“Federal Reserve officials indicated on Wednesday that they expected to soon slow the asset purchases they have been using to support the economy and predicted that they might raise interest rates next year, signs that policymakers are preparing to pivot away from full-blast monetary help as the business environment snaps back from the pandemic shock,” the New York Times reports.
“Foreign investors cannot get enough US government debt, which analysts say could help soften the blow when the Federal Reserve starts to cut back its own bond-buying program this year,” the Financial Times reports.
“Federal Reserve Chairman Jerome Powell has directed staff to review the central bank’s ethics rules around appropriate financial activities after filings showed a senior central bank official made multiple multimillion-dollar stock trades in 2020, while others held significant investments,” CNBC reports.
“El Salvador rushed to iron out snags on Tuesday after becoming the first country to adopt bitcoin as legal tender,” Reuters reports.
“The country’s adoption of Bitcoin is being seen as a real-world experiment, with proponents saying it will lower commission costs for billions of dollars sent from abroad, while critics are warning it may fuel money laundering.”
Axios: “While a 17% daily swing is far from unprecedented for bitcoin, it’s not the kind of thing most citizens want from their currencies. Neither is having a payments mechanism that can be unplugged by the government at will.”
Politico: “The statement opposing Jerome Powell by the high-profile progressive Democrats is part of a mounting effort on the left to urge Biden to reshape the Fed, though the prospect of Powell’s reappointment has split opinion among liberal advocates and lawmakers.”
“They acknowledged that the Fed under Powell ‘has made positive changes’ by steering the central bank toward a greater emphasis on reaching full employment. But they said they want to see someone at the helm who is more aggressive on financial regulation and climate change.”
Treasury Secretary Janet Yellen has told senior White House advisers that she supports reappointing Jerome Powell as Federal Reserve chair, Bloomberg reports,
Wall Street Journal: “Federal Reserve officials are nearing agreement to begin scaling back their easy money policies in about three months if the economic recovery continues, with some pushing to end their asset-purchase program by the middle of next year.”
Bloomberg: “Climate activists are starting to map out a coordinated campaign to oppose the potential re-nomination of Federal Reserve Chair Jerome Powell.”
Wall Street Journal: “Members of President Biden’s economic team generally support nominating Federal Reserve Chairman Jerome Powell to a second term, but growing resistance from prominent Democrats including Sen. Elizabeth Warren (D-MA) could lead to his replacement.”
“Some progressives are unhappy with his bent toward easing financial regulations that were put in place after the 2008 crisis and think the central bank should have someone more in sync with Democratic politics in charge.”
“An unusual surge of short-term lending by cash-rich companies is raising concerns on Wall Street that a period of unrest may lie ahead,” the Wall Street Journal reports.
“Investors such as money-market funds and banks are parking over $1 trillion in spare cash overnight at the Federal Reserve. That is the most on record since the Fed opened its facility for these reverse repurchase agreements in 2013.”
Washington Post: “The Biden administration is pushing back against a last-minute effort by a bipartisan group of senators to limit a proposal in the infrastructure bill to increase federal regulation of cryptocurrencies. The fierce lobbying push helped stall plans to finish voting on the bill Thursday night, and now it appears debate will stretch into the weekend.”
“The value of the world’s stock of negative-yielding debt has ballooned to more than $16.5 trillion, the highest in six months, as a relentless global bond rally drags borrowing costs below zero,” the Financial Times reports.
“Government bond yields have tumbled in recent weeks as some traders have piled in, a move that has blindsided many investors who expected an economic rebound from the pandemic along with rising inflation to lift long-term borrowing costs.”
“President Joe Biden has a tough decision in choosing the next Federal Reserve chair: Play it safe by giving Jerome Powell a second term or take a chance on a liberal like Lael Brainard, who would please progressives in Congress yet potentially agitate Wall Street,” Bloomberg reports.
“Either path offers speed bumps for the White House. Powell would likely sail to Senate confirmation, giving the Biden administration a significant bipartisan win. Financial markets would likely remain calm, but Biden would likely disappoint some progressive Democrats he needs for other issues.”
“A liberal nominee, like Fed Governor Brainard, who hews more closely to Biden’s economic agenda and is far more of a hawk on banking regulations, would likely keep Democratic senators like Elizabeth Warren and Banking Chair Sherrod Brown happy. Yet it would presage a bruising confirmation fight, potentially even a 50-50 vote with Vice President Kamala Harris the tie-breaker.”
Bloomberg: “Jay Powell is the front-runner for another term as chairman, but Democrats could push for Lael Brainard and other key appointments.”
“The real yield on 10-year US Treasuries fell further below zero on Monday as growing anxiety over the outlook for economic growth added fuel to a recent rally in bond markets,” the Financial Times reports.
Wall Street Journal: “That signal is so-called inflation expectations: what businesses, consumers, workers and investors expect inflation to be over the next one to 10 years. Because such expectations can be self-fulfilling, economists consider them key to where inflation is going… After rising sharply from October through May, they have now begun to ease.”
Wall Street Journal: “Chairman Jerome Powell, whose term expires in February, is viewed by some inside and many outside the administration as the front-runner for the job. But if Mr. Biden decides he would prefer his own pick, rather than the Republican chosen by President Trump, Fed governor Lael Brainard is the most likely candidate to succeed him.”
Politico: “President Joe Biden’s move to fire the top U.S. mortgage regulator is triggering calls from fellow Democrats to use the agency to expand access to loans for lower-income people, who have struggled to buy homes since the financial crisis.”
“The pressure from the left poses a tough choice for Biden. Democrats for years have pushed the agency responsible for Fannie and Freddie to expand homeownership and narrow the racial wealth gap.”
“But making mortgages cheaper and more accessible could also raise the risks of defaults and increase the odds that the companies would need another bailout in the future. Fannie and Freddie were seized by the government in 2008 to avert their failure during the subprime mortgage crash.”