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Trump Readies Fed Nominations; ECB Officials Voice Concern About Negative Rates; Central Bankers Consider Climate Risks
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Good day. Economists Judy Shelton and Christopher Waller could soon be nominated to the Federal Reserve Board, months after President Trump said they were his his picks to fill two vacant seats. Some European Central Bank policy makers raised concerns about the ECB's negative interest-rate strategy at their last meeting, minutes showed. And some central bankers are now talking about climate risk the way they talk about financial crises, writes the Journal's Greg Ip.
Please note: The central banking newsletter won’t be published Monday as the U.S. observes Martin Luther King’s Birthday.
Now on to today’s news and analysis.
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Trump Readies Nominations of Shelton, Waller for Fed Board Seats
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Economists Judy Shelton and Christopher Waller could soon be nominated by the White House for Federal Reserve Board vacancies. PHOTO: FROM LEFT: ANDREW HARRER/BLOOMBERG NEWS; DAVID PAUL MORRIS/BLOOMBERG NEWS
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The White House said it would soon nominate economists Judy Shelton and Christopher Waller to fill two Federal Reserve Board vacancies after months of President Trump criticizing the central bank for not doing more to stimulate the U.S. economy. Mr. Trump announced the picks on Twitter last July. The White House signaled it had finished months of background checks Thursday by affirming Mr. Trump’s plans to formally submit the nominations to the Senate for confirmation.
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ECB Officials Voiced Concern About Impact of Negative Rates
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Some ECB officials warned at their latest policy meeting, the first presided over by President Christine Lagarde, about the possible adverse side effects of negative rates on banks and asset markets, “namely equities, housing and real estate,” according to meeting minutes, raising questions about the future of a key policy tool.
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For the Economy, Climate Risks Are No Longer Theoretical
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"Last year Australia’s central bank hoped that several interest-rate cuts would mark a turning point for its slowing economy. That was before the worst bushfires in Australia’s history hit tourism, consumer confidence and growth forecasts for this year. There is now a good chance the bank will cut interest rates again soon," Greg Ip writes for the Journal. "Welcome to a world in which climate change’s economic impact is no longer distant and imperceptible."
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Other Developments Around the World
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WSJ Survey: U.S., China Agreement Will Boost Growth
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The trade deal signed this week is likely to provide extra fuel for growth in 2020 and prompt a pickup in business investment, economists surveyed by WSJ said. The survey also found most economists expect U.S. growth to continue at a slow-but-steady pace this year.
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U.S. to Change How It Releases Economic Data
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The Labor Department said technology upgrades will allow it to exclusively release high-profile economic data directly to the public, ending the news media’s practice of transmitting economic stories the moment data is released.
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Firms Still Unprepared for Libor 2021 Phaseout: BOE Joint Paper
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Firms need to step up preparations for the phaseout of the London interbank offered rate, a working paper by the Bank of England, the Financial Conduct Authority and a reference rates working group. (Dow Jones Newswires)
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Bank of Korea Leaves Interest Rate Unchanged
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South Korea’s central bank kept its base rate unchanged at 1.25% at the year’s first policy meeting, as widely expected, as it continues to assess the impact of its previous rate cuts in July and October.
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Bank of Korea Gov. Lee Ju-yeol was slightly more upbeat on the economy but didn't signal he could end the current easing cycle. After the decision, Bank of Korea watchers were split over what it will do this year. ANZ expects the BOK to stand pat through 2020. Capital Economics expects it may have to lower rates the second quarter, to spur growth. (Dow Jones Newswires)
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South Africa Central Bank Cuts Key Rate
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South Africa’s Reserve Bank cut interest rates to 6.25% on Thursday, a surprise move spurred by lower-than-expected inflation expectations that come amid a deteriorating outlook for Africa’s most developed economy.
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China Has Limited Room to Lower Banks' RRR, PBOC Official Says
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China has limited room to further lower commercial banks' reserve requirement ratio as Beijing has to ward off financial-sector risks, said an official with the country's central bank. Sun Guofeng, the People's Bank of China's head of monetary policy, said banks' average RRR has dropped to 9.9% after a cut earlier this month. (Dow Jones Newswires)
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New York Fed Adds $74.2 Billion to Markets in Two Operations
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An overnight operation added $39.4 billion, and a 14-day operation added $34.8 billion. The overnight repos were much smaller than the $120 billion the Fed was willing to offer, while the term repo was just under the $35 billion cap.
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Financial Regulation Roundup
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SEC's Jackson Resigns to Return to Law School Teaching Position
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Robert Jackson Jr., one of the two Democratic members of the Securities and Exchange Commission, plans to step down next month, leaving Republicans with stronger control of the agency at a time when conservatives are pushing to ease financial regulation broadly.
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SEC, Finra to Focus on Investment Advice, Outsourcing Risks
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U.S. securities regulators plan to take a closer look at how companies are complying with new rules on investment advice and how they are managing risks posed by outsourcing key services, according to their priority list.
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Major Companies Shared Vulnerability Used in Travelex Cyberattack
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A vulnerability at Travelex that was exploited by hackers to disrupt the money-exchange company existed at dozens of major U.S. companies and institutions, potentially leaving them open to similar breaches, a cybersecurity firm said.
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Finra Fines Prudential Affiliate for Misstatements
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The Financial Industry Regulatory Authority disclosed a $1 million fine against an affiliate of Prudential Financial for providing potentially thousands of workers in some of the retirement plans it administers with inaccurate data on the cost and performance of their investments.
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Former CFTC Chief Known to Launch Digital-Dollar Think Tank
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J. Christopher Giancarlo, who stepped down as chairman of the Commodity Futures Trading Commission last year, said he was creating the nonprofit Digital Dollar Foundation to study converting the dollar into a fully electronic currency based on blockchain, the technology that underpins bitcoin.
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Millions in New Jersey Tax Credits Went to Unqualified Firms
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New Jersey’s Economic Development Authority awarded millions of dollars in tax credits to unqualified companies that exploited the agency’s weak oversight of an $11 billion program, according to a state report.
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8:30 a.m.: U.S. Commerce Department releases December housing starts
9:15 a.m.: Federal Reserve releases December U.S. industrial production
10 a.m.: U.S. Labor Department releases November Job Openings and Labor Turnover Survey; University of Michigan releases preliminary January U.S. consumer sentiment
12:45 p.m.: Fed’s Quarles speaks on bank supervision at American Bar Association Banking Law Committee meeting in Washington
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Stock-Market Responses Triggered by the U.S.-China Trade War
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The tariffs that the U.S. and China imposed on each other directly hurt targeted firms and sectors abroad as intended, but they also hurt domestic firms, Peter Egger and Jiaqing Zhu write in a VoxEU post. The trade war also has indirectly affected stock prices in the U.S., China and other countries due to global value chains being linked. “Such indirect effects can be positive or negative, depending on a sector’s and economy’s position in the global value chain.” They add: “On average, the direct effects on U.S. firms are the largest, and the indirect effects induced by U.S. tariff changes (through global value chain relationships) are much larger than those of
China.”
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U.S. retail sales rose at a steady pace in December, a sign the 2019 holiday shopping season ended on a solid footing.
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U.S. initial jobless claims were down 10,000 to 204,000 in the week ending Jan. 11, the Labor Department said. (Dow Jones Newswires)
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The U.S. government will begin issuing 20-year bonds in the first half of 2020, the Treasury Department said.
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China's current account may maintain a small surplus in 2020 thanks to a trade truce with the U.S. and a narrowing deficit in services trade, according to a spokeswoman for the country's foreign-exchange regulator. (Dow Jones Newswires)
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Some non-Chinese companies say they are being left out of Beijing's transcontinental infrastructure program aimed at building goodwill abroad and boosting economic cooperation.
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In India, half a million unfinished apartments are stuck in financial limbo, dashing the dreams and the spending of a middle class that was supposed to be spearheading India’s economic rise.
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British retail sales fell unexpectedly in December, adding to signs the U.K. economy slowed sharply at the end of 2019.
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Manufacturing activity in the mid-Atlantic region increased in January, the Philadelphia Fed said. Its Manufacturing Business Outlook Survey's index of general activity increased to 17 in January from a revised reading of 2.4 in December. (Dow Jones Newswires)
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