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Regional Fed Leaders Praise New Policy Framework; Beige Book Finds Modest Growth; Fed Adviser Dies
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Good day. Regional Fed presidents John Williams and Loretta Mester praised the Federal Reserve's new policy regime, with the New York Fed leader saying it will help the central bank better achieve its job and inflation goals. Meantime, San Francisco Fed President Mary Daly said boosting fiscal support after recent cutbacks “would be appropriate” to help the economy. Meanwhile, Thomas Laubach, a top adviser to Fed Chairman Jerome Powell, died at age 55. Mr. Laubach authored seminal research used to measure estimates of the interest rate that neither spurs nor slows economic growth, work that underpinned shifts in Fed policy-making in recent years.
Now on to today’s news and analysis.
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Williams: New Policy Regime Will Help Fed Meet Job, Inflation Goals
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Federal Reserve Bank of New York leader John Williams, who also serves as vice chairman of the rate-setting Federal Open Market Committee, made limited comments on the monetary policy outlook. PHOTO: CARLO ALLEGRI/REUTERS
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Federal Reserve Bank of New York leader John Williams said the Fed’s plan to allow inflation to overshoot its 2% target to compensate for times when it runs short of that goal is “an important evolution in our thinking about how to achieve our goals and another step toward greater transparency.”
Separately, Clevelend Fed President Loretta Mester said that while the U.S. economy has rebounded from the worst of the coronavirus pandemic's hit, difficult times lie ahead, and San Francisco Fed President Mary Daly said reduced government support efforts will slow the economic recovery if they aren’t restored.
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Thomas Laubach, a Top Adviser to Federal Reserve Chairman, Dies
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Thomas Laubach, an influential thinker in monetary economics and a top adviser to Federal Reserve Chairman Jerome Powell who led the central bank’s division of monetary affairs, died Wednesday after being treated for pancreatic cancer. He was 55.
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Derby's Take: Fed Officials Praise New Approach to Inflation Target
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Two Federal Reserve officials said the Fed’s new policy-making framework will improve the odds of achieving the central bank’s employment and inflation goals, while offering few clues if the Fed will provide additional support to the economy. They also nodded favorably toward the strong role fiscal policy is playing and can play in shoring up the economy amid a historic downturn. Read more.
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Key Developments Around the World
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Federal Reserve's Beige Book Finds ‘Modest’ Economic Growth
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The U.S. economy grew modestly over the summer but remained well below its pre-pandemic level of activity, the Beige Book report said, adding that manufacturing and consumer spending picked up in many parts of the country but at a slower pace than in the spring.
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U.S. Debt Set to Exceed Size of Economy, a First Since World War II
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The Congressional Budget Office said federal debt held by the public is projected to reach or exceed 100% of U.S. gross domestic product, the broadest measure of U.S. economic output, in the fiscal year that begins on Oct. 1. That would put the U.S. in the company of a handful of nations with debt loads that exceed their economies, including Japan, Italy and Greece. This year the ratio is expected to be 98%, also the highest since World War II.
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Unemployment Claims Seen Easing as Economy Begins to Improve
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Applications for unemployment benefits are expected to have eased again last week in the U.S., a possible sign of a slowly improving labor market and the impact of a new measurement method.
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Singapore Central Bank Boosts Banks’ Access to Funding
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The Monetary Authority of Singapore will take several measures to boost banks’ access to Singapore dollar and U.S. dollar funding, the central bank said Thursday. The new measures will strengthen the banking sector’s resilience, facilitate more stable Singapore dollar and U.S. dollar funding conditions and support credit intermediation amid the coronavirus pandemic, the central bank said.
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How’s the Coronavirus Economy? Depends on Whom You Ask
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The current recession, like any other, has deepened the division between those who can navigate it and those who can’t. But the unusual nature of this downturn has made those differences starker.
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‘They Called Me ‘Slave’: Beirut Blast Exposes Migrant Workers’ Plight
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Covid-19 and an economic collapse in Lebanon following the deadly explosion last month reveal the inequities of a labor system at the heart of Mideast economies, including confiscated passports.
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Financial Regulation Roundup
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Robinhood Faces SEC Probe for Not Disclosing Deals With Traders
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Robinhood Markets Inc. faces a civil fraud investigation over its early failure to fully disclose its practice of selling clients’ orders to high-speed trading firms, people familiar with the matter said.
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Ernst & Young Loses Two German Clients Amid Wirecard Scandal
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Commerzbank and DWS Group, Deutsche Bank AG ’s asset-management arm, decided not to use EY’s affiliate in Germany, Ernst & Young GmbH, to audit their accounts because of exposure to Wirecard as a creditor and as an investor through its funds, respectively.
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SEC Probes China’s GSX Techedu After Short Sellers’ Pleas
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GSX Techedu Inc., a Chinese after-school tutoring company, said it is being investigated by the U.S. Securities and Exchange Commission after short sellers accused the Beijing-based firm of inflating its sales.
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Trump Golf Course Tax-Break Appears Vulnerable to IRS Challenge
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A string of recent IRS court victories could threaten a tax break President Trump’s business was able to claim in 2014 on its California golf course that involved a conservation easement, a legal document that restricted development rights on a portion of the property.
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8:30 a.m.: U.S. Commerce Department releases July international trade data
10 a.m.: Bank of England’s Bailey gives online speech on the future of cryptocurrency and stablecoin
11 a.m.: European Central Bank’s Schnabel speaks at online ECB research conference
12 p.m.: Atlanta Fed’s Bostic speaks on economic outlook and Fed’s pandemic response in online Wall Street Journal conversation
1 p.m.: Chicago Fed’s Evans speaks online on economy and monetary policy
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Time N/A: Bank of England’s Saunders gives speech on economy’s recent performance
8:30 a.m.: U.S. Labor Department releases August jobs report
11 a.m.: European Central Bank’s Lane speaks at online ECB research conference
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Beige Book Points to Economy Slowly Emerging From Deep Downturn
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The latest edition of the Beige Book report by the Federal Reserve, released Wednesday, showed the economic landscape remains dour. "Economic activity increased among most districts, but gains were generally modest and activity remained well below levels prior to the Covid-19 pandemic," the report said, adding that "continued uncertainty and volatility related to the pandemic, and its negative effect on consumer and business activity, was a theme echoed across the country." Many of the Fed's 12 districts pointed to the housing market as a source of good news and the central bank said jobs continued to come back and cited challenges in finding skilled workers. The Minneapolis Fed also weighed in on this year's controversial motorcycle rally in Sturgis, N.D., which had generated concern it would become a vector for spreading the coronavirus illness. The
Minneapolis Fed noted "attendance was down modestly from previous years, but offered a spike in regional consumer demand."
—By Michael S. Derby
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As World Turns Inward, Shinzo Abe’s Japan Has Turned Outward
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As the global trading system is being undermined by China and the U.S., Shinzo Abe has become one of its most effective defenders, consummating several trade pacts, Greg Ip writes at The Wall Street Journal.
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Doing the Math on Third-Quarter GDP
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Even if the U.S. economy performs poorly over the next month, third-quarter GDP is going to look very good, and even if it does great, the economy will still be in a deep hole, Justin Lahart writes at The Wall Street Journal.
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The Failed Experiment of Covid Lockdowns
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Statistical analysis shows locking down the U.S. economy didn’t contain the spread of the coronavirus and reopening it didn’t unleash a second wave of infections, Donald L. Luskin, chief investment officer of TrendMacro, writes at The Wall Street Journal.
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The U.S. nonfarm private sector added 428,000 jobs in August from July, suggesting the pace of job gains accelerated, ADP National Employment Report data showed. (Dow Jones Newswires)
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U.S. inventories of crude oil fell for a sixth straight week, with stockpiles down by 9.4 million barrels to 498.4 million barrels, while U.S. crude-oil production fell by 1.1 million barrels a day from the previous week to 9.7 million barrels a day as offshore oil producers halted most output, the Energy Information Administration said. (DJN)
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A private gauge of China’s services-sector activity expanded last month, but at a slower pace. The Caixin China services purchasing managers index fell to 54.0 in August from 54.1 in July. (DJN)
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Eurozone service activity barely expanded in August. The IHS Markit eurozone services PMI registered 50.5 in August versus 54.7 in July. (Marketwatch)
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Family-owned businesses continue to outperform non-family-owned peers in every region and sector while showing greater resilience amid the Covid-19 pandemic, Credit Suisse said. (DJN)
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Jobless claims in Spain increased by 29,780 in August to around 3.8 million people, the smallest increase for the month since 2016, data from the Labor Ministry showed. (DJN)
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Remittances to Latin American and Caribbean nations are expected to fall by about 4% this year, Moody's Investors Service said, as the recession is having a disproportionately negative impact on the Latino labor market in the U.S. (DJN)
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Germany and Sweden launched their inaugural green bonds. Germany on Wednesday raised 6.5 billion euros ($7.77 billion), including EUR500 million retained by the state, in its debut green bond. A day earlier Sweden carried out its debut 20 billion Swedish kronor ($2.31 billion) issuance. (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
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@WSJCentralBanks, @NHendersonWSJ, @michaelsderby, @NickTimiraos, @PaulHannon29, @wsj_douglasj, @HarrietTorry, @KateDavidson, @d_harrison, @kimmackrael, @TomFairless, @megumifujikawa, @mikemaloneyny, @pkwsj, @JamesGlynnWSJ
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