Good day. Federal Reserve Chairman wrapped up two days of congressional testimony yesterday, giving an optimistic view of the U.S. economy but warning of ways the coronavirus outbreak in China could hit growth. Capitol Hill will see more central bank action today, as Federal Reserve Board nominees Judy Shelton and Christopher Waller face questions at a confirmation hearing.

Now on to today’s news and analysis.

Over two days of hearings on Capitol Hill, Fed leader Jerome Powell offered an upbeat assessment of the U.S. economy while warning of risks to global supply chains from production shutdowns in China, reflecting how central bankers are adopting a cautious stance as they consider how the coronavirus outbreak in the world's second-largest economy could ripple through the global economy in the coming months. Mr. Powell also talked about the labor market, the role of regional Fed banks and the discount window during Wednesday's Senate panel hearing.

• China Ousts High-Level Officials as Coronavirus Cases Soar

Fed Chairman Jerome Powell again sounded a skeptical note over the need for what some have called “fedcoin” as he faced congressional questioning Tuesday and Wednesday.

The Fed leader questioned whether a digital dollar offered by the central bank would help assure the dollar’s ongoing dominance as other nations, notably China, and private corporations like Facebook Inc. pursue their own digital currencies. He also raised concerns about privacy, as a digital currency would allow authorities to see all of a person’s spending, in a way old-school cash payments don’t. Read More.

Speaking on a panel in Australia, Bank of Canada Gov. Stephen Poloz pointed to risks policymakers need to weigh when considering lowering interest rates to shield their economies from slower growth. He said rate cuts can help in the short term, but could intensify vulnerabilities such as high household debt levels. "So you may be able to get inflation on target today, but at the cost of making it very hard to keep inflation on target down the road," he said. The BOC has kept its key rate on hold since October 2018, but a worsening domestic outlook prompted Poloz to say in January that the door is open to a possible rate cut in the future. (Dow Jones Newswires)

• China Ousts High-Level Officials as Coronavirus Cases Soar
• Coronavirus to Shrink Global Oil Demand, IEA Says
• U.S. Travel Industry Set for Multibillion-Dollar Hit From Coronavirus

7 a.m.: European Central Bank’s Lane gives speech at Trinity College in Dublin
8:30 a.m.: U.S. Labor Department releases January CPI
9 a.m.: U.S. Senate Banking Committee holds confirmation hearing for Federal Reserve Board nominees Judy Shelton and Christopher Waller
12 p.m.: European Central Bank’s Panetta speaks on panel at Luiss University in Rome
12:45 p.m.: Dallas Fed’s Kaplan speaks in Grapevine, Texas
1 p.m.: European Central Bank’s Lane speaks in Dublin
2 p.m.: Bank of Mexico releases policy statement
5:30 p.m.: New York Fed’s Williams speaks in New York

8:30 a.m.: U.S. Commerce Department releases January retail sales
10 a.m.: University of Michigan releases preliminary February U.S. consumer sentiment
10:30 a.m.: Bank of Canada releases senior loan officer survey
11:45 a.m.: Cleveland Fed’s Mester speaks in Sarasota, Fla.

The budget that President Trump released this week is a model of mainstream Republican orthodoxy, Greg Ip writes for WSJ. As a statement of fiscal conservative principles, it is utterly unsurprising, except for this: Mr. Trump isn’t a fiscal conservative. In words and deeds he has seldom shown the concern over debt, deficits or government spending that his budget does.

• The U.S. budget deficit grew 25% in the first four months of the fiscal year, according to the U.S. Treasury Department. Federal outlays rose 10%, to $1.6 trillion, and federal tax receipts grew 6%, to $1.2 trillion—both record highs for the four-month period.
• Some $207.4 billion in U.S. student debt will be forgiven for Americans who take out loans over the next decade, the Congressional Budget Office said, with the biggest benefits going to borrowers who attend graduate or professional school.
• The Census Bureau is behind schedule in recruiting workers and improving online systems that underpin the 2020 count that gets fully under way next month, a government watchdog said.
• The yield on 10-year Greek government bonds breached 1% for the first time, marking a dramatic turnaround for an economy that had been viewed by investors as a bet too risky fewer than 15 months ago.
• Big buyers of Italy's 9 billion-euro issue of a new, March 2036-dated government bond included North American investors, according to the Italian Treasury's geographic breakdown of the sale. It showed a 63.4% allocation to foreign investors and 36.6% to domestic ones. European investors took the bulk of the issue but the Treasury said North American took 13.3% of the issue. (Dow Jones Newswires)

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