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Biden's $1.9 Trillion Rescue Plan Set To Turbocharge U.S. Economy – NPR

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A pedestrian on Feb. 25 walks past the window of a restaurant with a sign promoting its re-opening in Boulder, Colo. Congress on Wednesday passed a $1.9 trillion stimulus plan, which is expected to provide a strong boost to economic growth.

David Zalubowski/AP

David Zalubowski/AP

The U.S. economy is about to get a shot of its own.

The $1.9 trillion relief package passed by Congress on Wednesday is expected to give a substantial boost to the world’s largest economy once it’s signed by President Biden, putting more money in people’s pockets just as an improving pandemic outlook opens new avenues for them to spend it.

According to the Centers for Disease Control and Prevention, 61 million people in the United States have gotten at least one shot, with 32 million already fully vaccinated.

The rollout of vaccines offers the promise of more normal travel and entertainment options later in the year, further boosting the outlook of an economy already showing signs of improvement.

“The key engine of growth is going to be that powerful cocktail of both a healthier economy along with fiscal stimulus,” said Gregory Daco, Chief U.S. Economist at Oxford Economics.

The Organization for Economic Cooperation and Development projects the U.S. economy will grow by 6.5% this year. That’s more than twice the growth rate it was projecting in December — thanks in large part to more robust federal aid.

Daco himself believes the U.S. economy will grow by 7% this year, while also adding 7 million jobs – a level of growth not seen since about the 1980s.

“It’s been about four decades since we’ve seen such strong growth in real GDP,” he said. “But you have to remember that we’re coming out of a very deep hole when it comes to the damage that’s been done by the COVID crisis.”

A sign is shown at a COVID-19 vaccine site in San Francisco on Feb. 8. The rollout of vaccines is raising the prospect of increased travel and spending by Americans.

Haven Daley/AP

Haven Daley/AP

Also helping turbocharge growth is how President Biden’s plan is structured, according to experts.

The American Rescue Plan — which Democrats pushed through Congress with no Republican support — includes $1,400 payments for most Americans, extended unemployment benefits and increased subsidies for children.

The benefits are heavily weighted towards low- and moderate-income families, in marked contrast to the 2017 tax cut, which Republicans championed on a similar, party-line basis.

Rather than waiting for benefits to trickle down, the COVID relief package showers money on lower-income households, boosting income for the poorest 20% of families by an average of 20%, according to the Tax Policy Center’s analysis, while top earners would see their income rise less than 1%.

Because low-income families are more likely to spend the extra money, it’s expected to provide a significant lift to the broader economy.

“There was a big question about the [2017] Tax Cut and Jobs Act, whether or not it would over time have much of a stimulative effect,” said Howard Gleckman, a senior fellow at the non-partisan Tax Policy Center. “This one, there’s no question. Everyone agrees it will stimulate the economy. The question is will it stimulate the economy too much?”

Lower-income families get the biggest boost from the tax benefits in the American Rescue Plan, in contrast to the 2017 tax cut which primarily benefited the wealthy.

Tax Policy Center

Tax Policy Center

The center’s analysis looked only at the tax provisions of the latest bill, not measures like unemployment benefits or aid to cities and states.

But the question of whether it will prove too stimulative and trigger inflation has raised concerns among other analysts.

Former Treasury Secretary Larry Summers, who served in different positions in the Clinton and Obama administrations, has been one of the most prominent Democratic critics of the plan.

Summers is concerned that with consumer spending already on the rise, a surge in new federal spending could overwhelm businesses, triggering a rise in prices.

“We need to make sure we’re concerned with not overheating the economy,” Summers told NPR’s Weekend Edition last month.

Summers also warned that deficit-financed spending now on a short-term relief package could make it harder for the Biden administration to find money later for long-term investments in things like infrastructure.

The Labor Department said Wednesday that consumer prices had risen just 1.7% in the last year — below the Federal Reserve’s annual target of 2%.

While prices are expected to increase faster in the months to come, Fed officials have said repeatedly they expect that acceleration to be temporary.

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Alberta government's focus to be on jobs and economy for fall legislature sitting, starting Monday – Edmonton Journal

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Alberta government’s focus to be on jobs and economy for fall legislature sitting, starting Monday  Edmonton Journal



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Dollar catches footing as inflation pressures rates outlook

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The dollar steadied on Monday after its steepest weekly loss in more than a month, as traders weigh the effect of inflation on the relative pace of looming rate hikes – with a wary eye on U.S. growth data and a European Central Bank meeting.

The greenback had softened, especially against the yen, after Federal Reserve Chair Jerome Powell said on Friday it was time to start cutting back asset purchases, though not yet time to begin raising interest rates.

His remarks came as investors have priced in Fed rate hikes starting in the second half of next year and yet have begun to trim long dollar positions in anticipation that other central banks could get moving even sooner.

On Monday, the dollar was firm at $1.1643 per euro and found a footing on the yen at 113.54 after Friday’s slide. The Australian and New Zealand dollars were held below the multi-month peaks they had scaled during last week. [AUD/]

The Antipodeans, along with sterling, had bounded ahead this month as traders scrambled to price in higher rates while inflation runs hot, with markets now eyeing a near 60% chance of a Bank of England hike next week.

Sterling was up 0.1% at $1.3772, but analysts were cautious about further gains especially as the Fed edges closer to tapering and policy tightening. The Aussie was steady at $0.7473 and the kiwi at $0.7157.

“Dollar risks remain skewed to the upside,” said Kim Mundy, a currency analyst at the Commonwealth Bank of Australia in Sydney.

“(Fed) members are slowly conceding that inflation risks are skewed to the upside (and) the upshot is that interest rate markets can continue to price a more aggressive Fed Funds rate hike cycle which can support the dollar.”

This week, Australian inflation data due on Wednesday is likely to set the tone for the next stage in a tussle between traders and a resolutely dovish central bank.

On Thursday, U.S. growth data is expected to show a slowdown in growth as consumer confidence has faltered, but a surprise on either side might have consequences for the interest rate outlook.

Also on Thursday the Bank of Japan and the European Central Bank meet. Neither are expected to adjust policy, but in Europe market gauges of projected inflation are at odds with the bank’s guidance.

In the background, traders remain nervous about trouble brewing at indebted developer China Evergrande Group. It surprised investors by averting default with a last-minute coupon payment last week, but other pressing debts loom.

China’s yuan held just shy of a five-month peak in offshore trade at 6.3804 per dollar. Cryptocurrencies were steady below the heights reached last week, with bitcoin up 2% at $62,000.

In emerging markets the beaten-down Turkish lira was braced for selling as state banks are expected to follow a surprise rate cut from the central bank.

========================================================

Currency bid prices at 0110 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.1645 $1.1646 -0.01% -4.69% +1.1649 +1.1626

 

Dollar/Yen

113.7350 113.4900 +0.18% +10.07% +113.7400 +113.5750

 

Euro/Yen

132.45 132.17 +0.21% +4.35% +132.4500 +132.1200

 

Dollar/Swiss

0.9163 0.9162 +0.00% +3.56% +0.9169 +0.9157

 

Sterling/Dollar

1.3771 1.3756 +0.13% +0.81% +1.3775 +1.3752

 

Dollar/Canadian

1.2362 1.2368 -0.03% -2.90% +1.2379 +1.2358

 

Aussie/Dollar

0.7478 0.7470 +0.11% -2.79% +0.7478 +0.7465

 

NZ

Dollar/Dollar 0.7161 0.7150 +0.15% -0.29% +0.7162 +0.7148

 

 

All spots

Tokyo spots

Europe spots

Volatilities

Tokyo Forex market info from BOJ

 

(Reporting by Tom Westbrook; Editing by Sam Holmes)

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Oil prices on the march again in tight market; U.S. crude at 7-yr high

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Oil prices rose on Monday, extending pre-weekend gains, with U.S. crude hitting a seven-year high as global supply remained tight amid strong demand worldwide as economies recover from coronavirus pandemic-induced slumps.

Brent crude futures climbed 26 cents, or 0.3%, to $85.79 a barrel at 0048 GMT, following on from last Friday’s 1.1% gain. The contract was near a three-year high of $86.10, hit last Thursday.

U.S. West Texas Intermediate (WTI) crude futures rose 48 cents, or 0.6%, to $84.24 a barrel, after climbing 1.5% on Friday. It touched its highest since October 2014 – $84.28 – earlier in the session.

“Bullish sentiment continues to support oil prices as global supply remains tight at a time when demand is recovering from the pandemic,” said Toshitaka Tazawa, an analyst at Fujitomi Securities Co Ltd.

“But immediate gains for the WTI’s nearest-term contract may be limited given steepening backwardation,” Tazawa said.

WTI futures contracts are currently in steep backwardation, meaning later-dated contracts trade are at a lower price than the current contract. Normally later months trade at a higher price, reflecting the costs of storing oil.

Oil prices have also been bolstered by worries about coal and gas shortages in China, India and Europe, which spurred fuel-switching to diesel and fuel oil for power.

Reflecting strong market sentiment, money managers raised their net long U.S. crude futures and options positions in the week to October 19, the U.S. Commodity Futures Trading Commission (CFTC) said on Friday.

Over the weekend, Saudi Arabia’s crown prince said that the world’s top oil exporter aims to reach ‘net zero’ emissions of greenhouse gases, mostly produced by burning fossil fuels, by 2060 – 10 years later than the United States.

Meanwhile U.S. energy firms last week cut oil and natural gas rigs for the first time in seven weeks even as oil prices rose, energy services firm Baker Hughes Co said in its closely followed report on Friday.

 

(Reporting by Yuka Obayashi; Editing by Kenneth Maxwell)

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