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Janet Yellen's Debt Question; Policy Updates to Come from BOC, ECB, BOJ
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Good day. Janet Yellen plans to tell lawmakers today that the U.S. risks a longer, more painful recession unless Congress approves more aid and urge them to “act big” to shore up the recovery. A big question is hanging over Joe Biden's pick for Treasury Secretary: How much debt is too much? Elsewhere, policy updates from central bankers in Canada, the European Union and Japan are on this week's economic agenda.
Now on to today’s news and analysis.
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Yellen Will Urge Lawmakers to ‘Act Big’ to Avert Protracted Downturn
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Former Federal Reserve Chairwoman Janet Yellen testifying before a House committee in November 2015. PHOTO: CHIP SOMODEVILLA/GETTY IMAGES
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“Economists don’t always agree, but I think there is a consensus now: Without further action, we risk a longer, more painful recession now—and long-term scarring of the economy later,” Janet Yellen will say in her Senate testimony Tuesday, according to a copy of her prepared remarks that was viewed by the Journal. “Over the next few months, we are going to need more aid to distribute the vaccine; to reopen schools; to help states keep firefighters and teachers on the job.”
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The Debt Question Facing Janet Yellen: How Much Is Too Much?
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Janet Yellen has joined, cautiously, an emerging consensus concentrated on the left that more short-term borrowing is needed to help the economy, even without concrete plans to pay it back. Central to the view is the expectation that interest rates will remain low for the foreseeable future, making it more affordable to finance the borrowing.
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Key Developments Around the World
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What’s on Biden’s Business and Economic To-Do List
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Chances are good, analysts say, that the new administration will shy away from the pattern seen in President Obama’s first term, which largely sought sweeping legislation in tightly focused policy areas: financial regulation, health care and climate change.
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China Still Grew, Fueled Its Rise as Covid-19 Shook Global Economy
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Beijing said on Monday its gross domestic product rose 2.3% last year. While that is the weakest annual rate of growth since the Mao era, it was enough to make China the only major world economy to gain any ground at all last year.
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Financial Regulation Roundup
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Biden to Pick Rohit Chopra to Lead Consumer-Finance Agency
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President-elect Joe Biden plans to nominate Rohit Chopra, the former student-loan watchdog at the Consumer Financial Protection Bureau, to lead the agency, the transition team announced Monday.
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Companies Brace for New ESG Regulations Under Biden
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President-elect Joe Biden has said he would hold corporate executives personally accountable, including jail time where merited, for violations such as corporate pollution that affect the health and safety of workers and surrounding communities.
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Time N/A: ECB Vice President Luis de Guindos participates in Ecofin meeting
8:30 a.m. Philadelphia Federal Reserve Bank issues historical revisions to monthly Nonmanufacturing Business Outlook Survey
1 p.m.: Bank of England's Haldane participates in virtual discussion
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10:00 ET: Bank of Canada releases interest rate announcement and monetary policy report
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Fed Guidance Has Likely Helped Limit Upside Move in Treasury Yields
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Upside moves for Treasury yields are likely to be limited, a report Friday from research firm Capital Economics said. The firm’s analysts told clients that comments by Federal Reserve officials over recent days that indicated aggressive central bank bond buying will likely persist for some time given the economy’s probable path should put a lid on Treasury yields. Capital Economics thinks this message has gotten through to traders and investors. Additionally, “if Treasury yields do edge up again, we think any increase is likely to be driven more by higher inflation compensation than by rising real yields,” the report said.
—Michael S. Derby
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Post-Covid Recovery Divides Rich Nations From Poor
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Emerging-economy governments have less freedom to aggressively use monetary and fiscal stimuli, and the interaction of the pandemic-related recession and other vulnerabilities will hobble their ability to rebound, Greg Ip writes at The Wall Street Journal.
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Will Covid-19 Shake Up Capitalism?
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The next 10 years could see the words of the past 10 years turned into action, with governments turning more interventionist and companies doing more to head off political involvement in their businesses, James Mackintosh writes at The Wall Street Journal.
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Hopes for an economic rebound and a slowdown in borrowing have powered U.S. corporate bonds to a strong start in 2021.
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The International Energy Agency cut its monthly forecast for oil demand in 2021 by 280,000 barrels a day to 5.5 million barrels a day. (Dow Jones Newswires)
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German consumer prices fell 0.3% on a year-on-year basis in December, in line with the drop expected by economists polled by The Wall Street Journal. (DJN)
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Canadian housing starts for December came in at a seasonally adjusted annualized rate of 228,279 units, a 12.8% decrease from a revised 261,152 units in November, Canada Mortgage and Housing Corp. said Monday. (DJN)
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Malaysia's central bank is likely to cut its policy rate by another 25bps to 1.50% on Wednesday, according to seven of 12 economists polled by The Wall Street Journal.
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Vietnam's currency practices hurt U.S. businesses, the Trump administration said, but it declined to take any punitive action. (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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