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Fed Minutes Show Officials Content With Policy; Brainard and Evans See No Urgency in Paring Fed's Support
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Good day. Minutes of the Fed's March meeting showed most of the officials that participated expected rates to remain pinned near zero through 2023, and they didn’t express interest in reducing the central bank’s bond purchases. Fed officials saw an improved medium-term outlook for real GDP growth and employment, though they also considered “uncertainty surrounding that outlook as elevated.” Meanwhile, Fed governor Lael Brainard and Chicago Fed President Charles Evans said conditions that would spur Fed officials to reduce their monetary support for the U.S. economy are still some way off.
Now on to today’s news and analysis.
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Fed Minutes Show Expectations for Stronger Economic Recovery
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Federal Reserve officials want to see more improvement before they dial back the easy-money policies implemented early last year. PHOTO: J. SCOTT APPLEWHITE/ASSOCIATED PRESS
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Federal Reserve officials pointed to a brighter outlook for the economy at their most recent meeting while agreeing to provide continued support through ultralow interest rates and large monthly bond purchases.
President Biden’s $1.9 trillion pandemic relief package, signed into law March 11, prompted Fed policy makers to lift their forecasts for U.S. economic growth and inflation this year ahead of their March 16-17 meeting.
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Fed Officials: No Urgency to Pare Monetary Policy Support
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“We, as the monetary policy authority, still have some ways to go before we reach our dual mandate goals,” Federal Reserve Bank of Chicago President Charles Evans said during a virtual appearance.
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Derby's Take: Fed Officials Unfazed by China’s Digital Money Launch
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China may have beaten the U.S. to launching official digital money, but Federal Reserve policy makers don’t seem worried. As Federal Reserve Bank of Dallas President Robert Kaplan puts it, “I don’t think, at least for the—for the time being, that it jeopardizes the dollar’s role as the world’s reserve currency.” Read more.
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Key Developments Around the World
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Investors Sour on Emerging Markets as U.S. Prospects Brighten
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Pressure is building in some emerging markets as brightening U.S. growth prospects prompt investors to pull capital out of economies that look less robust. The yield on Brazil’s 10-year local currency bond jumped to 9.65% on Wednesday, the highest since the peak of the market tumult in March 2020, according to FactSet. Russian and Mexican bond yields also recently hit their highest levels in a year. February and March saw the biggest net outflows from emerging-market bonds since the pandemic emerged.
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Norway’s Stock Investing Behemoth Signals Shift to Active Management
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Norges Bank Investment Management, the arm of the Norwegian central bank that operates Norway's roughly $1.3 trillion sovereign wealth fund, is planning a more active approach to investing.
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G-20 to Seek Agreement on Global Minimum Tax Rate by Mid-2021
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Finance ministers from the Group of 20 leading economies said they hope to agree on a minimum tax rate for company profits by the middle of this year as part of a wider overhaul of the way international businesses are taxed.
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Financial Regulation Roundup
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SEC Official Warns on Growth of Blank-Check Firms
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Securities and Exchange Commission official John Coates said there are “some significant and yet undiscovered issues” with special-purpose acquisition companies, which bypass some safeguards of a traditional initial public offering.
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Investors Big And Small Drive Stock Gains With Borrowed Money
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The “everything rally” that started in stocks last year has been boosted by investors betting money they have borrowed. That includes both small day traders on Robinhood Markets Inc. and heavyweights like Archegos Capital Management, the firm that triggered a mini meltdown for several companies’ stocks. As of late February, investors had borrowed a record $814 billion against their portfolios, according to data from the Financial Industry Regulatory Authority.
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After Wirecard, Germany’s Proposed Audit Overhaul Worries Finance Executives
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Auditors and finance chiefs of some of Germany’s biggest businesses are worried that a new regulatory proposal intended to improve audit quality in the wake of the Wirecard AG scandal will lead to higher costs and less competition.
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Time N/A: Bank of Mexico releases March meeting minutes
7:30 a.m.: European Central Bank releases March 10-11 meeting minutes
12 p.m.: Fed’s Powell speaks at virtual International Monetary Fund debate on the global economy
2 p.m.: Minneapolis Fed’s Kashkari speaks at virtual Economic Club of New York event
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3:30 a.m.: European Central Bank’s de Guindos speaks at webinar
8:30 a.m.: U.S. Labor Department releases March PPI
10 a.m.: Dallas Fed’s Kaplan speaks virtually at Engage Undergraduate Investment Conference
12 p.m.: Dallas Fed’s Kaplan speaks virtually at Engage Undergraduate Investment Conference
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How Bidenomics Seeks to Remake the Economic Consensus
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President Biden’s embrace of bigger government is not grounded in the economics of the establishment but of left-wing thinkers in academia and think tanks and on Twitter, Greg Ip writes.
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Dollar Bond Binge Will Come Home to Roost Even Without a Blow-Up
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Rapid U.S. growth will have inevitable effects for the pile of U.S. dollar-denominated debt issued by foreign governments and companies in the last decade, even if that takes time to feed through, Mike Bird writes.
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The U.S. trade deficit widened 4.8% to $71.1 billion in February, the largest on record, as exports declined by a seasonally adjusted 2.6% amid supply-chain disruptions, winter weather and pandemic-related business restrictions around the world.
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China’s ambitions to develop a massive rare-earth mine have run into a maelstrom of local politics in Greenland.
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Trucking companies in the U.S. are stepping up driver recruitment to meet strong freight demand as the economy kicks into higher gear. (Dow Jones Newswires)
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Canada posted a second consecutive trade surplus in merchandise goods in February as both exports and imports declined, Statistics Canada said, noting the surplus for the month came in at 1.04 billion Canadian dollars, or the equivalent of $827 million. (DJN)
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Half of homeowners in Canada believe current real-estate prices are unreasonably high, with over 20% of them hoping the housing market crashes, according to polling results from the Vancouver-based Angus Reid Institute. (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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