Federal Reserve Chairman Jerome Powell will face some awkward questions when he testifies to Congress this week.<\/p>\n
The Fed\u2019s decision to skip an interest-rate hike last week, leaving borrowing costs unchanged for the first time in more than a year, is a puzzle.<\/p>\n
Ostensibly, it\u2019s to allow more time to wait and see the impact of past rate increases. But at the same time, the Fed\u2019s own estimate for how high rates need to go this year has risen. If the forecast is right, why wait? <\/p>\n
The impact of past rate hikes is, indeed, unclear. But if anything, it\u2019s surprising how little effect they\u2019ve had. The housing market, for example, seems to have absorbed the blow without collapse. Buyers are coping with higher mortgage rates. Home-builder confidence rose for the first time in 11 months, a report showed Monday. Data on housing starts and sales of existing homes add more color this week. <\/p>\n
Unemployment is still historically low\u2014another jobless claims report is due Thursday. And purchasing managers\u2019 indexes, while showing manufacturing is weak, also indicate that services are humming along. Another PMI update is coming on Friday.<\/p>\n
What\u2019s more, other central banks are still clearly in hiking mode. Watch the U.K., Switzerland, and Norway with big decisions later in the week.<\/p>\n
Inflation, while cooling, is still well above the level the Fed needs it to be.<\/p>\n
So why the pause? To be sure, lawmakers will also grill Powell from the other side as well, asking why he\u2019s still raising rates when consumers are already feeling the pinch. And a little bit of inflation may not sound so bad to politicians if the alternative is raising interest rates so high it brings the economy to a screeching halt.<\/p>\n
Nevertheless, explaining last week\u2019s decision will be Powell\u2019s biggest challenge.<\/p>\n
\u2014Brian Swint<\/em><\/p>\n *** Join Barron\u2019s associate editor for technology Eric Savitz and former Microsoft COO and Snowflake CEO Bob Muglia today at noon for a peek of the future of AI and what happens next. <\/em>Sign up here.<\/em><\/p>\n Try your hand at this morning\u2019s Barron\u2019s Daily crossword puzzle and sudoku games. For all games, including a digital jigsaw based on the week\u2019s cover story, click here.<\/em><\/p>\n Powell heads to Capitol Hill this week to answer lawmakers\u2019 questions about the state of the economy, one week after the central bank paused on further interest-rate increases but signaled rates might have to rise higher than previously expected.<\/p>\n What\u2019s Next:<\/strong> President Joe Biden is leaning on his economic record as he sets off on his reelection campaign. He promised higher wages and more jobs at a union rally last weekend, and plans coming fundraisers in California, Chicago and New York this month.<\/p>\n \u2014Liz Moyer<\/em><\/em><\/em><\/p>\n China cut its benchmark lending rate for the first time in 10 months Tuesday to reinvigorate its stalling economic recovery.<\/p>\n What\u2019s Next:<\/strong> The modest rate cut suggests an element of reluctance from China to stimulate demand. But the reality is the world\u2019s second-largest economy is going to need a much larger stimulus package.<\/p>\n \u2014Callum Keown<\/em><\/p>\n Investors will get a read on the post-Covid recovery of the commercial aerospace industry during the Paris Air Show this week. The first biannual show since 2019 runs through June 25 and should move the stocks of commercial aircraft makers such as What\u2019s Next:<\/strong> Boeing has announced large orders or preliminary agreements for new planes from \u2014Al Root and Janet H. Cho<\/em><\/em><\/p>\n Data This Week to Shed Light on Housing Market Recovery<\/h2>\n New data this week are expected to shed light on the housing market recovery, including Monday\u2019s home builder housing market index for June, which took the pulse of the single-family housing market. Later this week, the National Association of Realtors will report existing-home sales for May. <\/p>\n What\u2019s Next:<\/strong> National Association of Realtors\u2019 chief economist Lawrence Yun said his baseline forecast calls for a roughly 10% reduction in home sales this year after dropping 18% last year. Dietz expects mortgage rates over the next several years to fall to between 5% and 6%.<\/p>\n \u2014Shaina Mishkin and Janet H. Cho<\/em><\/em><\/p>\n FedEx Report Tonight Seen as Proxy for Consumer Spending<\/h2>\n \n FedEx What\u2019s Next:<\/strong> FedEx rival \u2014Liz Moyer<\/em><\/p>\n***<\/h4>\n
Congress to Ask Questions About Central Bank\u2019s Pause<\/h2>\n
\n
\n S&P 500
\n and
\n Nasdaq
\n ended last week on their longest streak of weekly advances in years. <\/p>\n<\/li>\n<\/ul>\n***<\/h4>\n
China Cuts Rates to Aid Sluggish Recovery<\/h2>\n
\n
***<\/h4>\n
What the Paris Air Show Says About Aviation Recovery<\/h2>\n
\n Boeing
\n and its European rival,
\n Airbus.<\/span>\n <\/p>\n\n
\n United Airlines,<\/span>
\n Saudia, and Riyadh Air. IBA\u2019s chief economist also expects
\n Delta Air Lines,<\/span>
\n Malaysia Airlines, and Air France KLM to be buyers of new aircraft, CNBC reported. <\/p>\n***<\/h4>\n
\n
\n
\n Lennar
\n and
\n Toll Brothers
\n gained confidence. Analysts expect existing-home sales for May to dip to 4.25 million annualized from 4.28 million in April.<\/p>\n<\/li>\n***<\/h4>\n
\n
\n reports fiscal fourth-quarter 2023 earnings after the market closes tonight, and investors are viewing the results as a proxy on consumer spending appetites, since shipping trends tend to follow consumer online shopping activity. The story will likely be one of slower package demand.<\/p>\n\n
\n United Parcel Service
\n faces potentially disruptive labor issues. Members of the International Brotherhood of Teamsters union overwhelmingly voted to go on strike if a collective bargaining agreement with UPS isn\u2019t reached by July 31.<\/p>\n***<\/h4>\n