|
Mexico's Finance Minister Picked as Central Bank Governor; Bank of Canada Leaves Key Rate Unchanged; Waiting on the ECB
|
|
|
|
|
|
Good day. Mexican President Andrés Manuel López Obrador said Finance Minister Arturo Herrera will be named as the next head of the Bank of Mexico, replacing Alejandro Díaz de León when his term finishes at the end of December. The Bank of Canada left monetary policy unchanged and repeated past guidance that it would leave the key rate near zero until economic slack is absorbed and a 2% inflation target is achieved on a sustainable basis. A policy decision by the European Central Bank is on the agenda today.
Now on to today’s news and analysis.
|
|
|
Mexican Finance Minister Tapped as Next Bank of Mexico Governor
|
|
|
Finance Minister Arturo Herrera’s nomination will have to be ratified by the Senate.
PHOTO: GUSTAVO GRAF MALDONADO/REUTERS
|
|
|
Arturo Herrera's nomination will have to be ratified by the Senate. He will be replaced at the finance ministry by Rogelio Ramírez de la O, a longtime economic adviser to Mr. López Obrador. “We want to maintain macroeconomic stability,” Mr. López Obrador said in a message posted online. “We want to maintain the economic policy that has given us good results.”
|
|
Bank of Canada Leaves Key Interest Rate at 0.25%
|
|
The Bank of Canada left its key interest rate and large-scale asset purchase program unchanged on Wednesday as it reiterated its view that a recent jump in inflation is temporary and the country’s economic recovery is largely on track.
|
|
|
|
Key Developments Around the World
|
|
|
Fed's Reverse Repos Crack Half a Trillion Dollars, Hit New Record
|
|
The Federal Reserve’s reverse repo facility took in a record $503 billion Wednesday amid an ongoing surge of money onto the central bank’s balance sheet from money funds, government sponsored entities and other eligible firms. Interest in the facility has been surging over recent weeks and record levels are being hit regularly. Firms using reverse repos get a zero percent return, but market participants say there is a dearth of money market investments now so options are limited. Fed leaders seem fine with the wall of cash heading their way, but some see that as driven by the Fed’s bond buying and others are worried about what it means for private money market trading.
—Michael S. Derby
|
|
China Will Keep Monetary Policy Stable, Central Bank Governor Says
|
|
China will keep its monetary policy stable and implement normal policy as the government thinks inflation is under control and the economy’s performance is reasonable, said the central bank Gov. Yi Gang Thursday.
|
|
|
China’s Economic Officials Temper Climate Efforts
|
|
China’s top economic planners have put the brakes on attempts by environmental officials to reduce carbon emissions as driving growth takes priority over meeting climate targets for now, according to people familiar with the matter.
|
|
|
Why Northern Ireland Is Back on the Trans-Atlantic Agenda
|
|
A complex arrangement to manage trade and preserve peace in Northern Ireland after Brexit is souring relations between London and Brussels and risks unsettling the U.K.’s close ties with Washington.
|
|
|
|
Financial Regulation Roundup
|
|
|
Coinbase Teams Up With 401(k) Provider to Offer Crypto
|
|
ForUsAll Inc., a 401(k) provider, announced earlier this month a deal with the institutional arm of Coinbase Global Inc. that will allow workers in plans it administers to invest up to 5% of their 401(k) contributions in bitcoin, ether, litecoin, and others.
|
|
|
SEC Pursuing Broad Review of Stock Market Structure
|
|
The Securities and Exchange Commission is considering changing rules that govern how U.S. stocks are traded, including pricing incentives that exchanges and brokers use to attract orders, Chairman Gary Gensler said Wednesday.
|
|
|
El Salvador Becomes First Country to Approve Bitcoin as Legal Tender
|
|
El Salvador’s legislative body passed a law early Wednesday that will make the nation the first in the world to deem bitcoin legal tender, allowing the world’s largest cryptocurrency by market value, to be used to pay taxes.
|
|
|
Europe Has a New Cop on the White-Collar Crime Beat
|
|
The new European Public Prosecutor’s Office will investigate and prosecute crimes involving EU funds and taxes, including the 750 billion euros the EU has earmarked to help member countries recover from the pandemic.
|
|
|
The G-7’s Global Tax Deal Faces a China Test
|
|
An endeavor by Group of Seven nations to set minimum global tax rates for big companies presents a rare opportunity to satisfy objectives of both the U.S. and China. Still, Beijing’s support isn’t a foregone conclusion.
|
|
|
|
|
8:30 a.m.: U.S. Labor Department releases May CPI; European Central Bank’s Lagarde holds press conference
1 p.m.: Bank of Canada’s Lane gives speech
|
|
|
10 a.m.: University of Michigan releases preliminary June U.S. consumer sentiment
|
|
|
Fed Banks Offer Differing Takes on Ideal Fed Funds Settings
|
|
New reports from two Federal Reserve banks offer conflicting takes on the potency of the central bank’s federal-funds rate. The Cleveland Fed says in a quarterly report that based on seven different monetary policy rules, the ideal setting of the fed-funds rate should be 0.72%, rather than the current 0% to 0.25% target rate range. By the second quarter of next year, policy rules suggest a 1.48% fed-funds rate, which the Fed seems unlikely to deliver. Meanwhile, the Atlanta Fed reports its so-called Wu-Xia shadow federal-funds rate stood at negative 2% at the end of May, pointing to a more stimulative monetary policy setting than the nominal level would suggest.
—Michael S. Derby
|
|
|
The Fed’s Duty Is to the Economy, Not ‘Equity’
|
|
The Federal Reserve’s new initiatives expose it to political pressures that are inconsistent with an independent institution, and if central bank wants to lose its independence, it is taking steps to assure that outcome, Michael T. Belongia and Peter N. Ireland write for the WSJ opinion page. Mr. Belongia is a professor of economics at the University of Mississippi. Mr. Ireland is a professor of economics at Boston College and a member of the Shadow Open Market Committee.
|
|
Technology Fills the Gap as Jobs Lag GDP
|
|
At the moment lack of supply, not lack of demand, is holding back job growth, and there are clearly limits to how far technology can substitute for staff, Greg Ip writes. Despite the hype, robots aren’t yet replacing cooks and they aren’t even replacing waiters, he notes. But, he adds, the longer shortages persist, putting upward pressure on wages, the greater the incentive for companies to turn to technology to economize on labor, and the longer the jobs recovery will take.
|
|
|
|
-
The National Retail Federation said Wednesday it expects retail sales to jump between 10.5% and 13.5% to more than $4.44 trillion this year compared with last, nearly double the trade group’s forecast in February.
-
U.S. wholesale inventories rose by 0.8% on month in April, compared with a revised 1.2% rise in March, according to data from the Commerce Department. The reading matches the increase expected by economists polled by The Wall Street Journal. (Dow Jones Newswires)
-
Oxford Economics’s eurozone recovery tracker, launched during the coronavirus pandemic, rose 2.3 points to 78.5 in late May, its highest ever level, indicating the recovery is entering a new, faster phase amid surging mobility and a record rise in consumer activity. (DJN)
-
Inflation in Brazil rose in May at the fastest pace for the month since 1996 amid a drought that has driven up power prices, adding headwinds for the country’s recovering economy. Consumer prices increased 0.83% from April and 8.06% from a year earlier, the Brazilian Institute of Geography and Statistics said. (DJN)
|
|
|
This newsletter is compiled by James Christie in San Francisco and Ed Ballard in London.
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
|
|