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Much More Data Needed for Fed to Alter Course, Waller Says; BOC's Macklem Links Policy and Wealth Inequality
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Good day. Federal Reserve governor Christopher Waller said the Fed will need to see much more data on jobs and inflation before it starts to talk about changing its policy course. Separately, St. Louis Fed President James Bullard said that while the outlook for the economy is good, it isn’t time for the central bank to change its very supportive monetary-policy stance. Elsewhere, the Bank of Canada’s Tiff Macklem said wealth inequality may be a side effect of the bank’s extraordinary monetary policy, and the Bank of Mexico’s board of governors voted unanimously to keep its overnight interest-rate target at 4%, its second consecutive meeting on hold.
Now on to today’s news and analysis.
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Fed’s Waller Says Inflation Jump Likely Temporary, Urges Patience
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Fed governor Christopher Waller, seen in 2020, says the Federal Reserve needs several more months of data. PHOTO: SARAH SILBIGER/GETTY IMAGES
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The U.S. economy is “going gangbusters,” but the Federal Reserve needs to see several more months of data on jobs and inflation before determining when to begin scaling back its easy-money policies, Fed governor Christopher Waller said.
Over the past week, official data have shown April job creation falling far short of economists’ forecasts, evidence of a shortage of available workers, and consumer prices rising much faster than expected, Mr. Waller said Thursday. But he called for central bankers to remain patient.
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Bullard Upbeat on Recovery, Not Ready for Monetary-Policy Change
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Federal Reserve Bank of St. Louis leader James Bullard said he expects the economy to produce inflation notably above the Fed’s 2% target for some time and that the job market is probably healthier than it looks.
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Key Developments Around the World
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U.S. Jobless Claims Fall to Another Pandemic Low
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Jobless claims continued a several-week slide to new pandemic lows, in a sign hiring is primed to strengthen as workers return to the labor market. Worker applications for unemployment benefits fell to 473,000 last week from a revised 507,000 a week earlier, the Labor Department said Thursday. Claims remain above pre-pandemic levels but are now at the lowest point since mid-March 2020, when the pandemic shut down the economy and triggered widespread joblessness.
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Bank of Canada Says Quantitative Easing Can Widen Wealth Inequality
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The Bank of Canada’s extraordinary monetary policy is supporting the economic recovery and helping people return to work, but may also be contributing to an uneven distribution of wealth, the central bank’s governor said Thursday.
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Bank of Mexico Holds Interest Rates Steady as Inflation Rises
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The Bank of Mexico kept interest rates unchanged after inflation reached a more than three-year high in April, with the 12-month inflation rate measured by the consumer-price index rising to 6.1% from 4.7% in March.
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Commodities Boost Economic Recoveries, Mirroring Aftermath of Financial Crisis
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Higher commodity prices are delivering economic windfalls to countries that supply metals vital to the global recovery from the pandemic
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China’s People Problem Swings to a ‘Decline That Sees No End’
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Results of a once-a-decade census present China and its president, Xi Jinping, with a stark choice: Unwind party controls on family planning and immigration, or stick with the policies and risk declining economic growth.
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New York Fed Announces Technical Shift in Treasury Buying
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The New York Fed said it will tweak the orientation of its Treasury bond buying more toward longer dated securities to reflect changes in debt issuance by the government. The bank said the shift will be “modest” and technical in nature. “Issuance patterns of Treasury securities have changed over the past year, resulting in modest shifts in the distribution of Treasury securities outstanding,” the bank said, adding, “as a result, the Desk will segment its purchase sectors for longer-dated securities into additional maturity ranges to reflect last year’s introduction of a new benchmark security.” (Dow Jones Newswires)
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Financial Regulation Roundup
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David Cameron’s Payday Preceded Greensill Capital’s Collapse
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David Cameron testified before a U.K. Parliament committee Thursday, saying “Nothing I did was in breach of the rules ” in lobbying on behalf of Greensill Capital, which collapsed into bankruptcy in March.
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Coinbase Profit Surges in Exchange’s First Report as Public Company
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Coinbase Global Inc.’s profit surged in the first quarter, driven by a manic rally in bitcoin and other digital assets, the cryptocurrency exchange said in its first earnings report as a public company.
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Audit Watchdog Proposes Framework to Help With New Trading Ban
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The U.S. audit watchdog has proposed a new framework that would help it implement a law that bans foreign companies from the country’s exchanges if their audits haven’t been inspected by American regulators.
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8:30 a.m.: U.S. Commerce Department releases April retail sales
9:15 a.m.: Federal Reserve releases April U.S. industrial production
10 a.m.: University of Michigan releases preliminary May U.S. consumer sentiment
10:30 a.m.: Bank of Canada releases senior loan officer survey
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8:30 a.m.: U.S. Commerce Department releases April housing starts
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Report Pans Boosting Capital Requirements for Fossil Fuel Lending
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Making banks hold more capital to offset risks from lending to energy businesses contributing to global warming is a bad idea, the Bank Policy Institute, an industry trade group, said in a report Thursday. “Requiring banks to hold more capital when lending to carbon-intensive firms misuses the risk-based capital regulatory framework, ignores the challenges in estimating climate-related financial risks, or overlooks that those risks tend to be relatively small compared with other sources of risk over similar time horizons,” the report said. It also said that if regulators did try to make banks hold extra capital for this purpose, it is likely lending would migrate to non-regulated financial firms. At the
same time, BPI said it believes higher capital requirements would limit credit for companies trying to move away from fossil fuel technology.
—Michael S. Derby
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Inflation Doesn’t Have to Mean High Interest Rates
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In an era of shifting economic orthodoxies, central banks may be less trigger-happy than in the past, and more willing to keep interpreting high consumer-price index numbers as temporary, Jon Sindreu writes.
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Auto makers have been forced to cut production of more than 1.2 million vehicles in North America because they can’t get enough computer-chips that are used for everything from safety systems to brakes and engines, research firm AutoForecast Solutions estimated.
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The U.S. producer-price index, a measure of the prices businesses receive for their goods and services, increased a seasonally adjusted 0.6% on the month. (Dow Jones Newswires)
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Freddie Mac's 30-year fixed-rate mortgage averaged 2.94% for the week ending May 13, down two basis points from the previous week. (DJN)
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South Korea’s gross domestic product will expand by 3.8% this year, a state-run think tank said Thursday, raising its 2021 growth forecast for Asia’s fourth-largest economy from a November forecast of 3.1% growth. (DJN)
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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
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