US ECONOMY & POLITICS

Fed’s Goolsbee Says Next Rate Move Is Open Even as Inflation Eases – Bloomberg, 7/31/2023

• Federal Reserve Bank of Chicago President Austan Goolsbee said data showing slower US inflation is “fabulous news” but he hasn’t yet decided on whether to support pausing interest-rate increases at the next policy meeting.
• “I haven’t made up my mind for what should happen in September,” Goolsbee said Monday in an interview on Yahoo! Finance.
• “But this golden path — which so far, we’re sticking on that line — that would be a triumph, and it’s certainly a possibility at this point,” he said, referring to being able to get inflation to the Fed’s goal without triggering a recession.
• Goolsbee, a voter on monetary policy this year, said the Fed will have to “play by ear” on whether the policy rate is sufficiently restrictive.
• “We’ll get several more major data points before the next meeting,” he said.
• “But it’s looking like we’re walking the line pretty well.”

Traders Brace for $102 Billion Wave of Treasury Bond Sales – Bloomberg, 7/31/2023

• The US Treasury is set this week to begin a ramp-up in issuance of longer-dated securities that’s likely to stretch into next year, forced by a rapidly deteriorating budget deficit and soaring interest rates.
• For the first time since early 2021, the Treasury will boost its so-called quarterly refunding of longer-term Treasuries, to $102 billion from $96 billion, the consensus among dealers suggests.
• Wednesday’s announcement will likely also see debt managers hoist regular auction sizes for securities across the yield curve — with potential exceptions or smaller bumps for notes less in demand.
• Dealers will be on watch separately for an update on a coming program to buy back older Treasuries.
• The consensus of dealers’ projections shows the following for the upcoming refunding auctions:

• $42 billion of 3-year notes on Aug. 8
• $37 billion of 10-year notes on Aug. 9
• $23 billion of 30-year bonds on Aug. 10

Small-Business Lending Is About to Change, With Simpler Requirements – Wall Street Journal, 7/31/2023

• The federal program for small-business lending is undergoing its biggest makeover in decades.
• The Small Business Administration is simplifying loan requirements, automating more of the process and expanding the pool of nonbank lenders licensed to issue SBA loans.
• The moves, many of which take effect Aug. 1, will make it easier for financial-technology firms to participate.
• SBA officials say they want to boost credit to small businesses that have struggled to get financing as banks favored bigger commercial borrowers.
• “These are the most sweeping changes I have seen in my 40-year career,” said Tony Wilkinson, chief executive of the National Association of Government Guaranteed Lenders, a trade group for current SBA lenders.
• One of lenders’ most important jobs is to say no when it is appropriate, he added, rather than give small-business owners loans they can’t repay.

Biden administration launches new SAVE student loan repayment plan – CNBC, 7/31/2023

• The Biden administration has launched a beta application for its new repayment plan for student loan borrowers.
• The Saving on a Valuable Education, or SAVE plan, is an income-driven repayment plan that may cut many borrowers’ previous monthly payments in half, and will leave some people with no monthly bill.
• The U.S. Department of Education says borrowers can begin enrolling now in what it calls, “the most affordable repayment plan yet.”
• Instead of paying 10% of their discretionary income a month toward their undergraduate student debt under the previous Revised Pay As You Earn Repayment Plan, or REPAYE, plan, borrowers will eventually be required to pay just 5% of their discretionary income under the SAVE plan.
• Those who make less than $15 an hour won’t need to make any payments under the new option, the Education Department says.
• Some of these benefits of the SAVE plan, including the change from 10% of discretionary income to 5%, won’t fully go into effect until next summer because of the timeline of regulatory changes.

EUROPE & WORLD

Euro Zone Returns to Growth as Core Inflation Stays Strong – Bloomberg, 7/31/2023

• The euro-area economy returned to growth while underlying inflation pressures persisted — supporting early arguments for the European Central Bank to raise interest rates again.
• Second-quarter gross domestic product advanced by 0.3% from the previous three months after shrinking and stagnating in the two earlier periods, according to Eurostat data published Monday.
• A Bloomberg survey of economists saw an increase of 0.2%.
• A separate release showed consumer prices rose 5.3% from a year ago in July, as expected.
• But in a sign of lingering dangers, the closely watched underlying inflation measure that excludes volatile costs like food and energy overshot estimates by a touch to stay at 5.5%, surpassing the headline gauge for the first time since 2021.
• While the euro zone’s GDP number looks encouraging, it was buoyed by a bumper three months from Ireland, which expanded by 3.3%.
• The country comprised less than 4% of the bloc’s overall output last year, and contributed about 0.1 percentage point to second-quarter growth.

China Stops Short of Direct Consumer Support to Spur Economy – Bloomberg, 7/31/2023

• China is seeking to boost consumption to spur the economy’s recovery, although the government has stopped short of providing direct fiscal support to consumers and companies to increase spending.
• The National Development and Reform Commission, China’s top economic planning agency, released a wide-ranging policy document Monday focusing on removing government restrictions on consumption, such as car purchase limits, improving infrastructure and holding promotional events like food festivals.
• “We’ve noticed that the growth momentum of some consumption categories is still not solid yet, and some residents have relatively weak confidence to spend,” NDRC Vice Chairman Li Chunlin told reporters. “This requires further policy support.”
• Like the measures announced Friday — which are focused on boosting manufacturing in the consumer-goods industries — the latest steps are targeted toward improving the supply of goods in the economy, rather than demand.

Walmart Pays $1.4 Billion to Boost Flipkart Stake – Wall Street Journal, 7/31/2023

• Walmart has paid $1.4 billion to buy out a large investor in Flipkart, further cementing its control of the Indian e-commerce giant.
• In recent days, Walmart bought the remaining shares of Flipkart owned by Tiger Global, according to a letter the New York hedge-fund sent to its investors that was reviewed by The Wall Street Journal.
• The transaction valued Flipkart at $35 billion, down from nearly $38 billion when it sold shares to Japan’s SoftBank, Walmart and other investors in 2021.
• The investment offers the U.S. retail behemoth greater exposure to the fast-growing global digital-consumer market.

Russia Says It Downed Three Ukrainian Drones Over Moscow – Wall Street Journal, 7/31/2023

• Russian authorities said they downed three drones targeting Moscow early Sunday, in an attack that Russian state media said injured one person and forced the temporary closure of one of the capital city’s main airports.
• The Ukrainian Air Force, meanwhile, said on its Telegram messaging channel that it destroyed eight Russian drones overnight, including four Iranian-made Shahed drones and four reconnaissance drones over the Kherson and Dnipropetrovsk regions.
• Russia’s Ministry of Defense said two drones were brought down over Moscow with electronic jamming equipment, and then crashed into a commercial building complex in the city.
• The other was destroyed in the air over the Odintsovo district in the Moscow region.
• The assault, which Russian officials described as an “attempted terrorist attack” by Ukraine, marked the fourth such strike on the capital this month, exposing serious vulnerabilities in the Kremlin’s ability to defend its territory since invading Ukraine nearly 18 months ago.

Hungary Delays Ratification of Sweden’s NATO Accession Bid Again – Bloomberg, 7/31/2023

• Hungarian Prime Minister Viktor Orban’s lawmakers boycotted an extraordinary meeting of parliament that opposition parties had called to ratify Sweden’s accession to NATO.
• The legislative session was adjourned on Monday after ruling party members, who wield a two-thirds majority in the chamber, failed to show for the meeting.
• Parliament may approve Sweden’s inclusion in the military alliance in the autumn, Cabinet Minister Gergely Gulyas told reporters last week.
• Hungary and Turkey are the only two NATO members who have yet to ratify Sweden’s inclusion in the military alliance, a bid that was prompted by security concerns following Russia’s invasion of Ukraine last year.
• Turkey lifted its objections earlier this month after Sweden pledged a new plan to crack down on Kurdish separatist groups in the Nordic country.

China Curbs Drone Export After US Says It Aids Russia War Effort – Bloomberg, 7/31/2023

• China slapped restrictions on the export of drones and certain components used in their manufacture, a move that could hurt production abroad of the aerial vehicles including types employed by armed forces in the Ukraine war.
• Exports of certain classes of drones, their engines and infrared imaging equipment won’t be allowed without a license starting Sept. 1, government agencies, including the top-ranked Central Military Commission, said in statements on Monday, adding that China is not targeting any specific country.
• The restriction on drone shipments will be effective for no longer than two years, the agencies said.
• “We have not marketed nor sold our products for military or war purposes,” DJI said in a statement to Bloomberg News. “We will strictly abide by the export control measures the Chinese government unveiled today.”
• Meanwhile, the authorities “see rising risks of civilian drones being used for military purposes,” China’s Ministry of Commerce said in one of the statements.
• “China has notified relevant countries of the measures.”

BOJ Wades Into Bond Market After YCC Tweak Triggers Yield Spike – Bloomberg, 7/31/2023

• The Bank of Japan sprung another surprise on Monday, announcing an unscheduled bond-purchase operation to tamp down rates after adjusting policy on Friday to allow benchmark yields to climb as high as 1%.
• It was the first time since February that the BOJ has waded into the market this way, suggesting that it will continue to smooth any sharp upward moves.
• With yields spiking to a fresh nine-year high in morning trading, the BOJ announced that it would buy the equivalent of more than $2 billion bonds at market rates.
• The 10-year yield dropped back below 0.6% and the yen reversed its advance against the dollar.

Factmonster – TODAY in HISTORY

• Columbus arrived at the island of Trinidad. – 1498
• The Marquis de Lafayette became a major-general in the American Continental Army. – 1777
• The first U.S. patent was issued to Samuel Hopkins of Vermont for a process of making fertilizer. – 1790
• Andrew Johnson, the 17th president of the United States, died in Tennessee. – 1875
• Mount Godwin-Austen (K2), the world’s second-highest peak, was climbed for the first time, by an Italian team led by Ardito Desio. – 1954
• The U.S. space probe Ranger 7 transmitted pictures of the Moon’s surface. – 1964