|
Fed's Evans Says Fed May Need to Let Inflation Overshoot Target; Fed-Funds Futures Point to Likely March Rate-Cut
|
|
|
|
|
|
Good day. Another day, another Fed official saying the central bank will wait to see how the coronavirus may affect the U.S. economy before taking action. This time it was the Chicago Fed’s Charles Evans, who also said the Federal Reserve may need to allow inflation to overshoot its 2% target in the future. Fed-funds futures signaled investors see a high chance of the Fed lowering its key next month. Meanwhile, a new paper suggests the rate of inflation since 2008 may have been even lower than previously thought, based on a measure of prices paid for consumer digital services.
Now on to today’s news and analysis.
|
|
|
Evans Says the Fed Likely to Need Inflation Overshoot in Future
|
|
|
The Chicago Fed's Charles Evans spoke Thursday as financial markets, worried by the coronavirus, move to price in a series of rate cuts this year. PHOTO: RICHARD DREW/ASSOCIATED PRESS
|
|
|
Chicago Fed leader Charles Evans said the U.S. central bank may need to let inflation overshoot its 2% target in the future as part of an effort to ensure price pressures aren’t too weak and monetary policy doesn’t get stuck at near zero rates. He also said that because the risks of falling to near zero rates are now higher, the Fed must be prepared to use stimulus tools such as bond buying and guidance about the future of interest rates when needed.
|
|
-
Like other Federal Reserve officials in recent days, Evans also said the Fed is closely monitoring the fallout from the spread of the coronavirus, but would look for an impact on the economy before thinking of a monetary policy response, which could take time as the evolution of the epidemic is still uncertain.
|
|
Bets on Interest Rate Cuts by Fed Escalate
|
|
Federal-funds futures, which traders use to bet on the path of central-bank policy, are showing investors have dramatically reassessed the chances the Federal Reserve will lower interest rates as soon as next month, betting the coronavirus will force the bank’s hand despite recent statements from bank officials indicating they aren’t yet convinced that action is needed.
|
|
|
|
The Latest on the Coronavirus Outbreak
|
|
|
Stock indexes around the world on Friday followed U.S. markets into correction territory as fears about the coronavirus continued. Futures tied to the S&P 500 were 0.7% lower Friday, indicating further declines are likely when the U.S. markets open. A U.S. coronavirus outbreak would trigger temporary but widespread disruptions of daily life and business activity, posing a new risk to the nation's longest economic expansion on record.
|
|
|
-
Banks with heavy exposure to Europe and Asia have warned their profits could be hit, and the auto industry braced for supply-chain disruptions. Starbucks said it had reopened hundreds of its China stores that had been closed in response to the outbreak.
-
Maritime operators are facing their biggest challenge since the financial crisis. Private-equity firms are adding protective clauses regarding pandemics in deal and fundraising documents.
-
In China the outbreak has spurred a rise in the use of virtual-meeting and work platforms that go beyond simple videoconferences.
-
Nigeria’s health authorities on Friday reported the first confirmed case of the coronavirus in sub-Saharan Africa, adding to fears about the spread of the deadly virus on a continent already beset by some of the world’s weakest health-care systems.
📞 On Call With WSJ: Register here for a conference call today at noon EST with Wall Street Journal editors and reporters on how global markets are reacting to the latest virus news.
For more, visit WSJ's live coverage page, which is updated regularly. Or check out our primer on what you need to know about the virus itself.
|
|
|
Key Developments Around the World
|
|
|
Investors Drop Italian Bonds, Seek Safety in German and French Debt
|
|
Investors are shunning Italian government bonds after the country became Europe’s epicenter for the coronavirus outbreak this week, leading to renewed worries about one of the region’s most indebted economies.
|
|
|
U.K., European Union Gear Up for Thorny Post-Brexit Negotiations
|
|
Prime Minister Boris Johnson wants Britain to set its own rules and is prepared for tariffs, and raising the stakes on Thursday his government said it wants a broad outline for a deal with the EU by June and would walk away from talks if no progress was made by then.
|
|
|
|
Research Suggests Inflation May Be Rising More Slowly Than Thought
|
|
Inflation may have been lower than official measures indicated in recent decades due to the difficulty in measuring prices paid for consumer digital access services, according to a new paper by Federal Reserve economist David Byrne and Carol Corrado of the Conference Board. It proposes a new method of measuring prices paid for consumer digital access services, which include internet, mobile phone, cable television and wireless streaming services. The services accounted for more than 2% of consumer spending in 2018.
|
|
|
|
Financial Regulation Roundup
|
|
|
Wells Fargo to Pay $35 Million to Settle ETF Probe
|
|
The bank agreed to pay $35 million to settle regulatory claims that its financial advisers recommended inverse exchange-traded funds that were too risky for some clients. Regulators have warned for years that inverse ETFs are unsuitable for many individual investors.
|
|
|
Sanders Aims New Tax Hike at Executive Retirement Plans
|
|
Front-runner for the Democratic presidential nomination Bernie Sanders would sharply curb tax benefits of executives’ retirement plans and require earlier taxation of stock options in a proposal that could dramatically alter compensation at major U.S. companies.
|
|
|
|
Former Alstom Executive’s Foreign Bribery Conviction Overturned
|
|
A U.S. judge acquitted former Alstom SA executive Lawrence Hoskins of charges he violated the U.S. Foreign Corrupt Practices Act in a ruling that could limit enforcement of the antibribery law.
|
|
|
Supreme Court Ruling Opens Door for More 401(k) Suits
|
|
A Supreme Court decision in a case against Intel Corp. alleging problems in its 401(k) plan “has pretty significant ramifications for people’s ability to bring lawsuits over fiduciary breaches,” according to a specialist in retirement-plan law.
|
|
|
Actor Steven Seagal Isn’t Above the Securities Law
|
|
The Securities and Exchange Commission said Mr. Seagal settled charges he was “unlawfully touting” by failing to disclose payments for promoting investment in an initial coin offering by Bitcoiin2Gen, the regulator's latest action on a celebrity digital-asset-offering endorser.
|
|
|
|
|
8:30 a.m.: U.S. Commerce Department releases January personal income and outlays; U.S. Commerce Department releases January advance economic indicators report
9:15 a.m.: St. Louis Fed’s Bullard speaks on economy and monetary policy in Fort Smith, Ark.
10 a.m.: University of Michigan releases final February U.S. consumer sentiment
11:15 a.m.: Bank of England’s Cunliffe speaks at China trade and financial globalization conference at London School of Economics
|
|
|
The Fed Can’t Inoculate the Economy From Coronavirus
|
|
"The Fed’s aim when it eases policies...is to induce businesses and households to borrow and spend more, and save less. When the problem is a loss of confidence in the economy, that is a good way to get things moving again," writes the Journal's Justin Lahart. "It is a whole different matter if businesses face supply-chain disruptions as a result of the spread of coronavirus in China and elsewhere. Lowering borrowing costs wouldn’t solve the most immediate problem—that companies can’t get hold of the goods they need."
|
|
U.S. Coronavirus Outbreak Would Pose Risk to Record Expansion
|
|
Writing at The Wall Street Journal, Eric Morath and Harriet Torry note that the extent of the economic damage—and whether it could trigger a recession—is difficult for economists to project and depends on whether an outbreak is limited to a city or two, or becomes more widespread—and how the public reacts. Already, public-health officials have told Americans to expect the virus to spread in the U.S. Economists, however, expect a swift U.S. recovery from any downturn as companies work to meet pent-up demand from consumers after the health threat subsides.
|
|
|
-
The New York Fed intervened with two repo operations, with an overnight operation adding $30.19 billion and a 14-day operation adding $25 billion, while the outstanding pool of repo operations fell to $130.2 billion.
-
Orders for new U.S. core capital goods rose 1.1% in January from December despite coronavirus risks that erupted late that month.
-
The euro has rallied against the dollar this week, contrary to what might be expected in a weak economy that has the biggest outbreak of coronavirus outside of Asia.
-
German jobless claims fell unexpectedly in February, showing the resilience of the German labor market in the face of the spreading coronavirus epidemic.
-
Manufacturing in the central U.S. expanded modestly this month, according to the Kansas City Fed. Its manufacturing index showed a reading of 5 for February, compared with -1 in January in -5 in December. Most survey respondents said they expect the coronavirus to weigh on their operations this year. (Dow Jones Newswires)
|
|
|
Send us your tips, suggestions and feedback. Write to:
Jon Hilsenrath, Michael Derby, Nell Henderson, Nick Timiraos, Jason Douglas, Paul Hannon, Harriet Torry, Kate Davidson, David Harrison, Kim Mackrael, Tom Fairless, Megumi Fujikawa, Michael Maloney, Paul Kiernan, James Glynn
Follow us on Twitter:
@WSJCentralBanks, @NHendersonWSJ, @michaelsderby, @NickTimiraos, @PaulHannon29, @wsj_douglasj, @HarrietTorry, @KateDavidson, @d_harrison, @kimmackrael, @TomFairless, @megumifujikawa, @mikemaloneyny, @pkwsj, @JamesGlynnWSJ
|
|