From CNN's Bryan Mena, Elisabeth Buchwald, Krystal Hur, Nicole Goodkind and Alicia Wallace
From CNN's Rob McLean
Wells Fargo shares rose 3% in premarket trading Wednesday after the bank said it would buy back $30 billion of its own stock.
The bank also said its board approved a quarterly common stock dividend of $0.35 per share.
CEO Charles Scharf said in a statement that Wells Fargo's "capital levels are strong and we expect them to remain so, allowing us to return excess capital to our shareholders."
The Federal Reserve is expected to announce Wednesday that it will raise its benchmark lending rate to the highest level in 22 years — just one month after hitting pause on a historic spate of rate hikes meant to crush decades-high inflation.
Moreover, the Fed could also hint at the possibility of another rate increase this year — its 12th hike since it began raising rates last spring — even though inflation has steadily cooled in recent months.
After the Fed’s July monetary policy meeting, which concludes on Wednesday, investors will be looking for more details around that potential hike.
Much depends on what economic data show in the next eight weeks — and things can go either way. That’s why the Fed is trying to retain the option of another rate increase in case inflation proves to be more resilient than expected.
Fed Chair Jerome Powell’s remarks during an annual gathering of central bankers and economists in Wyoming next month could shed more light on what to expect for the September decision.
There are three possibilities for what the Fed might do moving forward, according to economists: a second consecutive rate hike in September, one in November, or no more rate hikes after July. It’s anyone’s guess what will ultimately transpire, since the economy has consistently defied expectations. But right now, there’s no denying there’s optimism in the air.
From CNN's Anna Bahney
So many things are working against would-be home buyers this summer.
The housing market remains stuck, with sales pushed lower by a lack of both affordability and inventory, recent credit tightening, higher interest rates and home prices firming up across the country after a brief correction last fall.
The stubbornly low inventory of homes available to buy is keeping prices up and pushing sales down during this typically busy season. Many current homeowners who bought or refinanced into a 2%, 3% or 4% mortgage rate during the pandemic are reluctant to sell and become buyers with a mortgage at 6% or higher.
More than 60% of existing mortgage holders — the potential sellers who could bring inventory to market — are sitting on mortgages with rates below 4%, according to Black Knight, a mortgage data company. Even if they are likely to get a good price selling, they do not have an incentive to list in this environment.
In recent weeks, as mortgage rates closed in on 7%, affordability has worsened.
The monthly principal and interest payment needed to buy the median-priced home rose to $2,258 in June, marking the highest payment on record, according to Black Knight.
Nationally, it takes about 36% of the median household income to make the average mortgage payment — more than the recommended 30% allowance for housing.
Adding to all of that is a tightening of credit, with credit availability remaining close to the lowest levels since early 2013, as the industry continues to operate at reduced capacity, according to a report from the Mortgage Bankers Association.
However, there is some hope ahead: Mortgage rates are expected to drop in the second half of this year as inflation continues to cool, with economists and housing analysts forecasting rates to end the year around 6%.
Americans haven’t felt this optimistic about the economy and the potential for inflation to ease since 2021.
In addition, economists are noticing better business conditions and investors have grown more bullish on the Fed’s chances of pulling off a soft landing, a scenario in which the central bank succeeds at bringing down inflation without tanking the economy.
This new-found confidence comes as inflation has slowed and the economy has held up — all on the backdrop of 10 straight rate hikes since the Fed began to lift rates in March 2022. The economy’s remarkable resilience has quelled fears of a recession somewhat. Some Wall Street bankers now think a mild recession might happen later than expected.
That’s all thanks to inflation’s cooldown. The Consumer Price Index rose 3% in June, a much slower pace than the four-decade high of 9.1% in June 2022. The Fed’s preferred inflation gauge — the Personal Consumption Expenditures price index — rose 3.8% in May from a year earlier, down from the 4.3% annual rise seen in April. The Commerce Department releases the June reading of the Fed’s favorite inflation measure Friday.
Consumer optimism is a great sign for the Fed because it means Americans have faith that inflation will eventually come down to a sustainable level they’re familiar with.
Top economists say the labor market will prove to be a persistent source of inflationary pressure that would require the Federal Reserve to slow the economy further.
The Fed is closely watching the labor market for signs that demand and supply are coming back “into better balance,” as Fed Chair Jerome Powell describes it. Conceivably, that could mean fewer job openings do the trick of easing pressure off wage growth and, in turn, consumer prices.
Higher labor costs loom large for service-providing businesses such as restaurants and hospitals. Those are labor-intensive industries, so having to beef up compensation to hire enough staff means those higher costs can be passed on to consumers. Though for some businesses, it has become harder to pass costs on, according to anecdotes in the Fed’s Beige Book, a compilation of survey responses from businesses around the country.
The Labor Department releases its Employment Cost Index for the second quarter this Friday, a key report that will inform officials if underlying inflationary pressures have lost any steam in recent months.
Whatever the Fed decides to do won’t come without a vigorous debate, and perhaps even a dissent, though the Fed has a tradition of collegiality. Nearly all of the Fed’s decisions have been unanimous since the central bank began lifting rates in March 2022, with the exception of two meetings early in the Fed’s current inflation battle.
The Federal Reserve is at a crucial fork in the road after leaving interest rates unchanged at its June meeting for the first time since March 2022.
One road — continuing to raise interest rates to lower inflation — could lead to a recession. That would happen if the Fed ends up raising rates too high, causing businesses and consumers to cut back so significantly on spending that employers have to lay off masses of workers.
The other road — taking more time to gauge the economy's health — could undo the progress that has been made in getting inflation closer to the Fed's 2% target. That's because consumers might not have an adequate reason to stop spending, which would funnel right back into higher prices.
Traders are convinced the Fed will pick the first option at its meeting this week, according to the CME FedWatch Tool. But there's less of a consensus as to which road the Fed will take at future meetings.
The Fed had a similar predicament in 2006.
Wells Fargo shares rose 3% in premarket trading Wednesday after the bank said it would buy back $30 billion of its own stock.
The bank also said its board approved a quarterly common stock dividend of $0.35 per share.
CEO Charles Scharf said in a statement that Wells Fargo's "capital levels are strong and we expect them to remain so, allowing us to return excess capital to our shareholders."
The Federal Reserve is expected to announce Wednesday that it will raise its benchmark lending rate to the highest level in 22 years — just one month after hitting pause on a historic spate of rate hikes meant to crush decades-high inflation.
Moreover, the Fed could also hint at the possibility of another rate increase this year — its 12th hike since it began raising rates last spring — even though inflation has steadily cooled in recent months.
After the Fed’s July monetary policy meeting, which concludes on Wednesday, investors will be looking for more details around that potential hike.
Much depends on what economic data show in the next eight weeks — and things can go either way. That’s why the Fed is trying to retain the option of another rate increase in case inflation proves to be more resilient than expected.
Fed Chair Jerome Powell’s remarks during an annual gathering of central bankers and economists in Wyoming next month could shed more light on what to expect for the September decision.
There are three possibilities for what the Fed might do moving forward, according to economists: a second consecutive rate hike in September, one in November, or no more rate hikes after July. It’s anyone’s guess what will ultimately transpire, since the economy has consistently defied expectations. But right now, there’s no denying there’s optimism in the air.
So many things are working against would-be home buyers this summer.
The housing market remains stuck, with sales pushed lower by a lack of both affordability and inventory, recent credit tightening, higher interest rates and home prices firming up across the country after a brief correction last fall.
The stubbornly low inventory of homes available to buy is keeping prices up and pushing sales down during this typically busy season. Many current homeowners who bought or refinanced into a 2%, 3% or 4% mortgage rate during the pandemic are reluctant to sell and become buyers with a mortgage at 6% or higher.
More than 60% of existing mortgage holders — the potential sellers who could bring inventory to market — are sitting on mortgages with rates below 4%, according to Black Knight, a mortgage data company. Even if they are likely to get a good price selling, they do not have an incentive to list in this environment.
In recent weeks, as mortgage rates closed in on 7%, affordability has worsened.
The monthly principal and interest payment needed to buy the median-priced home rose to $2,258 in June, marking the highest payment on record, according to Black Knight.
Nationally, it takes about 36% of the median household income to make the average mortgage payment — more than the recommended 30% allowance for housing.
Adding to all of that is a tightening of credit, with credit availability remaining close to the lowest levels since early 2013, as the industry continues to operate at reduced capacity, according to a report from the Mortgage Bankers Association.
However, there is some hope ahead: Mortgage rates are expected to drop in the second half of this year as inflation continues to cool, with economists and housing analysts forecasting rates to end the year around 6%.
Americans haven’t felt this optimistic about the economy and the potential for inflation to ease since 2021.
In addition, economists are noticing better business conditions and investors have grown more bullish on the Fed’s chances of pulling off a soft landing, a scenario in which the central bank succeeds at bringing down inflation without tanking the economy.
This new-found confidence comes as inflation has slowed and the economy has held up — all on the backdrop of 10 straight rate hikes since the Fed began to lift rates in March 2022. The economy’s remarkable resilience has quelled fears of a recession somewhat. Some Wall Street bankers now think a mild recession might happen later than expected.
That’s all thanks to inflation’s cooldown. The Consumer Price Index rose 3% in June, a much slower pace than the four-decade high of 9.1% in June 2022. The Fed’s preferred inflation gauge — the Personal Consumption Expenditures price index — rose 3.8% in May from a year earlier, down from the 4.3% annual rise seen in April. The Commerce Department releases the June reading of the Fed’s favorite inflation measure Friday.
Consumer optimism is a great sign for the Fed because it means Americans have faith that inflation will eventually come down to a sustainable level they’re familiar with.
Top economists say the labor market will prove to be a persistent source of inflationary pressure that would require the Federal Reserve to slow the economy further.
The Fed is closely watching the labor market for signs that demand and supply are coming back “into better balance,” as Fed Chair Jerome Powell describes it. Conceivably, that could mean fewer job openings do the trick of easing pressure off wage growth and, in turn, consumer prices.
Higher labor costs loom large for service-providing businesses such as restaurants and hospitals. Those are labor-intensive industries, so having to beef up compensation to hire enough staff means those higher costs can be passed on to consumers. Though for some businesses, it has become harder to pass costs on, according to anecdotes in the Fed’s Beige Book, a compilation of survey responses from businesses around the country.
The Labor Department releases its Employment Cost Index for the second quarter this Friday, a key report that will inform officials if underlying inflationary pressures have lost any steam in recent months.
Whatever the Fed decides to do won’t come without a vigorous debate, and perhaps even a dissent, though the Fed has a tradition of collegiality. Nearly all of the Fed’s decisions have been unanimous since the central bank began lifting rates in March 2022, with the exception of two meetings early in the Fed’s current inflation battle.
The Federal Reserve is at a crucial fork in the road after leaving interest rates unchanged at its June meeting for the first time since March 2022.
One road — continuing to raise interest rates to lower inflation — could lead to a recession. That would happen if the Fed ends up raising rates too high, causing businesses and consumers to cut back so significantly on spending that employers have to lay off masses of workers.
The other road — taking more time to gauge the economy's health — could undo the progress that has been made in getting inflation closer to the Fed's 2% target. That's because consumers might not have an adequate reason to stop spending, which would funnel right back into higher prices.
Traders are convinced the Fed will pick the first option at its meeting this week, according to the CME FedWatch Tool. But there's less of a consensus as to which road the Fed will take at future meetings.
The Fed had a similar predicament in 2006.
