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Federal Reserve Survey Finds Americans Entered 2022 on Strong Financial Footing; Some Fed Officials Talking About Policy Shift
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Good day. A survey by the Federal Reserve in October and November ahead of the Omicron wave of Covid-19 found the strong U.S. economic recovery combined with government stimulus programs allowed households to enter this year in good financial shape, with more than three-quarters of adults reporting they were either doing OK or living comfortably, the highest share since the survey began in 2013. Fast forward and the U.S. now faces economic headwinds with its highest inflation in four decades, rising interest rates, wobbly stock and financial markets and imbalances of supply and demand in goods and labor markets. Meanwhile, some Fed officials are starting to talk about a possible shift in the central bank’s interest-rate policy. St. Louis Fed President James Bullard, for instance, says the Fed may be able to pull back on some of its rate rises in the
future, though he hopes for a 3.5% federal-funds rate by the end of the year.
Now on to today’s news and analysis.
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Americans Had Strong Personal Finances Late Last Year, Fed Finds
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Americans reported the highest level of financial well-being last fall than at any point in almost a decade, according to a Federal Reserve survey, bolstering households ahead of growing economic uncertainty. Overall, 78% of adults said they were either doing OK or living comfortably, up from 75% in 2020 and the highest share since the survey began in 2013. All racial and ethnic subgroups saw improvement in 2021, according to the report.
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Two Fed Officials Weigh Future Rate Policy Shift
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Federal Reserve Bank of St. Louis President James Bullard said that while he sees no reason to slow down rate increases now, he noted the Fed may be able to pull back on some of its rate rises in the future.
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Federal Reserve Leadership Is Formally Sworn In
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Federal Reserve Chairman Jerome Powell was formally sworn in on Monday to a second, four-year term leading the central bank, and governor Lael Brainard took the oath of office to become the Fed’s vice chairwoman.
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Bernanke: Fed Will Bring Inflation Down Over Next Couple of Years
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Former Federal Reserve Chairman Ben Bernanke said Monday he thinks the Fed will be successful in containing inflation. “I don’t want to give you really sharp forecasts, but I do think the Fed will bring inflation down over the next couple of years,” Bernanke said during a discussion at the Brookings Institution. The former Fed chair also said the central bank will be helped by “contained inflation expectations,” meaning the public doesn’t think the high inflation over the past year will continue indefinitely.
—Greg Robb, MarketWatch
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Biden Kicks Off Economic Group Linking U.S., Asia
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President Biden and leaders from countries in the Indo-Pacific region endorsed a new economic platform meant to counter China’s influence through cooperation on issues such as supply chains, clean energy and digital rules.
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Stock Market’s Drop Is Hitting Many 401(k)s Harder This Time
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Millions of workers and retirees are more exposed to the stock-market slide than they might expect, as many Americans spent the past decade putting more of their retirement money into target-date funds.
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Key Developments Around the World
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At Davos, CEOs Fret Over Economy, Start to Plan for a Downturn
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With fears of a downturn gathering steam, executives at the World Economic Forum sound gloomy. “You walk around and everyone thinks it’s going to be bad, so it’s going to be bad,” Palantir Technologies Inc.’s chief executive said.
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Europe’s Economy Slows as Factories Hit Hard by Surging Costs
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Europe’s economy slowed in May and flagging factory orders point to a further weakening over coming months, according to business surveys, with the U.K. suffering the sharpest slowdown as inflation hit a four-decade high.
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Egypt’s Bread Crisis Awakens Old Fears of Political Unrest
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Long the world’s top importer of wheat, Egypt has been hammered by Russia’s invasion of Ukraine, which has disrupted wheat supplies from both countries. The pair previously supplied more than 80% of Egypt’s imports.
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Australia’s New Leader Anthony Albanese Promises to Unite Country
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When Anthony Albanese, Australia’s new center-left prime minister, meets President Biden at this week’s Quad summit it will bring together two leaders who emphasized their working-class upbringings in their pursuit of power.
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Indonesia’s Central Bank Stands Pat on Key Rate
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Financial Regulation Roundup
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SEC Fines BNY Mellon Over ESG Claims
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The Securities and Exchange Commission fined the investment management arm of Bank of New York Mellon Corp. $1.5 million for misleading claims it made about funds that use environmental and social criteria to pick stocks.
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GameStop Launches Digital Wallet for Crypto, NFTs
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GameStop Corp., a meme-stock poster child, launched a digital wallet, pushing further into a buzzy area by allowing users to store, send, get and use cryptocurrencies and nonfungible tokens across decentralized apps.
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Time N/A: ECB’s de Guindos at ECOFIN meeting in Brussels
10 a.m.: U.S. new home sales for April
12:20 p.m.: Fed’s Powell speaks at National Center for American Indian Enterprise Development Reservation Economic Summit
2 p.m.: ECB’s Lagarde gives opening remarks at ‘Europe’s Global Role’ dinner at World Economic Forum
10 p.m.: Reserve Bank of New Zealand interest rate decision
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2 a.m.: World Economic Forum annual meetings
3 a.m.: SAFE-CEPR policy lecture by ECB’s Panetta on normalization of monetary policy
4 a.m.: ECB’s Lagarde in dialogue on ‘European Unity in a Disordered World?’ at World Economic Forum; Publication of ECB Financial Stability Review
5:45 a.m.: ECB’s Lane gives keynote speech at 20th anniversary of German Bernacer Prize in Madrid
8:30 a.m.: U.S. durable goods orders for April
12:15 a.m.: Fed’s Brainard speaks at Johns Hopkins University School of Advanced International Studies
2 p.m.: Federal Open Market Committee May 3-4 meeting minutes
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Boston Fed: Concentrated Economy Making Inflation Surge Worse
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Concentration in the U.S. economy is a notable contributor to the inflation surge the U.S. is facing, according to a paper from the Federal Reserve Bank of Boston. Noting that the U.S. economy is 50% more concentrated now than in 2005, economists Falk Bräuning, José Fillat and Gustavo Joaquim write that “our findings suggest that the increase in industry concentration over the past two decades could be amplifying the inflationary pressure from current supply-chain disruptions and a tight labor market.” They add that “the recent rise in concentration is an amplifying factor for the pass-through of current cost shocks emanating from supply shortages, energy price shocks, and labor market tightness.”
—Michael S. Derby
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The U.S. economy continued to expand in April, picking up pace compared with the previous month, according to data from the Federal Reserve Bank of Chicago released Monday. The Chicago Fed National Activity Index rose to 0.47 last month from a revised 0.36 in March, broadly in line with the 0.50 consensus forecast from economists polled by FactSet. April’s positive reading signals economic growth was above its historical trend. (Dow Jones Newswires)
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China's central bank urged the nation's lenders to step up support for the real economy and meet credit demand, as the world's second largest economy faces increased downward pressure. In a meeting with 24 financial institutions, the People's Bank of China and China's banking regulator urged lenders to "go all out to stabilize the fundamentals of the economy," the PBOC said in a statement. (DJN)
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Singapore’s core consumer prices rose at a faster pace in April than in March, driven by higher costs for food, electricity, gas, retail and other goods, the Department of Statistics said. Core CPI, which strips out private road transport and accommodation costs, rose 3.3% in April from a year earlier, compared with a 2.9% increase in March. (DJN)
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Malaysia's consumer-price index is expected to have risen 2.3% on year in April, marginally higher than March's reading, according to the median estimate of eight economists polled by the WSJ. That estimate reflects higher food prices, increased utility bills and improved economic activity, says Sanjay Mathur, ANZ Research chief economist for Southeast Asia and India. (DJN)
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Australia's housing-construction boom won't be immediately slowed by the prospect of sharply rising interest rates, according to home builders. The Housing Industry Association said Tuesday that building activity is supported by a solid pipeline of work, and will extend at least until mid-2023. (DJN)
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New Zealand retail sales were 0.5% softer in 1Q, with a rebound likely to be some time off in the future, says Ratish Ranchhod, senior economist at Westpac. Domestic spending appetites will soften over the coming months as consumer prices rise and mortgage rates climb, squeezing households' spending power, he says. (DJN)
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Business confidence in Germany rose in May as German companies saw their current business situation with less pessimism, lifting the Ifo business-climate index to 93.0 points from a revised figure of 91.9 points in April. Economists polled by the Wall Street Journal expected the index to decrease to 91.2. (DJN)
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Confidence among Belgian businesses fell slightly in May, due to the Ukraine war and high energy prices, pulling the country’s business confidence index down to 1.8 from 2.4 in April, according to data from the National Bank of Belgium. Economists polled by The Wall Street Journal forecast the index at 2.1. (DJN)
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This newsletter is compiled by James Christie in San Francisco.
Send us your tips, suggestions and feedback. Write to:
James Christie, Jon Hilsenrath, Michael S. Derby, Nell Henderson, Nick Timiraos, Paul Hannon, Kim Mackrael, Tom Fairless, Megumi Fujikawa, Perry Cleveland-Peck, Michael Maloney, Paul Kiernan, James Glynn
Follow us on Twitter:
@WSJCentralBanks, @NHendersonWSJ, @michaelsderby, @NickTimiraos, @PaulHannon29, @kimmackrael, @TomFairless, @megumifujikawa, @pkwsj, @JamesGlynnWSJ, @cleveland_peck
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