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[Quick Facts]

1. Further rate hikes would be needed this year and some officials backed a rate hike in June, Fed minutes show.

2. Russia's oil and gas revenues shrank by more than a quarter in June.

3. Williams says data support further rate hikes.

4. Visco says ECB shouldn't ignore concerns about excessive increases in borrowing costs.

5. Consumers' inflation expectations continued to fall, according to an ECB survey.

[News Details]

Further rate hikes would be needed this year and some officials backed a rate hike in June, Fed minutes show

The meeting minutes of the Federal Reserve show that the pause in rate hikes agreed by officials at their June meeting is fragile, although almost all officials thought it was "appropriate or acceptable" to keep rates unchanged. Almost all officials expected more rate hikes in 2023 to continue to fight stubborn inflation.

When discussing the outlook for monetary policy at the June FOMC meeting, all participants continued to expect that it would be appropriate to maintain a restrictive monetary policy stance on the economy in order to meet the Fed's inflation target.

According to the minutes, nearly all participants noted that further increases in the target federal funds rate during 2023 would be appropriate in their economic projections.

In considering the decision at last month's meeting, the minutes exposed some divisions within the Fed. Most participants supported a pause in rate hikes in June, while a few were in favor of a 25 basis point increase in June or could have supported such a proposal.

Regarding downside risks to economic activities, the minutes show that at the June meeting, the Fed staff still expected a mild recession this year like at the previous two meetings in March and May.

Russia's oil and gas revenues shrank by more than a quarter in June

Russia's oil and gas revenues shrank by more than a quarter last month due to falling crude oil prices and restricted gas supplies to Europe. Budget revenues from oil and gas taxes fell 26% in June from a year earlier to about 529 billion rubles ($5.84 billion), Russia's Finance Ministry said. The decline in gas exports to Europe, once the largest market for Russian gas giants, was the biggest contributor to the drop in gas revenues. Currently, tax revenues from gas exports plummeted 86% to 30.1 billion rubles.

Williams says data support further rate hikes

We still have more work to do to balance supply and demand and reduce inflation, said John C. Williams, President of the Federal Reserve Bank of New York, in a speech on Wednesday. The Fed's future moves will "rely on data." Data supports the idea that the Fed may need to raise rates further at some point, Williams added.

Inflation was still too high, which made him feel uneasy, but he also admitted that price pressures had eased. Current demand for labor remains high and the economy is responding quite well to rate hikes.

Williams also said that the recent divergence between Fed officials' view that rates need to be raised and the market's view that the Fed is about to cut rates has eased. He declined to say whether he thought it was necessary to raise rates in July, noting that his staff had not yet begun the work that would help him decide how to act at the next monetary policy meeting.

Visco says ECB shouldn't ignore concerns about excessive increases in borrowing costs

I don't understand and I continue to disagree with comments which would indicate that the risk of more - rather than less tightening is preferable, European Central Bank's Governing Council member Ignazio Visco said in a speech on Wednesday. He believes it's necessary to remain very vigilant.

He reiterated the potential threats to banks and lending. He believes it is necessary for officials to proceed with caution to avoid unwanted effects on economic activity, financial stability, and price stability in the medium term. It will be important to watch the evolution of risk perception among intermediaries. Past crises have highlighted that this is an important factor in the intensity of the contraction of credit.

Visco is one of the dovish officials at the ECB. Earlier this year, he accused some colleagues of signaling interest rate hikes months in advance.

Consumers' inflation expectations continued to fall, according to an ECB survey

ECB consumer survey results show that consumer expectations for euro area inflation kept falling in May, continuing the trend of a sharp decline in the previous month. This will give ECB officials less pressure. Consumer expectations for inflation in the euro area over the next 12 months fell to 3.9% from 4.1% in April. However, inflation expectations for the next three years were maintained at 2.5%, still above the ECB's 2% target.

Previous data show that the overall CPI rise in the euro area slowed down, mainly due to the decline in energy costs. Policymakers currently are focusing on the again accelerated core inflation. While the ECB has not yet reached the end of its tightening path, "it is not yet possible to answer the question of how much rates will be further raised," said German central bank president Joachim Nagel earlier Wednesday.

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