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Powell Sees a Long Recovery for U.S. Job Market; Biden Proposes $1.9 Trillion Pandemic Relief Plan
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Good day. December's job loss report was unwelcome news for the Federal Reserve, Chairman Jerome Powell said Thursday in a webcast, saying the economy "is far from our goals.” The situation argues for keeping the Fed's easy-money policies and asset purchasing campaign in place for the foreseeable future, Mr. Powell added. Meanwhile, President-elect Joe Biden unveiled his Covid-19 relief plan. It calls for Congress to back a round of $1,400-per-person direct payments to most households, a $400-per-week unemployment insurance supplement through September, expanded paid leave and increases in the child tax credit.
Please note: There won't be a Central Banking newsletter on Monday in observance of Martin Luther King Jr. Day. We'll be back on Tuesday.
Now on to today’s news and analysis.
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Jobs Market Has Long Recovery Ahead, Says Fed’s Powell
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‘We are a long way from maximum employment,’ said Fed Chairman Jerome Powell. PHOTO: JIM LO SCALZO/BLOOMBERG NEWS
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The U.S. is a long way from a strong job market, Federal Reserve Chairman Jerome Powell said, indicating the central bank’s easy-money policies will remain in place for the foreseeable future. He added that under the Fed’s new framework for interest-rate policy adopted last year, the central bank won’t raise interest rates to prevent unemployment from falling unless it sees a serious risk of excessive inflation.
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Biden Lays Out Pandemic Priorities in Relief Plan
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President-elect Joe Biden on Thursday called for a $1.9 trillion Covid-19 relief plan to help Americans weather the economic shock of the pandemic and pump more money into testing and vaccine distribution.
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Derby's Take: Lots of Life Left in Fed’s Bond Buying, Central Bank Officials Say
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Top Federal Reserve officials have been driving home in comments that they see no looming shift in the central bank’s bond buying stimulus campaign, suggesting the effort will remain in place under its current terms through this year. Read more.
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Key Developments Around the World
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Bank of Korea Holds Record-Low Rate Steady
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South Korea’s central bank held its policy rate at a record-low 0.5% on Friday, as widely expected, after making cuts totaling 75 basis points last year to help support the pandemic-hit economy.
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China's CPI Likely to Rise Mildly in 2021, PBOC Vice Gov. Says
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China's consumer inflation will likely rise mildly in 2021, and the central bank will ensure its monetary policy is stable and refrain from taking sharp turns in policy to sustain an economic recovery, said Chen Yulu, a vice governor at the People's Bank of China. The country's average lending rate to corporate borrowers fell to 4.61% in 2020, the lowest level on record, after Beijing pledged to help businesses hit hard by the coronavirus, Mr. Chen said in a briefing. Further, China's current interest-rate level is appropriate, said Sun Guofeng, head of the PBOC's monetary policy department. (Dow Jones Newswires)
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China Exports Boom While Covid-19 Ravages Global Economy
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The coronavirus dealt a blow to global trade in 2020, but not in China, where exports rose last year to their highest level on record, positioning it as the only major world economy to grow during the pandemic-scarred year.
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Oil Demand Recovery Expected to Fall Short of Pre-Pandemic Levels
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Global appetite for oil will remain subdued in the first quarter due to coronavirus lockdown measures and rising infection rates, OPEC said, maintaining its forecast that world demand in 2021 won’t recover to pre-pandemic levels.
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WSJ Survey: U.S. Economic Growth Will Exceed 4% in 2021
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Economists raised their growth prediction for 2021 U.S. GDP in the January survey, saying vaccinations and the prospect of more financial relief from Washington for individuals and businesses brightened economic prospects.
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U.S. Unemployment Claims Rise as Pandemic Weighs on Economy
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Applications for unemployment claims, a proxy for layoffs, rose by 181,000 to 965,000 last week, marking the biggest weekly increase since March 2020 and putting initial jobless claims at their highest level since mid-August.
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Financial Regulation Roundup
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Fannie, Freddie Taxpayer Stake Won't Be Restructured Under Trump
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The Treasury Department decided not to restructure the taxpayers’ stake in Fannie Mae and Freddie Mac, effectively ending the Trump administration’s push to ensure the mortgage giants are eventually returned to private hands.
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Banks Can’t Blacklist Entire Industries Under New OCC Rule
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Banks would be prohibited from refusing to lend or provide other services to entire categories of lawful businesses under a rule a top bank regulator completed Thursday, his last day before stepping down.
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Chinese Investors Pour Billions Into Stocks on U.S. Blacklist
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Buyers using a trading link known as Stock Connect have bought the equivalent of a net $15.8 billion in Hong Kong shares in the first nine trading days of this year, with a heavy concentration on stocks targeted by the U.S.
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8:30 a.m.: U.S. Labor Department releases December PPI; U.S. Commerce Department releases December retail sales
9:15 a.m.: Federal Reserve releases December U.S. industrial production
10 a.m.: University of Michigan releases preliminary January U.S. consumer sentiment|
11:30 a.m.: Minneapolis Fed's Kashkari joins a virtual town hall on the economy hosted by the Minnesota Hospital Association 2021 Winter Trustee Conference
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Time N/A: Central Bank of Brazil releases policy statement
10 a.m.: Bank of Canada releases interest-rate announcement and monetary policy report
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IMF Paper Flags Hurdles for Central Bank Digital Money Adoption
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The question of whether central banks around the world will move to offer their own official digital currencies to counter private rivals has picked up steam over the last couple of years, to the point that the U.S. Federal Reserve says it is researching the subject. But new work from the International Monetary Fund suggests official digital currencies may face more roadblocks than now understood. “Close to 80% of the world’s central banks are either not allowed to issue a digital currency under their existing laws, or the legal framework is not clear,” the web post written by Catalina Margulis and Arthur Rossi said. They also note for a currency to be successful and work like normal money it must be
widely held, but it is unclear how to do that in the digital realm. “Governments cannot impose on their citizens to have it, so granting legal tender status to a central bank digital instrument might be challenging. Without the legal tender designation, achieving full currency status could be equally challenging,” the authors wrote.
—Michael S. Derby
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Oil Market Has Plenty of Wild Cards Remaining
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Saudi Arabia’s decision to slash its oil output was a pleasant New Year’s surprise for energy-sector investors. But developments in the world’s two largest economies could cut the party short, Jinjoo Lee writes at The Wall Street Journal, noting U.S. production could increase while China, which had been stockpiling crude while the commodity was cheap, could opt to draw on its supplies.
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New York City apartment tenants are more than $1 billion in debt from missed rent payments during the coronavirus pandemic, according to a new survey measuring the depth of the rent crisis brought on by Covid-19.
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The U.K.'s GDP fell 2.6% on month in November, significantly less than the 4% contraction predicted by economists in a WSJ poll. (Dow Jones Newswires)
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The U.S.-China trade pact signed a year ago is being credited for improving business conditions for some U.S. companies, even if China’s commitment to greatly increase purchases of U.S. goods has fallen short.
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The Trump administration banned imports of cotton and tomato products from Xinjiang, the broadest U.S. ban yet to target allegations of forced-labor practices in the northwest Chinese region.
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The fastest Covid-19 vaccination rollout in the world is drawing investors to Israel, making its stock market one of the top performers in 2021.
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The U.S. Commerce Department moved ahead Thursday with rules to let the U.S. block purchases of communications technology from China and five other countries deemed foreign adversaries, leaving a decision on how and whether to go ahead with the effort to President-elect Joe Biden’s administration.
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Inflation in Argentina accelerated in December as the country's consumer prices rose 4.0% from November and 36.1% from a year earlier, the Indec statistics agency said. (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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