filed a liquidation petition against the firm over its non-payment of a HK$1.6 billion loan.Other property developers also fell, with Sunac China Holdings (HK:1918), Longfor Properties Co (HK:0960) and Logan Property Holdings (HK:3380) falling between 3% and 9%. The broader Hang Seng index fell 1.4%, dragged lower largely by losses in the real estate sector. Country Garden Services Holdings (HK:6098) — a unit of the embattled developer — was the worst performer on the Hang Seng with a 4.6% loss.5. Oil slipsOil prices fell slightly in European trade on Wednesday, with traders eyeing a massive weekly build in U.S. inventories and a potential ceasefire between Israel and Hamas.Prices were sitting on strong gains from the prior session after media reports suggested that the Organization of the Petroleum Exporting Countries and its allies — a group known as OPEC+ — could maintain its current pace of supply cuts until the end of 2024, keeping global supplies limited.But crude prices still remained within a $75 to $85 trading range established so far in 2024, as optimism over the OPEC+ reports was countered by industry data showing a massive build in U.S. oil inventories.Brent oil futures expiring in April fell 0.5% to $83.20 a barrel, while West Texas Intermediate crude futures dropped 0.6% to $78.44 per barrel by 03:15 ET.Crude was also pressured by strength in the dollar, as markets positioned for the PCE price index data this week. More

WELLINGTON (Reuters) -New Zealand’s central bank held the cash rate steady at 5.5% on Wednesday and trimmed the forecast peak for rates, catching markets by surprise as policymakers said the risks to the inflation outlook have become more balanced.The Reserve Bank of New Zealand’s decision was in line with forecasts but defied some outlying market bets for a rate rise and kept the central bank more in line with global peers, most of whom have called an end to their aggressive hike cycles.The RBNZ’s rate forecast track and commentary were also slightly more dovish than some traders had anticipated, triggering a selloff in the New Zealand dollar and a rally in bonds.The bank lowered its forecast cash rate peak to 5.6% from a previous projection of 5.7% – toning down its hawkish stance and effectively reducing the risk of further tightening. “Core inflation and most measures of inflation expectations have declined, and the risks to the inflation outlook have become more balanced,” the RBNZ statement said.The market had priced in around a 23% chance of a hike this week. The probability of a move by May more than halved to just 6%, from 47% before the announcement. while two-year swap rates dived to 4.995%, from 5.195% and the kiwi dollar was down almost 0.9% at $0.6112, breaking support around $0.6152.ASB chief economist Nick Tuffley said that the tone of the statement was not as hawkish as could have been, with the risks now seen as more balanced as opposed to the upward skew noted in November’s statement.“We think over coming months the hurdle for an OCR move in either direction remains high,” he said.RBNZ Governor Adrian Orr told a press conference that while the committee had discussed a hike, “there was very strong consensus that the official cash rate right now is sufficient”. In a Reuters poll of 28 economists all but one had forecast the RBNZ would leave the cash rate at a 15-year high for the fourth consecutive meeting.GLOBAL POLICY IMPULSEA front-runner in withdrawing pandemic-era stimulus among its peers, the RBNZ has battled to curb inflation, lifting rates by 525 basis points since October 2021 in the most aggressive tightening since the official cash rate was introduced in 1999. The rate hikes have sharply slowed the economy with recent data showing that it was tracking below previous central bank expectations.Global central banks, led by the Federal Reserve, have recently pushed back against market expectations for an early start to rate cuts given persistent inflationary pressures.The RBNZ’s statement was broadly in tune with global concerns about prices, reiterating that it needs to keep policy restrictive for a while in order to bring inflation below the top-end of its 1% to 3% target band.The central bank noted a global impulse towards holding policy tighter for longer.”A more general risk to global growth is that central banks may need to keep policy interest rates at restrictive levels for longer than currently reflected by financial market pricing, to ensure that inflation targets are met,” the RBNZ statement said.The central bank also flagged geopolitical risks and a slowdown in China’s economy as challenges for policy. New Zealand’s annual inflation has come off in recent months and is currently running at 4.7% with expectations that it will return to its target band in the second half of this year.ANZ, which was alone in predicting a hike this week, said in a note the overall tone of the statement was not nearly as hawkish as they had anticipated.”The evidence threshold for the RBNZ committee is clearly much higher than we appreciated, so we have reluctantly parked further hikes back in the risk basket, pushing cuts out to mid-2025,” ANZ chief economist Sharon Zollner said. More