Yellen's Pitch in 2015 for Raising Rates; Fed's Clarida Upbeat on Economic Outlook
By James Christie
Good day. Janet Yellen pressed ahead in 2015 with the Fed's first interest rate increase in nearly a decade despite several colleagues' misgivings over global economic weakness and weak inflation pressures, according to transcripts of the policy meeting released Friday. Also Friday, Fed Vice Chairman Richard Clarida said regarding the economy that "the welcome news on the development of several effective vaccines indicates to me that the prospects for the economy in 2021 and beyond have brightened and the downside risk to the outlook has diminished."
Now on to today's news and analysis.
Fed Raised Rates in 2015 Despite Concerns Over Growth, Inflation
Janet Yellen during an event at which she was announced as President-elect Joe Biden's pick to be secretary of Treasury on Dec. 1. PHOTO: ALEX WONG/GETTY IMAGES
Janet Yellen, who has been nominated by President-elect Joe Biden to serve as Treasury secretary, argued at the Fed's December 2015 meeting for raising short-term rates to slow hiring and pre-empt inflationary pressures that could require more aggressive rate increases later. "We would want to check the pace of employment growth somewhat to reduce the risk of overheating that could eventually force us to tighten abruptly," she said. The decision to lift interest rates from near zero was approved unanimously by the rate-setting Federal Open Market Committee. But Ms. Yellen allowed for the risk that inflation dynamics weren't operating as they had in prior periods, which is what transpired.
Clarida Sees Fed's Bond-Buying Pace Continuing Through 2021
Federal Reserve Vice Chairman Richard Clarida said he doesn't expect the central bank to pull back on bond-buying stimulus efforts this year, even as the arrival of vaccines to combat the coronavirus pandemic has improved the U.S. economic outlook.
Virus Surge Ends Seven Months of U.S. Jobs Growth
The U.S. shed 140,000 jobs in December as a resurgence of the coronavirus ended seven months of job growth and weakened the recovery, with restaurants and bars driving the decline by cutting 372,000 jobs.
Job Losses in 2020 Were Worst Since 1939
This Could Be the Best Year on Record for Job Growth
Covid-19 Small-Business Loan Program PPP Resuming
The Paycheck Protection Program of forgivable loans is reopening as the federal government extends efforts to preserve jobs and help businesses weather the coronavirus pandemic and related lockdowns.
Economist Nellie Liang a Leading Contender for Senior Treasury Post
Ms. Liang is being considered for a position as the U.S. Treasury's undersecretary for domestic finance. She was nominated by President Trump to a seat on the Fed's board of governors in 2018, but her nomination ran into opposition from Senate Republicans.
Businesses Brace for a Democratic Congress
Key Developments Around the World
Italy's Government Teeters Over How to Revive the Economy
In the depths of the pandemic, one sign of normality is returning to Italy: political instability, as the government of Prime Minister Giuseppe Conte struggles to avoid collapse after a small coalition member threatened to withdraw vital parliamentary support.
Mexicans in U.S. Sent Record Remittances Despite Covid-19 Pandemic
Remittances rose 11% to $36.9 billion in the first 11 months of the year, more than the record $36.4 billion sent in all of 2019, according to figures released by Mexico's central bank. The average remittance was 4.3% higher at $340, the bank said.
Newsmakers Live: Q&A With James Bullard
Federal Reserve Bank of St. Louis President James Bullard will answer questions on the economic and monetary policy outlook for 2021 in an online interview at 1 p.m. EST Tuesday with Nick Timiraos, WSJ's chief economics correspondent. Sign up here to get a reminder and submit questions in advance.
Financial Regulation Roundup
TikTok and Discord Are the New Wall Street Trading Desks
A new army of social media-enabled day traders is helping push stocks to records and turning companies into market sensations.
Deutsche Bank to Pay $130 Million to Settle Federal Investigations
Deutsche Bank agreed Friday to pay $130 million largely to settle allegations that it violated laws against bribery by using middlemen and hiding its payments to them as part of a global effort to win business.
Blacklisted Chinese Telecoms Carriers Cut From Stock Indexes
Shares in China's three major telecommunications companies dropped in Hong Kong on Friday, after index compilers said they would remove the stocks from their benchmarks due to a U.S. government investment ban.
Monday (all times ET)
12 p.m: Atlanta Fed's Bostic in a virtual discussion on the economic outlook with former Atlanta Fed president Dennis Lockhart
6 p.m.: Dallas Fed's Kaplan participates in a Dallas Fed Virtual Town Hall
9:35 a.m.: Fed's Brainard discusses artificial Intelligence and financial services at the Virtual Federal Reserve Artificial Intelligence Symposium
10 a.m.: U.S. Labor Department releases November Job Openings and Labor Turnover Survey
11 a.m.: Boston Fed's Rosengren joins Greater Boston Chamber of Commerce: 2021 Economic Overview virtual event; Boston Fed's Rosengren, Dallas Fed's Kaplan and Minneapolis Fed's Kashkari in virtual Racism and the Economy event series
12 p.m.: Cleveland Fed's Mester joins European Economics and Financial Centre virtual event
1 p.m.: Kansas City Fed's George discusses economic and monetary policy outlook at virtual event hosted by The Central Exchange
JPMorgan: Unified Democratic Control Boosts Economic Outlook
Unified government under Democrats, locked in after the Atlanta Senate races, augers stronger growth, according to Michael Feroli, economist at JPMorgan Chase Bank NA. He expects to see another stimulus package just shy of $1 trillion and believes it will have a tangible impact on growth. If fiscal aid passes, along with other increases in government spending, growth this year would be about 1.5 percentage points higher than it would without the aid, at 5.3%, followed by 2.6% in 2022, Mr. Feroli said in a note to clients. "This would also leave the level of GDP at the end of 2022 above the pre-pandemic path that it was on," he added. Stronger activity could also push the Federal Reserve to start slowing its bond buying program this year, although in an appearance Friday, Fed Vice-chairman Richard Clarida said he expects to stick with $120 billion a month in bond buying for all of 2021.
—Michael S. Derby
Jobs Market Suffers a Relapse
With services spending likely to rebound once the danger for Covid has diminished, many of those who have lost their jobs might be able to find work again, but for now the virus is in control, Justin Lahart writes.
Joe Biden's Big Decision on Tech Taxes
Unless the incoming administration restarts global efforts to reform corporate-tax rules, the likes of Alphabet, Apple and Facebook will soon face myriad such levies around the globe, Rochelle Toplensky writes.
China's consumer price index rose 0.2% in December, rebounding from a decline in the prior month and beating the 0% growth predicted by economists polled by WSJ. (Dow Jones Newswires)
The eurozone's jobless rate fell to 8.3% in November, from 8.4% in October, the fourth straight month it shrank even as a sharp rise in new coronavirus infections and tightened government restrictions led many businesses to reduce or suspend their services, the European Union's statistics agency said. (DJN)
The Dow Jones Industrial Average rose 1.6% for the first week of 2021, marking its fourth-straight weekly gain despite a mob storming the U.S. Capitol Wednesday and a decline in nonfarm payrolls reported Friday.
A blast of cold weather in northeast Asia and a shortage of ships for transporting gas have sparked a scramble for cargoes of liquefied natural gas, igniting a steep rise in prices.
Remittances sent home by Mexicans in the U.S. rose 11% to $36.9 billion in the first 11 months of the year, more than the record $36.4 billion sent in all of 2019, according to figures released by Mexico's central bank.
Turkey's current-account deficit for November was $4.06 billion compared with a surplus of $518 million in November 2019, according to the central bank's data. (DJN)
Brazil's exports of beef increased 8% by volume to 2.02 million metric tons in 2020 from the year earlier, boosted by an increase in sales to China, according to Brazilian trade group Abrafrigo. (DJN)
Mexico's production of cars and light trucks fell 20% in 2020 to just over 3 million units, mainly the result of shutdowns in April and May when output was practically nil, statistics institute Inegi said. (DJN)
This newsletter is compiled by James Christie in San Francisco and Ed Ballard in London.
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