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Fed Looks to Bolster Forward Guidance; Mulls Yield Curve Control , Minutes Show – Investing.com

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© Reuters.

By Yasin Ebrahim

Investing.com – Federal Reserve policymakers discussed the need to bolster forward guidance in the coming months when they met last month, and suggested that the jury was still out on the use of yield curve control, according to the Fed’s June meeting minutes released Wednesday.

“Various participants noted that the economy is likely to need support from highly accommodative monetary policy for some time and that it will be important in coming months for the Committee to provide greater clarity regarding the likely path of the federal funds rate and asset purchases,” according to the minutes. 

There was also support to tie forward guidance to economic metrics, with a number of policymakers suggesting future monetary policy be linked to inflation outcomes. 

“Participants generally indicated support for outcome-based forward guidance. A number of participants spoke favorably of forward guidance tied to inflation outcomes that could possibly entail a modest temporary overshooting of the committee’s longer-run inflation goal but where inflation fluctuations would be centered on 2 percent over time,” the minutes showed. 

Fed members discussed two tools for conducting monetary policy when the federal funds rate is at its effective lower bound, including forward guidance and large-scale asset purchase programs in supporting employment and inflation and an approach that caps or targets interest rates along the yield curve — a measure allowing central banks to target specific government bond yields through the purchase and sale of bonds, to help keep lending rates near zero.

Debate Over Yield Curve Control

Pointing to a review of the yield caps or targets (YCT) policies the Federal Reserve followed during and after World War II and that the Bank of Japan and the Reserve Bank of Australia are currently employing, nearly all Federal Open Market Committee members indicated that they had many questions regarding the costs and benefits of such an approach. 

“The three experiences suggested that credible yield curve target (YCT) policies can control government bond yields… and may not require large central bank purchases of government debt,” the minutes showed. “But the staff also highlighted the potential for YCT policies to require the central bank to purchase very sizable amounts of government debt under certain circumstances … and the possibility that, under YCT policies, monetary policy goals might come in conflict with public debt management goals, which could pose risks to the independence of the central bank.”

With the central bank is likely to persist with ensuring rates remain lower for longer, yield curve control is unlikely to make into the Fed’s toolbox in the immediate future. “Yield curve control is still under discussion, though FOMC members still have “many questions” on the costs and benefits. It’s probably not imminent,” Pantheon Macroeconomics said. 

Following their June 9-10 meeting, Fed officials left interest rates in the range of 0%-to-0.25% and signaled that near zero rates would continue through at least 2022.

In their post-meeting statement, they vowed to persist with bond purchases “at least at the current pace to sustain smooth market functioning, thereby fostering effective transmission of monetary policy to broader financial conditions.”

The Fed committed to buying $80 billion a month in Treasuries and $40 billion a month in agency mortgage backed securities.

The Fed’s balance sheet has declined by $12.4 billion to $7.08 trillion as of June. 24, compared with the week prior, driven by a decline in demand for the Fed’s dollar swap lines from overseas central banks.

The U.S. central bank’s balance sheet stood at about $4 trillion just before the pandemic struck in the U.S. in early March.

Threat of a Second Wave

Since the Fed’s last meeting, the U.S. has seen a greater resurgence in infections that has forced states to roll back plans to speed up the pace of reopening businesses. 

In testimony before the House Financial Services Committee on Tuesday, Federal Reserve Chairman Jerome Powell, acknowledged the threat of a potential second wave of infections on the economy.

A second wave could “force government and force people to withdraw again from economic activity … and “undermine public confidence, which is what we need to get back to lots of economic activity,” Powell said.

“Output and employment remain far below their pre-pandemic levels. The path forward for the economy is extraordinarily uncertain and will depend in large part on our success in containing the virus,” he added.

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Onion recall expands across Canada; 17 hospitalizations linked to salmonella – Global News

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The Canadian Food Inspection Agency on Sunday expanded its recall of onions from the United States linked to 17 salmonella hospitalizations in Canada.

The department said the recall now includes red, yellow, white and sweet yellow onions that are distributed by the company, Thomson International in California. It was initially only red onions.

Read more:
Red onions from the U.S. could contain salmonella, health officials warn

Since the initial recall on July 30, there have been six additional reported illnesses of salmonella linked to the onions, the Public Health Agency of Canada (PHAC) said in a statement. The cases were in Saskatchewan and Quebec.

There are a total of 120 cases of salmonella in Canada linked to the onions, the agency said. The impacted provinces are British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec and Prince Edward Island.

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“Although the investigation has determined that red onions are the likely source of the outbreak, Thomson International Inc. has recalled all varieties of onions that could have come in contact with potentially contaminated red onions, due to the risk of cross-contamination. Onion varieties include red, white, yellow, and sweet yellow onions,” the statement read.






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Foods pregnant women should eat and avoid


Foods pregnant women should eat and avoid

The agency warned Canadians to no eat, use, sell or serve any red, white, yellow and sweet yellow onions from Thomson International, or any products made with these onions.

If you check the sticker on your onion or label on a bag, and it’s not clear whether it came from the U.S., you should throw it out anyway, PHAC said.

There have been no reported deaths.

It’s possible that more cases will be reported as “there is a period of time between when a person becomes ill and when the illness is reported to public health officials. For this outbreak, the illness reporting period is between two and four weeks,” PHAC said.

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Read more:
Why finding the source of a foodborne illness outbreak isn’t easy

In the U.S., federal health officials said nearly 400 people in more than 30 states have reported salmonella linked to onions from Thomson International.

The federal agency said the illnesses began between mid-June and mid-July.

Salmonella symptoms typically start six to 72 hours after exposure to the bacteria and can include fever, chills, diarrhea, abdominal cramps, headache, nausea and vomiting. These usually last between four and seven days.

Most people recover without treatment, but in some cases, antibiotics may be required. Children aged five years and under, older adults, pregnant women or people with weakened immune systems are at higher risk for contracting serious illness.

— With files from Global News’ Leslie Young and the Associated Press

© 2020 Global News, a division of Corus Entertainment Inc.

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U.S. stock markets move higher to start August; gold up – Business News – Castanet.net

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U.S. stock markets started the month higher as the price of gold briefly surpassed US$2,000 an ounce.

In New York, the Dow Jones industrial average was up 118.61 points at 26,546.93. The S&P 500 index was up 18.14 points at 3,289.26, while the Nasdaq composite was up 113.36 points at 10,856.90.

The S&P/TSX composite index was closed due to the Civic Holiday in many provinces.

The Canadian dollar traded for 74.44 US compared with 74.60 on Friday.

The September crude contract was up 17 cents at US$40.44 per barrel and the September natural gas contract was 15.3 cents at US$1.95 per mmBTU.

The December gold contract, which had the highest trading volume, was down US$3.20 at US$1,982.70 an ounce after peaking at US$2,009.50. The September copper contract was up 4.15 cents at nearly US$2.91 a pound.

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China's factory output grows at strongest pace in nearly decade. But weak spots remain – CNN

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A private survey of manufacturing activity rose to 52.8 in July, up from June’s 51.2 as factories in the country picked up new orders. That’s the quickest rate since January 2011. The Caixin/Markit manufacturing Purchasing Managers’ Index beat market estimates and marked a third straight month the index remained above 50, the level that separates expansion from contraction.
China's economy is growing again. That's good news for the rest of the world
The survey was the latest sign of improvement in China. The economy returned to growth last quarter after recording its worst three-month period in decades. And the country’s official PMI survey released Friday — which mainly covers larger business and state-owned firms — indicated a fifth consecutive month of expansion for the sector. (The Caixin poll is more focused on small and medium-sized companies.)
Stimulus measures in China have “paved the way for a period of above-trend growth in construction and industry,” wrote Julian Evans-Pritchard, senior China economist for Capital Economics, in a Monday research note. China promised in May it would throw 3.6 trillion yuan (roughly $500 billion) at its economy in extra stimulus measures, including allowing local governments to issue more bonds to build 5G networks, railways, and other infrastructure projects.
Evans-Pritchard added that the strength in manufacturing could offset struggles in other areas, including the services industry.
Despite the growth, Caixin’s survey revealed some weak spots. New export orders contracted for a seventh straight month as the coronavirus weighs on overseas demand. The labor market is also under strain, as firms maintain a cautious approach to hiring.
“We caution that manufacturing PMIs could moderate in coming months as recovery momentum softens across the world due to the protracted Covid-19 pandemic,” Nomura analysts wrote in a Monday research note.
The Nomura analysts cautioned that the Chinese economy still faces many challenges. It has still proven tough for Beijing to convince people to spend money again. And rising US-China tensions could hit both exports and manufacturing investment.
“We believe it is still too early for Beijing to unwind or roll back the easing and stimulus measures it introduced” in the first half, they said, adding, though, that Beijing might be reluctant to roll out more stimulus in the second half of the year.
Beijing has recently indicated that it may continue to focus on boosting demand at home. “Domestic circulation” as the main driver of future growth was the emphasis at a policy meeting last week held by the Politburo, the Communist Party’s top decision-making body.

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