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ECB's Lane Cautious on Recovery After Lagarde Comments Boost Euro; Fed Seeks to Extend Access to Emergency Facilities
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Good day. European Central Bank President Christine Lagarde sounded an optimistic note on the eurozone’s economy and played down concerns over the recent strength of the euro, sparking a rally in the common currency and stirring questions as to whether the bank will provide a fresh round of stimulus to support the region’s stuttering recovery. The ECB's chief economist sounded a more cautious note in a blog post published today. In the U.S., a top official at the New York Fed said the Fed aims to broaden who can take part in its efforts for providing pandemic-related emergency support.
Now on to today’s news and analysis.
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Lagarde’s Optimism on Europe’s Economy Triggers Euro Rally
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European Central Bank President Christine Lagarde.
PHOTO: ADRIAN PETTY/EPA/SHUTTERSTOCK
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The ECB left its key interest rate unchanged at -0.5% and slightly revised up its forecasts for economic growth and inflation through 2022. ECB President Christine Lagarde said the 19-nation currency union was experiencing a strong economic rebound from the deep contraction caused by the coronavirus pandemic, citing a recent bounce back in manufacturing and services. However, analysts warned that the ECB might be too sanguine at a time when Covid-19 cases are surging across the continent and eurozone inflation has fallen below zero.
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ECB’s Lane Cautious Over Recovery
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The European Central Bank’s chief economist, Philip Lane, has sounded a cautious note on Europe’s stuttering recovery and weak inflation rate, leaving the door open for a fresh burst of stimulus in the coming months.
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New York Fed Seeks to Diversify Firms Providing Emergency Support
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“Now that the facilities are operational, our focus is on extending access to the facilities,” New York Fed Executive Vice President Daleep Singh said Thursday. Mr. Singh leads the bank’s markets group, which implements monetary policy and monitors financial markets.
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WSJ Survey: Economy Recovering Faster Than Economists Expected
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Business and academic economists polled by The Wall Street Journal expect GDP to increase at an annualized rate of 23.9% in the third quarter. That is up sharply from an expectation of an 18.3% growth rate in the previous survey.
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U.S. Unemployment Claims Held Steady Last Week
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Unemployment claims were unchanged at 884,000 last week after falling steadily for weeks from a peak of about 7 million in March. The pace of descent has slowed and claims remain above the prepandemic record of 695,000.
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Greenspan Worried About Inflation, Deficits
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Speaking on CNBC, former Fed chairman Alan Greenspan said "my overall view is that the inflation outlook is unfortunately negative and that's essentially the result of entitlements crowding out private investment and productivity growth." He also said the deficit is "getting out of hand." (Dow Jones Newswires)
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GOP ‘Skinny’ Bill on Coronavirus Aid Blocked by Democrats in Senate
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Democrats blocked Senate Republicans’ whittled-down $300 billion aid package from advancing Thursday, the latest skirmish in the political battle over stalled pandemic relief and economic stimulus.
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Key Developments Around the World
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Global Economy on Track for Rebound, but Slower Grind Looms
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The global economy is set to regain lost ground in the three months through September, but there are indications that its recovery is likely to slow from there, with the novel coronavirus still weighing heavily on consumer services and other businesses.
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Canadian Economy Will Need Extraordinary Support, Macklem Says
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Bank of Canada Gov. Tiff Macklem said Canada's economy will continue to require extraordinary support, including ultralow interest rates, to get back to pre-pandemic levels of growth and employment.
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EU Demands U.K. Scrap Proposal That Would Breach Brexit Deal
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The EU demanded that U.K. Prime Minister Boris Johnson’s government withdraw the proposal by the end of the month. If that doesn’t happen, the bloc could take legal action or halt talks over future relations between the two sides, officials said.
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Financial Regulation Roundup
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U.S. Says It Is Cracking Down on PPP Fraud
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Authorities sought Thursday to underscore their efforts to combat fraud in the government’s coronavirus relief program for small business, pointing to charges filed against 57 people for alleged crimes related to the Paycheck Protection Program.
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Hong Kong Wins More Listings of U.S.-Traded Chinese Firms
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The tally of U.S.-listed Chinese companies securing alternative listings in Hong Kong grew, as stock in China’s largest restaurant group started trading in the city and a major hotel chain began taking orders for its own offering.
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8 a.m.: European Central Bank's Lane speaks in online panel discussion at workshop organized by the Dublin Chamber of Commerce
8:30 a.m.: U.S. Labor Department releases August CPI
8:30 a.m.: European Central Bank's Schnabel gives speech at webinar organized by Centre for European Reform
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9:15 a.m.: Federal Reserve releases August U.S. industrial production
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Fed Needs Fiscal Support to Close Gap Between Markets, Economy
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The Federal Reserve’s easing moves are intended to induce people to take more economic risks, but that is blunted now as monetary policy can’t lessen Covid-19 restrictions or prompt worried Americans to forgo social distancing, Justin Lahart writes at The Wall Street Journal.
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A crush of imports into U.S. West Coast seaports is straining capacity at the gateways and on key inland distribution lanes, raising shipping prices for retailers and complicating efforts to replenish inventories following the supply chain upheaval from the coronavirus pandemic.
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U.S. mortgage rates dropped to all-time lows for the ninth time in 2020, with the benchmark 30-year fixed-rate mortgage averaging 2.86% for the week ending Sept. 10, down 13 basis points from the week prior, Freddie Mac said Thursday. (Dow Jones Newswires)
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Turkey's current-account deficit for July was $1.82 billion, compared with a surplus of $1.99 billion in July 2019, according to the central bank data. (DJN)
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U.N. sustainable development goals could be pushed back a decade by the coronavirus pandemic, according to the nonprofit Social Progress Imperative, which said goals such as ending poverty may not be met until 2092, or 62 years behind the UN's schedule. (DJN)
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More than 70% of U.S. companies polled by the American Chamber of Commerce in Shanghai expect geopolitical turbulence to create operational difficulties for them over the next three to five years, up sharply from roughly half that said the same thing last year.
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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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