5 Things You Need to Know to Start Your Day

Fed decision day has arrived, Trump calls the charges against him “election interference,” and the Microsoft-Activision deal hits another sn [View in browser]( [Bloomberg]( Fed decision day has arrived, Trump calls the charges against him “election interference,” and the Microsoft-Activision deal hits another snag. — [Liza Tetley]( Decision day Federal Reserve [policymakers are poised to pause their hiking cycle for the first time in 15 months](, in a rate decision that will land at 2:00 p.m. in New York. Fed Chair Jerome Powell has signaled that he’d prefer to wait to evaluate the impact of past hikes on the economy, as well as the recent banking turmoil. The Fed’s likely to keep options open to hike again. Meanwhile,[Ken Griffin’s hedge fund Citadel is bracing for a US recession by ramping up high yield credit trades](. He expects the Fed to raise interest rates one more time this year and then pause for an extended period. Trump hearing Former President [Donald Trump continued to insist on his innocence during his first public remarks following his arraignment in federal court over mishandling of classified materials](, urging prosecutors to dismiss the charges and dubbing them “election interference.” “I’m not the one who thinks I’m above the law,” he said, hours after his arraignment in Miami and on the eve of his 77th birthday. “It’s Joe Biden and his corrupt department of injustice who think they are above the law.” Microsoft-Activision [Microsoft’s $69 billion acquisition of Activision Blizzard hit another hurdle after being temporarily blocked by a federal judge in California](, who said a restraining order was necessary while the Federal Trade Commission challenges the deal. The ruling holds the two companies apart for five days after the court rules on a more permanent pause, according to US District Judge Edward J. Davila. This comes after UK competition regulators recently vetoed the merger; a decision Microsoft is appealing. Positive markets S&P 500 and Nasdaq futures are climbing this morning, up 0.2% and 0.3% respectively as at 5:31 a.m. in New York, as the markets anticipate a pause in rate hikes from the Fed. Treasury yields are falling slightly while a measure of the dollar weakens. Spot gold prices, oil and iron ore are all climbing. Coming up… We’ve got US MBA Mortgage Applications at 7:00 a.m., followed by May PPI at 8:30 a.m. and EIA US Crude Oil Inventories at 10:30 a.m. The US will sell $46 billion 17-week bills at 11:30 a.m. At 2:00 p.m. we’ll get that all important FOMC rate decision, which will be followed by a speech by Powell at 2:30 p.m. Earnings include Lennar. What we’ve been reading Here’s what caught our eye over the past 24 hours: - [Shell is refocusing on fossil fuels and boosting its dividend]( - McKinsey identifies who will be the[biggest losers in the AI boom]( - Cracks appear in [Putin’s bravado]( faced with Ukrainian counteroffensive - The[ECB is set to test the bloc’s banks by demanding repayment](on a load of pandemic debt in one go - [Dubai’s most expensive house on sale is a Versailles-evocative $204 million]( pile - The UK[ economy bounces back in April after a strong month for pubs]( - [Thursday’s US Open will be the first LA](bbg://news/stories/RW8JQWTP3SHS)has hosted in 75 years And finally, here’s what Joe’s interested in this morning... Hello and Happy Fed Day. The widespread expectation is that the FOMC makers will hold rates steady today. And that perhaps we might even get a proper pause in the hiking cycle. Zoom out, big picture, and it looks like inflation continues to decelerate. Here's a YOY chart measuring CPI in a bunch of different ways. On the other hand, core inflation has remained hot on a sequential basis. [Here is a good thread from Jason Furman]( breaking down what's going on there, and why at least some softening should be expected. Whether that softening is enough is TBD. But anyway, the big picture is that the soft landing crowd lives to see another batch of data. Inflation is decelerating. The labor market remains robust. The unemployment rate is below 4%. The pace of job creation has been strong. Other measures of labor market utilization, such as the Prime Age Labor Force Participation Rate or the Employment-to-Population ratio have been impressive. A plausible story you could tell about the last few years is that reversing destruction is hard and costly. Covid and the policies designed to mitigate its spread ground the economy to a halt virtually overnight in March 2020. It's as if a building collapsed or was demolished almost instantaneously. There's no way you can rebuild it as fast as it fell apart. However, if it's an emergency and you must expedite its construction, it's going to be particularly costly and taxing overall (you'll have to pay more for round-the-clock labor, more for materials etc.). In 2020, policymakers, having learned the lessons of the 2010s, decided not to let the Covid recession turn into a long, drawn-out downturn, with an aim to restoring maximum employment as soon as possible. And the labor market recovered far faster than anyone expected, and far faster than in any other previous downturn. Arguably though, the rebuilding process was costly and taxing to the system. Rehiring people is difficult when done in short order. We've never had months before, like we had in the middle of 2020, where millions of people were returning to employed status. Even the raw monthly job gains we saw in 2022 were extremely high by historical measures. So perhaps in the short-run, the growth of the economy was quite literally unsustainable, as we got back to more normal levels of activity in record breaking time. This unsustainability showed up in higher prices, bottlenecks, supply chain breakages, shortages and so forth. In the long-run, our current levels of activity and labor market utilization may be consistent with more stable prices as growth becomes more normal. At least that's the hope anyway. We still have to see more data to find out if the story is true or not. Follow Bloomberg's Joe Weisenthal on Twitter @TheStalwart Follow Us Like getting this newsletter? 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