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Fed's Williams Strikes Reassuring Note on Emergency Lending; Politics Isn’t Yellen’s Forte, but It’s What She’s In For
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Good day. Federal Reserve Bank of New York President John Williams said the Fed can bring emergency lending back online if it is needed to help support the economic recovery. As for the recovery, Mr. Williams noted he optimistic about it given developments surrounding coronavirus vaccines. He also didn’t bat down the idea of the Fed adopting negative rates as a strategy as clearly as some of his colleagues at the central bank. Meanwhile, Janet Yellen has done it all in economic policy, but if confirmed she will face new tests on debt and spending in a deeply divided Washington.
Please note the Central Banking newsletter is taking a break for the Thanksgiving holiday in the U.S. and will return to your inbox on Monday, Nov. 30.
Now on to today’s news and analysis.
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NY Fed's Williams: Federal Reserve Could Restart Emergency Lending
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John Williams, president of the Federal Reserve Bank of New York.
PHOTO: LUCAS JACKSON/REUTERS
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The Federal Reserve is well prepared to navigate the U.S. economy’s challenging path to recover from the effects of the coronavirus pandemic, and the central bank can resume emergency lending efforts if it deems it necessary, Federal Reserve Bank of New York President John Williams said Tuesday. “We’re still in a deep recession” with high unemployment and an economy far from full strength despite its recent dramatic rebound, Mr. Williams said during a virtual event held by The Wall Street Journal. However, Mr. Williams noted he feels positive about the future in light of news of vaccines for the Covid-19 illness, and said “We’re going to see continued good growth next year.”
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Politics Isn’t Janet Yellen’s Forte, but It’s What She’s In for Now
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When she led President Clinton’s Council of Economic Advisers in the late 1990s, Janet Yellen confided to her husband, economist George Akerlof, about the challenges she faced navigating Washington’s political storms. Those storms are about to become her headache again.
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Derby's Take: NY Fed Williams Says Negative Rates Are a ‘Possible Option’
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Federal Reserve officials have for some time pushed back against the idea that negative interest rates have a place in the central bank stimulus tool kit. John Williams, the leader of the Federal Reserve Bank of New York and one of the central bank’s top policy makers, on Tuesday appeared to walk that back a few steps. Read more.
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Consumer Confidence Drops Amid Rising Covid-19 Cases
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The Conference Board, a private research group, said its index of consumer confidence fell to 96.1 this month, from a revised 101.4 in October. Economists surveyed by The Wall Street Journal had expected a reading of 98.0.
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U.S. Home-Price Growth Accelerated in September
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The S&P CoreLogic Case-Shiller National Home Price Index rose 7% in the year ended in September, up from a 5.8% annual rate the prior month. September marked the highest annual growth rate since May 2014.
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Jobless Claims Hold at High Level as Recovery Navigates Covid Surge
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Jobless claims likely held at a high level last week as the U.S. economic recovery navigates a surge in new coronavirus cases and tighter restrictions on businesses in some states.
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Key Developments Around the World
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RBNZ: New Zealand Economy Relatively Resilient to Pandemic Shock
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New Zealand’s economy has been “relatively resilient” to the shock of the coronavirus pandemic due to local containment of the virus and significant stimulus, the country's central bank said.
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Accelerating Oil Price Rally Signals Optimism About Global Growth
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A recent rise in oil prices continued Tuesday, sending crude to its highest level since early March with investors wagering on a brighter economic outlook. U.S. crude-oil futures for January delivery rose 4.3% to $44.91 a barrel, rallying for the sixth time in seven sessions.
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Financial Regulation Roundup
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JPMorgan Chase Unit to Pay $250 Million Penalty
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JPMorgan Chase Bank N.A. entered into a resolution with the Office of the Comptroller of the Currency to pay the civil penalty over deficiencies in internal controls and internal audit practices, the company said in a regulatory filing Tuesday.
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Germany’s DAX Index Changes Rules After Wirecard Collapse
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Germany’s leading stock index expanded its size and changed rules to boost the quality of its constituent companies, a move sparked in part by the collapse of payment company Wirecard AG because of a multibillion-dollar fraud. All potential members would have to achieve a measure of positive operating profit—known as earnings before interest, tax, depreciation and amortization— for two full years before joining.
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Pressure Mounts on Coal Miner that Rattled China’s Bond Market
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Policy Risk Weighs On Turkish Bank Debt
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Turkish banks face worsening operating conditions after Turkey's Banking Regulation and Supervision Agency said Tuesday it has revoked the minimum asset ratio requirement for domestic banks, in a further effort to tighten monetary policy, according to credit-research firm CreditSights. The Turkish central bank's negative foreign-exchange reserves effectively limit the support that can be provided to the banks, which remain highly dependent on the access to foreign currency-swap markets, it added. (Dow Jones Newswires)
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8:30 a.m.: U.S. Commerce Department releases October durable-goods data, October advance economic indicators report and second estimate of third-quarter GDP
10 a.m.: U.S. Commerce Department releases October personal income and outlays and October new-home sales reports
10 a.m.: University of Michigan releases final November U.S. consumer sentiment
2 p.m.: U.S. Federal Reserve releases Nov. 4-5 meeting minutes
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Note: U.S. markets closed for Thanksgiving holiday
Time N/A: Bank of Mexico releases monetary policy decision minutes; Bank of Korea releases policy statement
3:30 a.m.: Riksbank releases interest-rate decision and monetary policy report
7 a.m.: European Central Bank’s Lane gives speech at online event hosted by Trinity College Dublin
7:30 a.m.: European Central Bank releases Oct. 28-29 meeting minutes
8 a.m.: European Central Bank’s Schnabel joins virtual event organized by Dutch National Bank
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Fed Historian Says Fed Still Has Strong Emergency Lending Powers
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The Trump Treasury Department's decision last week to pull back on emergency lending efforts operated by the Federal Reserve leaves the central bank in limbo for now, writes University of Pennsylvania professor Peter Conti-Brown in a post on the Brookings Institution webpage. That said, the historian of the Fed says the central bank could reconsider its powers, noting it can “change its legal and technical theory of its emergency lending such that the Treasury’s money is not necessary,” as he believes current law would allow such an interpretation. He notes that “There is no requirement in the statute that the Treasury provide these funds to the Fed in the first place.” Mr. Conti-Brown
also says the Fed should publicly state that its ability to provide emergency lending outside of Treasury cooperation isn't over, noting there is nothing in the law to hold the Fed back.
—Michael S. Derby
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St Louis Fed Leader Touts Benefits Of Nominal GDP Targeting
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In a presentation to a group in Finland, St. Louis Fed leader James Bullard's argued that a policy regime called nominal gross domestic product targeting can avoid creating economic inequality because that sort of system seeks to smooth out the path of activity. The regime described by Bullard has its adherents, but after the Fed just updated its inflation targeting regime, it's not something now on the Fed's radar screen.
—Michael S. Derby
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How Janet Yellen as Treasury Secretary Strengthens Biden’s Hand
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Central bankers probably wish they could tell fiscal authorities what to do. Expected to be tapped to become the next Treasury secretary, former Federal Reserve Chairwoman Janet Yellen will get a chance to do just that, Justin Lahart writes at The Wall Street Journal.
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When the Coronavirus Pandemic Settles Down, so Will Homeowners
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The U.S. housing market has been radically changed by the Covid-19 crisis and some changes will persist, but the first thing to come after the crisis passes will be the hangover, Justin Lahart and Laura Forman write at The Wall Street Journal.
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U.S. manufacturing activity across the central Atlantic region remained broadly positive in November, as the Federal Reserve Bank of Richmond’s Fifth District Survey of Manufacturing Activity's composite index came in at 15, versus 29 in October. (Dow Jones Newswires)
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The Dow Jones Industrial Average closed above 30000 on Tuesday for the first time.
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The German economy posted a record expansion in output in the third quarter, as gross domestic product grew 8.5% compared with the previous quarter and a preliminary estimate of 8.2%, statistics office Destatis said Tuesday. Economists polled by The Wall Street Journal forecast an 8.2% expansion. (DJN)
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German business sentiment fell in November for the second consecutive month, as the Ifo Institute’s business-climate index came in at 90.7 points, compared with a downwardly revised 92.5 points in October. Economists surveyed by The Wall Street Journal had forecast the index at 90.6. (DJN)
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Shops in France can reopen under strict social-distancing rules starting on Saturday, President Emmanuel Macron said, charting a painstaking exit from France's coronavirus lockdown. (DJN)
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Oxford Economics' eurozone recovery tracker recorded a fourth consecutive fall for the week ended Nov. 8 due to the effect of restrictions put in place across the region, a decline consistent with the firm’s forecast of a 2.6% contraction in eurozone GDP in the fourth quarter. (DJN)
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The number of Mexicans employed in October rose by 1.9 million from the previous month as the gradual reopening of nonessential businesses continued, statistics agency Inegi said. The unemployment rate fell from 5.1% in September to 4.7%. (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
Follow us on Twitter:
@WSJCentralBanks, @NHendersonWSJ, @michaelsderby, @NickTimiraos, @PaulHannon29, @wsj_douglasj, @HarrietTorry, @KateDavidson, @d_harrison, @kimmackrael, @TomFairless, @megumifujikawa, @mikemaloneyny, @pkwsj, @JamesGlynnWSJ
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