Good day. Turkey's central bank cut its key interest rate on
Thursday in a move that could complicate the country's path to
economic recovery from the Covid-19 pandemic and a prolonged
inflation problem. Several other central banks also issued policy
announcements, with officials in Norway standing out with a rate
increase. Meanwhile, manufacturing and services businesses in both
the U.S. and Eurozone reported slower growth in activity this
month, although the pullback was more pronounced in Europe, as
supply-chain bottlenecks and worries over the Delta variant weighed
on companies.
Now on to today's news and analysis.
Top News
Turkish Lira Falls Near Record Lows After Rate Cut
Officials cut Turkey's key policy rate, its one-week repo rate,
to 18% from 19%. Following the announcement, the Turkish lira fell
1.3% against the dollar, with one dollar buying 8.767901 lira, just
shy of record lows hit in June. Turkey's economy is also struggling
due to conflicts in the Middle East and President Recep Tayyip
Erdogan's own moves to replace the central bank chief three times
in two years.
Norway's central bank raised its key interest rate to 0.25% from
zero while suggesting a further increase later this year. The raise
marks the first move since the Norwegian central bank cut the rate
to zero in May last year as the pandemic took hold.
The Bank of England said its nine-member Monetary Policy
Committee voted unanimously to keep the central bank's policy rate
at a record low of 0.1%, but two officials on the panel pushed for
the BOE's asset purchase program to be scaled back.
The South African Reserve Bank kept its main repo rate at a
record-low 3.5%, and said high commodity prices are helping
Africa's most developed economy bounce back from the
pandemic-induced recession faster than expected.
Taiwan's central bank left its benchmark rate unchanged at
1.125%, saying moderate inflation and an uncertain economic
recovery called for a continuation of its loose monetary
policy.
The Bangko Sentral ng Pilipinas maintained its benchmark
overnight borrowing rate at 2.00% and its corresponding lending
rate at 2.50%, despite a worsening economic outlook and stubbornly
high inflation.
Derby's Take: Powell's Muni Bond Holdings Flag Expansive Fed
Footprint
By Michael S. Derby
Federal Reserve Chairman Jerome Powell's personal investment
profile is a reminder of why the Fed has generally tried to keep
any asset buying it does to Treasurys and certain types of mortgage
bonds.
According to a document detailing Mr. Powell's personal
investments last year, he reported holding municipal bond-related
investments of a type that a central bank emergency lending effort
ended up targeting in 2020. Read more.
U.S. Economy
Economic Growth in U.S. and Europe Slows
The U.S. and European economies slowed in September as
supply-chain bottlenecks and worries over the Delta variant weighed
on businesses, adding to signs the global economy is experiencing a
soft patch.
U.S. Jobless Claims Hover Near Pandemic Low
Initial unemployment claims, a proxy for layoffs, rose by 16,000
to a seasonally adjusted 351,000 last week from a revised 335,000
the prior week, while the four-week moving average for initial
claims declined slightly.
Pelosi Says Government Funding Won't Lapse
House Speaker Nancy Pelosi said Congress wouldn't let government
funding expire next week, the first hint Democratic leaders might
decouple the government's funding from a contentious increase in
the debt limit.
Democrats Scramble to Find Agreement on $3.5 Trillion Spending
Bill
Democratic leaders raced to find agreement around a roughly $3.5
trillion spending package to assuage concerns between dueling
centrist and liberal factions that threatened to derail a separate
vote on an infrastructure package.
Key Developments Around the World
China Makes Preparations for Evergrande's Demise
Chinese authorities are asking local governments to prepare for
the potential downfall of China Evergrande Group, signaling a
reluctance to bail out the debt-saddled property developer while
bracing for any economic and social fallout.
China Evergrande Never Got Auditor Warning Despite Big Debt
Load
Foreign Businesses Say They Feel Effects From China's Turn
Inward
U.S. and European companies operating in China are feeling the
effects as the country increasingly turns inward by keeping its
borders closed and showing growing favoritism toward domestic
companies, two business lobbies said.
Financial Regulation Roundup
PBOC Official Repeats Cryptocurrencies Aren't Legal Tender
Cryptocurrencies came under pressure after an official from the
People's Bank of China reportedly said digital currencies are not
legal tender in the country, MarketWatch reports. Deputy Director
of the Financial Consumer Rights Protection Bureau, Yin Youping,
said those assets have no actual value and the public should be
wary and "protect their pocket, " according to a Google translation
of those comments reported by People's Daily Online.
Feedback Sought on Anti-Money-Laundering Rules for
Antiquities
The U.S. Treasury Department has begun the process of extending
anti-money-laundering requirements to art and antiquities dealers,
part of an effort to plug a longstanding hole in U.S. laws that
guard against financial crimes.
Forward Guidance
Friday (all times ET)
8:45 a.m.: Cleveland Fed's Mester speaks virtually on economic
outlook at Ohio Bankers League CEO Symposium
9:25 a.m.: European Central Bank's Lane speaks on panel at
virtual Joint Regional Financing Arrangements seminar series
organized by the European Stability Mechanism
10 a.m.: U.S. Commerce Department releases August new-home
sales; Kansas City Fed's George speaks virtually on economy and
monetary policy to American Enterprise Institute; Fed's Powell,
Clarida and Bowman speak at virtual Fed Listens event on the
pandemic recovery
Saturday
7 a.m.: New York Fed's Williams speaks virtually on
international coordination of monetary policy strategies at Swiss
National Bank conference
Research
Reverse Repos Jump to New Record Level After Fed Tweak
Record inflows hit the Federal Reserve Bank of New York's
reverse repo facility Thursday, a day after the Fed doubled to $160
billion how much an individual counterparty could place on the
central bank's books. The reverse repo facility took in $1.352
trillion, up from $1.283 trillion on Wednesday, as money-market
funds and other eligible firms continue to find it easier to move
money to the Fed for a 0.05% return rather than chase scarce
short-term investments in the private sector. Fed officials seem
completely fine with the level of inflows, as the reverse repo
facility saw almost no activity as recently as the spring. The
facility compares to the $8.5 trillion Fed balance sheet, and
dwarfs the $120 billion a month the Fed continues to add via its
bond-buying stimulus.
-- Michael S. Derby
Commentary
Fed Officials See 'Transitory' Inflation Lasting Quite a
While
The message from the Fed's latest projections is "transitory" is
lasting an awfully long time, Greg Ip writes, noting next year's
projected 2.3% is the highest next-year core inflation forecast
since projections were first published in 2007.
America's Cash Might Stay on the Sidelines
If anything, the recent experience with the Delta variant --
which hit the U.S. just as many people thought that a return to
normality beckoned -- has given people a new appreciation for
having a financial buffer, Justin Lahart writes.
Evergrande Is Only the Latest in a Chain of Chinese Debt
Crises
As Evergrande Group teeters, many are wondering if China's
economy or financial system will tip over too, Nathaniel Taplin
writes, noting that a little history may be helpful in
understanding what to look for.
America Risks an 'Evergrande Moment'
Many modern economies have come to rely in one form or another
on property to fuel the economic engine, with all the monetary and
policy supports -- and credit risks -- that entails, Joseph C.
Sternberg writes.
Basis Points
The Conference Board's Leading Economic index, which measures
U.S. business cycles, came in at 117.1 in August, up 0.9% from
July, beating expectations of economists polled by The Wall Street
Journal, who forecast a 0.7% increase. In July, the index rose by
0.8% on month, less than the 0.9% rise previously estimated. The
indicator is well above pre-pandemic levels. (Dow Jones
Newswires)
Factory activity in the central U.S. eased this month, according
to the Federal Reserve Bank of Kansas City, whose Tenth District
Manufacturing Survey's composite index fell from 29 in August to
22. Economists polled by The Wall Street Journal expected a reading
of 30. (DJN)
Retail sales in Canada declined 0.6% in July to a
seasonally-adjusted 55.8 billion Canadian dollars, or the
equivalent of $43.69 billion, Statistics Canada said. It had
previously estimated July retail sales would fall by a steeper
1.7%. In June, retail sales advanced 4.2%. (DJN)
Spain's gross domestic product grew by 1.1% in the second
quarter from the previous three-month period, according to a second
estimate released by statistics office INE. This was down from the
2.8% initially estimated. (DJN)
Mexico's consumer price index rose 0.42% in the first two weeks
of this month, pushing the 12-month inflation rate up to 5.87% from
5.59% at the end of August, the National Statistics Institute said,
supporting expectations that the Bank of Mexico would raise
interest rates again this month to keep inflation in check.
(DJN)
(END) Dow Jones Newswires
September 24, 2021 10:39 ET (14:39 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.