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Quarles Sees Fed Asset Buying Continuing; Clarida Says More Support Will Be Needed for Recovery
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Good day. The Federal Reserve may need to stay engaged in asset buying for some time because financial markets are dealing with too many Treasurys to handle on their own, Randal Quarles, the Fed’s vice chairman for supervision, said Wednesday. Meanwhile, Fed Vice Chairman Richard Clarida said the U.S. recovery has a long way to go, adding that “additional support from monetary—and likely fiscal—policy will be needed.” And Australia's central bank is considering ways of offering further support for the economy.
Now on to today’s news and analysis.
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Quarles Wonders If Treasury Market Can Handle Big Issuance Alone
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Randal Quarles attended an International Monetary Fund Committee meeting last October.
PHOTO: AL DRAGO/BLOOMBERG NEWS
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The Federal Reserve’s point man on financial regulation said the Treasury market has grown so large that some level of central bank involvement may need to continue to ensure orderly trading conditions.
Randal Quarles , the Fed’s vice chairman for supervision, was discussing the outlook for the central bank’s $120 billion-a-month in purchases of Treasury and mortgage debt. Those purchases ramped up in March as the central bank responded to market and economic stress caused by the coronavirus pandemic.
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Fed’s Clarida: Continuing Support Will Be Needed to Sustain Recovery
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Federal Reserve Vice Chairman Richard Clarida said that even though the U.S. economy’s recovery has been surprisingly strong after a heavy hit earlier in the year, it will need continuing support to recover what was lost so far during the coronavirus pandemic.
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Key Developments Around the World
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Reserve Bank of Australia Sifting Options to Further Support Economy
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The Reserve Bank of Australia may cut interest rates further and deploy a bigger bond buying program over time, but Gov. Philip Lowe has indicated there is no rush, highlighting the role that government spending is now doing to drive the economic recovery.
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Stock and Bond Investors Disagree on European Banks
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Bond investors are signaling confidence in European banks even as their share prices languish. That is because the European Central Bank has provided the banks with more than €1.5 trillion in cheap loans, bolstering their balance sheets, even as negative interest rates has made it harder for them to turn a profit.
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Pandemic Spending Threatens Brazilian Stocks’ Hard-Won Climb
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Brazil’s government spurred big gains in stocks in recent years by pursuing austerity policies that allowed its central bank to cut interest rates to all-time lows. Now, some worry efforts to fight Covid-19 could unravel all that.
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IMF: Pandemic Response Will Push Global Public Debt to a Record
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Governments have committed $11.7 trillion, or 12% of global output, as of Sept. 11, the IMF said in its semiannual Fiscal Monitor report, adding that will drive up budget deficits by 9% of gross domestic product on average this year.
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Oil Recovery Expected to Falter Though Supply Glut Shrinks
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The world is burning through the oil supply glut that threatened to cripple the energy industry a few months ago, but spiraling coronavirus infection numbers are putting the recovery in jeopardy, the International Energy Agency said.
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The Verdict on Trump’s Economic Stewardship, Before Covid and After
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Donald Trump has presided over two economies during his time in office. In the first, which lasted until March, the economy reached historic milestones for jobs, income and stock prices. The second part, which arrived with Covid-19, was historically bad.
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Pelosi, Mnuchin Disagree on Virus Testing, Continue Stimulus Talks
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House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin remain at odds over whether to include a national plan for coronavirus testing in a new economic relief package, her spokesman said.
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Newsmakers Live: Q&A With Mary Daly
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San Francisco Fed chief Mary Daly will answer questions on the economic outlook and steps the central bank has taken to cushion the shock posed by the pandemic. She will take questions in an interview moderated by Nick Timiraos, WSJ’s chief economics correspondent. Sign up here to be notified when the Oct. 15 event begins and to submit questions in advance.
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Financial Regulation Roundup
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Meat Giant JBS’s Owner Settles U.S. Corruption Charges
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Brazil’s J&F Investimentos, which controls the world’s largest meatpacker, JBS SA, put an end to a long-running legal dispute in the U.S. over bribes it paid in Brazil, agreeing Wednesday to pay $128 million to settle the case.
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New York Regulator Urges Oversight for Social-Media Giants
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New York’s top financial watchdog said a dedicated regulator should oversee large social-media platforms, which should also be designated as systemically important, following a cyberattack on Twitter Inc. during the summer.
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9 a.m.: Bank of England’s Cunliffe speaks on Covid-19 lessons for macroprudential policy at Peterson Institute for International Economics virtual event
9:45 a.m: Bank of Canada’s Lane speaks on online panel at central bank payments conference
11 a.m.: Fed’s Quarles speaks on the Covid-19 response at virtual Institute of International Finance meeting
12 p.m.: San Francisco Fed’s Daly speaks in online Wall Street Journal discussion
12 p.m.: European Central Bank’s Lagarde speaks in online CNBC debate on the economy during IMF/World Bank meetings
5 p.m.: Minneapolis Fed’s Kashkari speaks on economy at virtual New York University event
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8:30 a.m.: U.S. Commerce Department releases September retail sales
9:15 a.m.: Federal Reserve releases September U.S. industrial production
9:35 a.m.: St. Louis Fed’s Bullard speaks on monetary policy in transition at virtual International Monetary Fund panel series
9:45 a.m.: New York Fed’s Williams discusses culture and community development in virtual event
10 a.m.: University of Michigan releases preliminary October U.S. consumer sentiment
12:55 p.m.: European Central Bank’s Enria speaks at online event
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NY Fed Sketches Out How New Stimulus Checks Might Be Used
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While prospects for additional government aid are dimming as elected officials struggle to agree on what they should do, fresh research from the Federal Reserve Bank of New York has some ideas about what consumers would do with additional stimulus checks if they get them. “Our survey results indicate that households expect to consume even smaller shares of a potential second round of stimulus payments, while they expect to use a higher share to pay down their debt,” bank economists wrote in a posting on the New York Fed's website. But regardless of how checks might be used, they are important sources of aid. Checks issued earlier in the year helped consumers by increasing household income and the ability
to pay down debt, which “contributed importantly to the sharp increase in the overall saving rate during the early months of the pandemic,” the economists wrote.
—Michael S. Derby
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Should Fiscal Policy Get More Chinese?
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The International Monetary Fund is suggesting that rich countries inch a bit further in China’s direction when it comes to spending on infrastructure, Nathaniel Taplin writes at Heard on the Street.
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China raised $6 billion with its latest international bond sale, matching a record set last year, ahead of economic data that is likely to show growth is recovering toward pre-pandemic levels.
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Undergraduate enrollment tumbled this fall at many colleges and universities around the U.S., dragged down by a sharp drop in first-year students whose school plans were upended by the coronavirus pandemic.
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Argentina needs to make it a top priority to develop a "credible and comprehensive economic agenda," to get itself of its economic crisis, International Monetary Fund Managing Director Kristalina Georgieva said. (Dow Jones Newswires)
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Argentina's inflation accelerated slightly in September as some easing of quarantine restrictions allowed economic activity to begin to recover, lifting consumer prices by 2.8% from August and by 36.6% from a year earlier, the Indec statistics agency said Wednesday. (DJN)
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Norway's trillion-dollar sovereign-wealth fund made a positive return of 4.3% in the third quarter as strong gains in the U.S. technology sector helped offset general uncertainty surrounding Covid-19. (DJN)
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Chile's economy could get a boost of about 2 percentage points thanks to a measure allowing workers to withdraw part of their contributions to a private pension fund, according to the Institute of International Finance. (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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