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New Boston Fed President Backs Interest Rate Increases; WSJ Live Today With Summers and Kashkari
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Good day. In her first public remarks as the president of the Federal Reserve Bank of Boston, Susan Collins said she is on board with further interest-rate increases as projected by Federal Reserve officials last week. “Accomplishing price stability will require slower employment growth and a somewhat higher unemployment rate,” she said, citing the Fed’s goal of inflation averaging 2% over time. Ms. Collins, the former provost at the University of Michigan, took over as Boston Fed president on July 1. Meanwhile today at 1 p.m. EDT, Nick Timiraos of The Wall Street Journal speaks with former Treasury Secretary Lawrence Summers and Neel Kashkari, president of the Minneapolis Fed, about the Fed’s tightening campaign and its economic effects. Join the conversation by submitting your questions to them via the link below.
Now on to today’s news and analysis.
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Boston Fed President: More Rate Increases Needed to Cool Inflation
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Boston Fed President Susan Collins is the first Black woman to lead a regional Fed bank.
PHOTO: FEDERAL RESERVE BANK OF BOSTON/VIA REUTERS
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Susan Collins, the new president of the Federal Reserve Bank of Boston, said she is committed to bringing inflation down to 2% even if it means slowing the economy.
Ms. Collins said Monday she supported further interest-rate increases as projected by Federal Reserve officials last week. They showed the central bank raising aggressively through next year, despite rising fears of an economic slowdown or a recession.
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Fed’s Bostic Says Central Bank Hasn't Lost Credibility With Public
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The Federal Reserve hasn’t lost credibility with the broader public beyond Wall Street, Federal Reserve Bank of Atlanta President Raphael Bostic said Monday. “I’m heartened as I go around [my] district [that] people ... have faith that what we're doing is going to be effective,” Bostic said during an interview streamed online by the Washington Post. Bostic also said the public’s long-term expectations for inflation are at or near the central bank’s 2% target. (MarketWatch)
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Fed’s Mester Says Inflation Will Remain Hard to Predict
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It is going to be difficult for Federal Reserve officials to discern signal from noise about inflation given all the conflicting supply-and-demand factors influencing prices, Federal Reserve Bank of Cleveland President Loretta Mester said Monday. “We have to understand that inflation is going to be continuing to be hard to predict,” Mester said, in a talk at the Massachusetts Institute of Technology. (MarketWatch)
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Democrats Release Text of Proposal to Avert Government Shutdown
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Senate Democrats released the text of the proposal that lawmakers could pass to avoid a government shutdown after federal funding runs out on Friday. The resolution would extend current funding levels until Dec. 16.
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Rents Drop for First Time in Two Years After Climbing to Records
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Apartment asking rents nationally fell 0.1% in August from July, according to a report from property data company CoStar Group. It was the first monthly decline in rent since December 2020, the company said.
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Live With Larry Summers and Neel Kashkari
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WSJ’s Nick Timiraos at 1 p.m. EDT Tuesday sits down with former Treasury Secretary Lawrence Summers and Neel Kashkari, president of the Minneapolis Fed, to discuss the central bank’s September policy meeting and the steps it is taking to battle high inflation. How much higher will the Fed raise rates? What will be the economic consequences of its decisions? Submit your questions for the panel.
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Key Developments Around the World
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Bank of Japan’s Kuroda Defends Bond-Buying Program
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Bank of Japan Gov. Haruhiko Kuroda rejected criticism his monetary easing–which pumps yen into the market by buying Japanese government bonds–might cancel out the government’s move to buy yen in exchange for dollars.
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British Pound, Bonds Roiled as Tax-Cut Plans Spook Investors
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Britain’s beleaguered pound was hit again on Monday in a selloff by investors, despite promises by the Bank of England that it would raise interest rates as much as needed to hit its inflation targets.
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Italy’s Election Winner Will Have to Work With Europe on Economy
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Italian election victor Giorgia Meloni faces heavy economic and diplomatic constraints to charting a new course with her right-wing coalition and an approaching recession will make it hard to follow a more nationalist, EU-skeptic path.
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China Reins In Its Belt and Road Program, $1 Trillion Later
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China has spent a trillion dollars to expand its influence across Asia, Africa and Latin America through its Belt and Road infrastructure program. Now, Beijing is working on an overhaul of the troubled initiative.
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Financial Regulation Roundup
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Three Men Charged in Stock Scam Involving $100 Million Deli
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A deli in southern New Jersey was the vessel for an elaborate fraud scheme involving three men who managed to inflate the company’s stock-market value to $100 million, according to federal prosecutors and regulators.
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SEC Fines ESG Investment Firm Wave Equity Partners
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The SEC alleged Wave Equity Partners failed to promptly repay one of its funds for some expenses and didn’t tell investors for more than two years, as it cracks down on undisclosed costs charged by private-equity firms.
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8:30 a.m.: U.S. durable goods report for August (advance)
9 a.m.: ECB’s de Guindos speaks at Barclays-CEPR International Monetary Policy Forum in London; S&P CoreLogic Case-Shiller Home Price Index for July
10 a.m.: U.S. new home sales for August; Conference Board Consumer Confidence Survey for September
7:50 p.m.: Bank of Japan releases July 20-21 meeting minutes
8:35 p.m.: San Francisco Fed’s Daly speaks at Symposium on Asian Banking and Finance
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Time N/A: Bank of Thailand releases policy statement
3:15 a.m.: ECB’s Lagarde speaks at forum on U.S.-European geoeconomics in Frankfurt
4:15 a.m.: Text of speech by BOE’s Cunliffe to AFME Operations, Post-Trade, Technology & Innovation
8:35 a.m.: Atlanta Fed’s Bostic speaks at Banking and the Economy: A Forum for Minorities in Banking
10:15 a.m.: Fed’s Powell gives prerecorded remarks at Community Banking Research Conference in St. Louis
11 a.m.: Fed’s Bowman speaks on banking competition at Community Banking Research Conference in St. Louis; ECB’s Elderson speaks online at event on European monetary policy for the planet and for the people
2 p.m.: Chicago Fed’s Evans in moderated Q&A with London School of Economics
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S&P Expects Fed to Keep Tight Policy Until Second Half of 2023
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The Federal Reserve will keep monetary policy tight until the second half of next year, according to S&P Global Ratings. S&P said in a research note the Fed is now likely to push rates to 400-425 basis points by early next year. The Fed will then cut rates late next year “as its soft landing turns into a hard one with prices softening on weak demand,” S&P added. Beth Ann Bovino, S&P’s chief U.S. economist, said that “While our baseline now includes a shallow recession, we can’t rule out chances of an even harder landing.”
—Stephen Nakrosis
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Hawkish Move Seen Necessary to Steady the Pound
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Deutsche Bank’s George Saravelos said in a research note that the pound’s debacle calls for “a large, inter-meeting rate hike from the Bank of England as soon as next week to regain credibility with the market.” The central bank needs to send “a strong signal that it’s willing to do ‘whatever it takes’ to bring inflation down quickly and real yield into positive territory,” Mr. Saravelos, Deutsche Bank’s global head of foreign exchange research, added.
—Paulo Trevisani
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Britain’s Sketchy Growth Plan Is Scarier Than Its Bond Vigilantes
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The expensive economic policy of U.K. Prime Minister Liz Truss has revived fears of “bond vigilantes,” but the turmoil in financial markets may have more to do with the plan’s unclear return on investment, Jon Sindreu writes.
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Factory activity in Texas contracted in September for the fifth consecutive month but manufacturing output expanded, data from the Federal Reserve Bank of Dallas showed. Its index for general business activity of the Texas Manufacturing Outlook Survey decreased to minus 17.2 this month from minus 12.9 in August. (Dow Jones Newswires)
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President Biden’s plan to cancel student debt for some borrowers will cost the federal government an additional $400 billion, according to the nonpartisan Congressional Budget Office.
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About 64,000 U.S. home-purchase agreements fell through in August, Redfin said, equal to 15.2% of homes that went under contract that month, up from 12.1% a year ago and comparable with July’s revised rate of 15.5%. The percentage has now hovered around 15% for the past three months. Before the pandemic, it was around 12%. (DJN)
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Lumber prices have fallen to their lowest level in more than two years, bringing two-by-fours back to what they cost before the pandemic building boom and pointing to a sharp slowdown in construction.
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Business confidence in Belgium fell sharply in September, declining for the fifth consecutive month amid higher energy prices and weaker demand. The country’s business confidence index fell to minus 11.8 this month from minus 5.8 in August, data from the National Bank of Belgium showed. (DJN)
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Brazil posted a bigger-than-expected current account deficit in July on softer trade and a wider services deficit, Goldman Sachs economist Alberto Ramos said in a research note after the country’s central bank reported a current account deficit of $4.1 billion for the month and a $1.3 billion current account surplus in June. (DJN)
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Pakistan will get a new finance minister after the incumbent lost support from his political party for agreeing to austerity measures in an effort to win a bailout from the International Monetary Fund.
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This newsletter is compiled by James Christie in San Francisco.
Send us your tips, suggestions and feedback. Write to:
James Christie, Jon Hilsenrath, Michael S. Derby, Nell Henderson, Nick Timiraos, Paul Hannon, Kim Mackrael, Tom Fairless, Megumi Fujikawa, Perry Cleveland-Peck, Michael Maloney, Paul Kiernan, James Glynn
Follow us on Twitter:
@WSJCentralBanks, @NHendersonWSJ, @michaelsderby, @NickTimiraos, @PaulHannon29, @kimmackrael, @TomFairless, @megumifujikawa, @pkwsj, @JamesGlynnWSJ, @cleveland_peck
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