Holding on too tight

For the past few years, central banks around the world have been trying to slow inflation by tamping down the kind of demand that leads to price pressures. It’s been a long and windy path, but some countries are now lowering interest rates, citing sufficient progress in their inflation fights. In the US, with a rate drop seemingly months off at best, the new line from desperate investors is that the Federal Reserve might wait too long to lower rates, risking a downturn (the kind prominent economists and Wall Street veterans alike have repeatedly been wrong about). But Fed Chair Jerome Powell and his colleagues do seem ready to declare victory for a segment of the economy that has fueled inflationary pressures. America’s recently white-hot employment picture has cooled to about where it was on the eve of the pandemic. That’s due in part to a surge in immigration, with newly arrived individuals taking a lot of jobs Americans don’t want. As a result, the rebalancing of the American jobs market has occurred without a real rise in unemployment.

Another helpful development for the central bank is the newly frugal US consumer. They kept spending through the pandemic but are now pinching pennies. Then there’s the very tight housing market, where high interest rates are keeping people from giving up ultra-low mortgages they secured before or during the early days of the pandemic. Meanwhile in the South, some local groups are pushing for restrictions on new housing developments. But not everyone is looking at lower rates. In Japan, which abandoned its historic era of negative rate policy earlier this year, inflation has accelerated on the back of rising energy costs. That supports the case for the central bank to consider raising interest rates in coming months.

Nvidia’s massive rally this year has become a punchline but it also briefly made the AI leader the world’s most valuable company, overtaking Apple and Microsoft. Demand for its H100 processor, which has enabled a new generation of artificial intelligence tools, is so great that some customers have to wait six months to get it. Dell also announced it’s building an AI factory for Elon Musk’s startup xAI alongside Nvidia. Despite the high valuations, tech giants have “warped expectations” about how much AI will contribute to profits, Parmy Olson writes in Bloomberg Opinion. But Citigroup says about half of all banking jobs have a high potential to be automated–and another 12% could soon be augmented by AI.

Donald Trump raised more money than US President Joe Biden for the second straight month, thanks mostly to Trump being found guilty of trying to manipulate the 2016 election. But Biden’s coffers are still flush as the two prepare to face off Thursday in their first debate. Contributions jumped for the twice-impeached Trump—who still faces prosecutions for allegedly mishandling state secrets and trying to subvert the 2020 election—in part because of a $50 million gift from right-wing billionaire Timothy Mellon. Trump still hasn’t picked a running mate, but scrutiny is increasing on far-right US Senator JD Vance, who Republican pollster Frank Luntz calls a “more articulate version of Trump.”

Prime Minister Benjamin Netanyahu is increasingly isolated from two forces critical to Israel’s war against Hamas: the Biden administration and his own military. He infuriated the White House by accusing the US without providing evidence of withholding weapons. A top official for the Israel Defense Forces appeared to suggest that Netanyahu’s goal of destroying Hamas is unachievable. US envoy Amos Hochstein, who personally expressed US displeasure to Netanyahu over his outburst, traveled to the region to calm the growing threat of war with Hezbollah, the powerful, well-armed Lebanese militia that may pose a greater threat to Israel than Hamas.

It’s been a bumpy few years for the auto industry, and this week brought a new pothole. Auto retailers and their customers across the US and Canada have been scrambling after CDK Global—a software provider to some 15,000 dealers—was waylaid by debilitating cyberattacks. Then there are EVs, with Canada preparing potential new tariffs on Chinese-made electric vehicles to align the country with actions taken by the US and European Union. And in case you missed it, here’s a look at the factory that will produce Ferrari’s first electric super-cars.

When it came to returning to the office, some employers resorted to “hot desking,” which let employees sit at any open spot and saved companies money on full office setups. Now, somewhere between the DJ parties and yoga classes to make office work “fun,” it’s back to the future. Firms are again offering workers a desk of their very own. Then there are four-day work weeks: Some companies are mulling the shift but weighing the potential pitfalls to productivity.

The UK’s new government will inherit historic challenges resulting from the Covid-19 pandemic, Russia’s war on Ukraine, Brexit and even the 2008 financial crash. Inflation is just one obstacle facing Labour Leader Keir Starmer, Tory Prime Minister Rishi Sunak or whomever the country elects on July 4. But there is a solution to Britain’s economic crisis: it involves increasing the nation’s productivity and efficiency.

Get Bloomberg’s Evening Briefing: If you were forwarded this newsletter, sign up here to get it every to get it every Saturday, along with Bloomberg’s Evening Briefing, our flagship daily report on the biggest global news.

Bloomberg Invest Summit: Led by Bloomberg’s Global Finance Correspondent Sonali Basak, this two-day event at Convene in New York on June 25-26 offers top strategies for navigating current market risks and seizing future opportunities. Covering topics from artificial intelligence to geopolitical risk, central bank policy and future economic trends, our lineup of the industry’s most influential speakers will engage allocators, dealmakers and investors worldwide. Learn more.