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The Fed pauses hiking but signals more to come, US chipmaking supplier sues rival on spying claims, and Microsoft leapfrogs tech rivals in A [View in browser]( [Bloomberg]( The Fed pauses hiking but signals more to come, US chipmaking supplier sues rival on spying claims, and Microsoft leapfrogs tech rivals in AI race. — [Liza Tetley]( Fed pause The [Federal Reserve paused its series of hikes but said it expects borrowing costs to go up more]( than previously expected to tamp down on inflation and labor market strength. Fed chair Jerome Powell indicated that at least two more increases might be necessary this year, possibly as soon as July, with policymakers keeping their options open over the coming months to assess how previous moves are affecting the economy. He added rate cuts would be a “couple of years out.” Spy claims The [biggest US supplier of chipmaking equipment, Applied Materials, is suing a Chinese-owned rival]( over what it says was a 14-month effort to poach employees and steal semiconductor equipment designs. The firm accused Mattson, a California-based company acquired by Beijing E-Town Dragon Semiconductor Industry Investment Center in 2016, of hiring 17 of its most senior engineers over just more than a year. The lawsuit, not previously reported, was filed in 2022. Microsoft’s leapfrog With OpenAI, the creators of ChatGPT, [Microsoft is boosting its dominance in the tech world and turning into the unlikely AI giant to beat](. The company is now tasked with turning the buzz around the tool into a business, and stands to make a lot of money by doing so. It’s invested $13 billion in OpenAI since 2019, and its share price has shot up 30% since ChatGPT’s unveiling. Kim Forrest, chief investment officer and founder of Bokeh Capital Partners LLC, says Microsoft is “the clear leader. Google just got completely leapfrogged.” Sinking markets S&P 500 and Nasdaq futures are falling 0.3% and 0.6%, respectively, as of 5:24 a.m. in New York, as tech drags. Treasury yields are climbing after warnings from the Fed yesterday that rates will go higher in the coming months. Meanwhile, a measure of the dollar is strengthening on that prospect. Gold prices are falling, with the higher rate outlook generally a dampener on appetite for bullion, while oil and iron ore both climb. Coming up… We’ve got US Initial Jobless Claims at 8:30 a.m., accompanied by US May Retail Sales, US June Empire Manufacturing, and the Philadelphia Fed Business Outlook. Those are followed by US May Industrial Production at 9:15 a.m. and US April Business Inventories at 10:00 a.m. The US will sell $65 billion 4-week and $55 billion 8-week bills at 11:30 a.m., and then at 4:00 p.m. we’ll get US April TIC Flows. Earnings today include Adobe, Kroger and Jabil. What we’ve been reading Here’s what caught our eye over the past 24 hours: - A [weakening Chinese economy has prompted the central bank to cut]( rates - [Odey Asset Management’s search for a new home for funds and staff]( may signal its end - [Citigroup expects its recent job cuts will hike costs for this quarter](by around $400 million - [Staff are increasingly unsure about working at home](— but don’t share their bosses’ love of offices - [China’s youth jobless rate edged up to a fresh record in May]( to nearly 21% - [An investigation into former UK prime minister Boris Johnson]( finds he misled Parliament - [America’s doctors are suffering from so-called moral injury](bbg://news/stories/RWAEFITP3SHS) And finally, here’s what Joe’s interested in this morning... Here's a chart of the YOY change in Producer Prices excluding food and energy, which just came out yesterday. The good news is that there's more and more charts that roughly have this shape these days. The bad news is that there are still charts that look like this. This is the monthly change on Core PCE. As you can see here, the pace of monthly price increases by this measure is significantly higher than it was pre-crisis. And there are hints or maybe reasons why it might be decelerating, but this doesn't look like a chart rapidly returning to normal. So it's in this context that the Fed yesterday left everything open. There was no rate hikes, but they are expected to be necessary. They're not locked in though. Powell stressed that point. Probably the best summary of his views came in a response to a question from [Howard Schneider of Retuers](, during which Powell said: "I would almost say that the conditions that we need to see in place to get inflation down are coming into place. And that would be growth meaningfully below trend. It would be a labor market that's loosening. It would be a goods pipeline getting healthier and healthier." And then he added that now we need to see that process of those factors actually working to dampening inflation. In theory, we're in a good position to see continued deceleration. Now the question is whether that's true in practice. And if not, then the Fed says it's prepared to do more. And if it's necessary, there's no reason for the Fed to be hesitant to do more. The unemployment rate is robust. Stocks are surging lately. The housing market has stabilized. (See shares of homebuilder Lennar up another 2% this morning after strong earnings). If the Fed wants to hike more, there's plenty out there giving it the green light. Follow Bloomberg's Joe Weisenthal on Twitter @TheStalwart Follow Us Like getting this newsletter? 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