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Fed Officials See Vaccines Fueling Rebound, Rising Bond Yields as Sign of Expected Growth; Fed Blames Systems Outage on Human Error
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Good day. The U.S. economy’s growth this year could be the “strongest we’ve seen in decades,” as vaccines to combat the coronavirus pandemic roll out, New York Fed President John Williams said Thursday. Meanwhile, several Fed officials said they weren't worried about the recent rise in long-term bond yields. And the Fed said an outage of its key financial services on Wednesday was caused by a maintenance mistake and it is taking steps to prevent a recurrence.
Now on to today’s news and analysis.
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Fed Officials Upbeat on Outlook, Say Bond Yield Rise Not of Concern
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Economic growth this year could be the strongest in decades as vaccines to combat the coronavirus pandemic roll out, Federal Reserve Bank of New York President John Williams said Thursday. He is shown above in November 2019. PHOTO: GABE PALACIO FOR THE WALL STREET JOURNAL
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Federal Reserve officials said Thursday they continue to see the U.S. economy in recovery mode, with several noting they aren’t concerned about the recent rise in long-term bond yields and see no need to use monetary policy to push against it. Their comments came on a day of market volatility as stock prices fell sharply and Treasury yields rose. The rising cost of longer-term borrowing has rattled many investors, but over recent days Fed officials have shrugged off higher Treasury yields and attributed the bond market’s shift toward higher borrowing costs to expectations for an improving economy.
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Fed Attributes Payment Systems Outage to ‘Human Error’
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“The incident was caused by an operational error involving an automated data center maintenance process that was inadvertently triggered during business hours,” a Fed spokeswoman said. Such tasks are normally performed after-hours, she said, adding, “This was human error.”
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Key Developments Around the World
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Inflation Decline Gave Bank of Mexico Time to Cut Interest Rates
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Mexican central bankers saw a window of opportunity to reduce interest rates earlier this month amid a lull in inflation and signs that the country’s economic recovery will be slow in 2021, according to minutes of their meeting.
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RBI Stabilizing Prices With Flexible Inflation Targeting, Report Says
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The Reserve Bank of India's flexible inflation targeting seems to be achieving its aim of helping to stabilize prices, according to a report released Friday. India's consumer-price inflation averaged 3.9% from October 2016 to March 2020, while inflation volatility also declined. Contributors to the central bank's "Report on Currency and Finance for the year 2020-21" say the RBI's target of 4% inflation with a plus/minus 2% tolerance band is an appropriate framework for defining price stability for the next five years. (Dow Jones Newswires)
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Global Trade Roars Back From Depths of Covid-19 Pandemic
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Global trade has rebounded from its collapse in the early stages of the pandemic, with China and other Asian manufacturing countries grabbing a bigger slice of exports—market share they are expected to keep after the health crisis fades.
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China Lets Yuan Rise Steadily, Pressuring Exporters
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China’s currency has continued to climb in value this year on the back of a strong economic recovery, and Beijing doesn’t appear to be in a hurry to weaken it despite the pressure it is putting on exporters.
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Rich Countries' Governments Borrowed $18 Trillion in 2020
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Rich countries borrowed a record $18 trillion from bond markets in 2020, but their borrowing costs hit a record low, due to a big rise in bond buying by central banks and a lack of concern about public debt levels among private investors.
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Boost to Household Income Primes U.S. Economy for Stronger Growth
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The Commerce Department is set to report today on how much Americans earned and spent in January—key indicators of the economy’s health. Economists predict that consumer spending grew solidly last month while income soared.
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U.S. Unemployment Claims Fell Sharply Last Week
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Initial weekly unemployment claims decreased by 111,000 to a seasonally adjusted 730,000 last week, the lowest weekly level of new applications to regular state programs since late November and the biggest weekly drop since last summer.
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U.S. Durable-Goods Climbed 3.4% in January
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New orders for durable goods rose 3.4% to a seasonally adjusted $256.6 billion in January from December, the ninth straight month of gains and the largest percentage increase since July 2020.
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Financial Regulation Roundup
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German Regulator Steps Down, EY Changes Leadership After Scandal
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The scandal around electronic payments company Wirecard AG is leading to more exits, with the head of Germany’s accounting regulator stepping down and auditor Ernst & Young naming a new leadership team in the country.
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Munger Renews Robinhood Criticism, Likens App to Racetrack Betting
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Legendary investor Charlie Munger on Thursday continued a war of words with popular online brokerage Robinhood Markets Inc. over the way it and others have enabled and profited from the recent boom of individual investing.
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Coinbase Files for Public Offering
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Coinbase Global Inc. filed for an initial public offering on Thursday with the Securities and Exchange Commission, becoming the most prominent cryptocurrency-focused company yet to tap the public markets.
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Time N/A: Bank of England’s Haldane gives recorded comments on inflation outlook
7:30 a.m.: Bank of England’s Ramsden speaks on bank resolution at Institute of Chartered Accountants in England and Wales webinar
8:30 a.m.: U.S. Commerce Department releases January advance economic indicators report: U.S. Commerce Department releases January personal income and outlays
10 a.m.: University of Michigan releases final February U.S. consumer sentiment
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10:30 p.m.: Reserve Bank of Australia releases policy statement
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For U.S. Businesses, a Time to Spend
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Many companies might be at the point where they have to expand capital spending just to keep up, as Federal Reserve figures show capacity utilization among manufacturers where it was before the health crisis took hold, Justin Lahart writes. He adds that it seems probable that services spending will really pick up as Americans return to more normal activities, so service-sector businesses will need to prepare for that.
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Eurozone businesses and households grew more upbeat in February on the back of the rollout of vaccines and a drop in daily reported Covid-19 infections, lifting the European Commission’s Economic Sentiment Indicator to 93.4 from 91.5 in January, the highest level since March 2020. (Dow Jones Newswires)
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Manufacturing in the central U.S. expanded in February at a faster pace the previous month, the Federal Reserve Bank of Kansas City said, noting its Tenth District Manufacturing Survey's composite index rose to 24 from 17 in January. (DJN)
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China's official manufacturing purchasing managers index, a key gauge of factory activity, is expected to edge down to 51 in February from 51.3 in January due to Lunar New Year disruption, according to a WSJ poll of nine economists. (DJN)
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U.S. farmers are expected to plant a record amount of acres this year to take advantage of high agricultural prices after years of tough market conditions, with the U.S. Department of Agriculture projecting farmers will plant 182 million acres of corn and soybeans in 2021. (DJN)
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Mexico's current account surplus reached $26.6 billion in 2020, equivalent to 2.4% of GDP, compared with a deficit of $4.2 billion, or 0.3% of GDP in 2019, the country's central bank said. (DJN)
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Argentina’s leftist government is unlikely to reach a deal with the International Monetary Fund to repay $44 billion in debt before the country’s October midterm elections, extending the uncertainty for South America’s second biggest economy, according to people familiar with the matter.
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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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