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Fed's Powell says US economy faces long, uncertain recovery – BNN



Federal Reserve Chair Jerome Powell said the U.S. economy has a long way to go before fully recovering from the coronavirus pandemic and will need further support.

“The path forward will depend on keeping the virus under control, and on policy actions taken at all levels of government,” he told the House Financial Services Committee on Tuesday. While a recovery is underway, “both employment and overall economic activity, however, remain well below their pre-pandemic levels, and the path ahead continues to be highly uncertain.”

Read More: Powell and Mnuchin Set to Get Grilled on Need for More Stimulus

In his own remarks, U.S. Treasury Secretary Steven Mnuchin said he and the White House continue to seek an agreement with both parties in Congress on another fiscal relief package.

‘Still Needed’

“The President and I remain committed to providing support for American workers and businesses,” he said in testimony released Tuesday. “I believe a targeted package is still needed, and the administration is ready to reach a bipartisan agreement.”

Powell and Mnuchin’s appearance is a quarterly exercise mandated by the Cares Act passed by Congress in March, which appropriated about US$2 trillion to help speed the U.S. recovery. The pair are likely to face questions about their use of Cares Act funds and about what else should still be done.

Prospects for another round of fiscal support have further dimmed amid spiraling partisan tension over the battle to replace Supreme Court Justice Ruth Bader Ginsburg, with just 42 days remaining before the U.S. election.

Main Street

Powell was prepared for questions about the Fed’s troubled Main Street Lending Program, a US$600 billion facility aimed at providing credit to small- and mid-sized companies. He said Fed officials had responded to feedback by making adjustments to the program.

Still, he added, “Main Street loans may not be the right solution for some businesses, in part because the Cares Act states clearly that these loans cannot be forgiven.”

The Fed has come under criticism for the low take-up so far from the Main Street program. It has so far purchased just US$1.5 billion in loans, as of Sept. 16. Some banks, especially larger institutions, have balked at lending through the program to the riskier businesses that may need them the most.

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Fed's Brainard calls for more fiscal aid for economy –



By Dan Burns and Ann Saphir

(Reuters) – Despite a “heartening” bounceback from the initial hit to the U.S. economy delivered by the COVID-19 pandemic, the recovery is uneven and uncertain and will require continued support to ensure it becomes broadbased and sustainable, Federal Reserve Governor Lael Brainard said on Wednesday.

The economy’s overall improvement, however, masks big disparities among sectors and among Americans that could hold back the recovery.

The Fed, she told an online conference of the Society of Professional Economists, is committed to providing “sustained accommodation” to the economy for as long as needed, and won’t raise rates if inflation rises temporarily above 2%.

That could happen as early as next spring, she said, as data registers year-over-year gains from the nadir of the coronavirus crisis.

At the same time, the biggest risk to her outlook for recovery is that fiscal support from the federal government will be withdrawn too soon. It’s a view widely shared by her Fed colleagues. Talks on a new pandemic relief package are ongoing, but prospects remain dim for the Republican-controlled Senate to approve any aid before the Nov. 3 election.

“This strong support from monetary policy – if combined with additional targeted fiscal support – can turn a K-shaped recovery into a broad-based and inclusive recovery that delivers better outcomes overall,” Brainard said.

Brainard’s reference to a “K-shaped” recovery nods to an increasingly popular description of the rebound from the spring’s low point in activity, under which many households and small businesses have seen little improvement.

“Premature withdrawal of fiscal support would risk allowing recessionary dynamics to become entrenched, holding back employment and spending, increasing scarring from extended unemployment spells, leading more businesses to shutter, and ultimately harming productive capacity,” Brainard said.

Among the more troubling developments from the recession caused by the pandemic, she said, are that job losses have occurred disproportionately among minority populations and, more recently, that prime-age working women have left the labor force.

“If not soon reversed, the decline in the participation rate for prime-age women could have longer-term implications for household incomes and potential growth,” she said.

Brainard signaled that the Fed will not only keep rates at their current near-zero level for years, but will, even after liftoff, raise them only gradually to keep rates at levels designed to stimulate economic growth.

That approach, laid out in a newly adopted framework that Brainard repeatedly called “powerful” on Wednesday, ensures the Fed will not tighten policy too soon.

Brainard said it will take time to see a sustainable rise in inflation, which she expects to linger below the 2% target for the next few years.

The central bank will also “have the opportunity” in the months ahead to clarify how the Fed’s asset purchase program could best work in combination with forward guidance on rates, she said.

Asked about the risk of a potentially contested U.S. presidential election, Brainard sidestepped a direct response but said the Fed is in a “good place” to maintain financial stability through its extensive monitoring and its existing backstop facilities.

(Reporting by Ann Saphir and Dan Burns; Editing by Andrea Ricci)

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Varcoe: Facing historic 10 per cent hit to economy, it's time for Calgary to play more offence – Calgary Herald



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She also pointed to a CED study last year that found companies across the province will spend $18.4 billion on digital transformation initiatives across various industrial sectors by 2022.

CED expects the number of local technology companies to at least double by 2030, while the sector creates almost 50,000 new jobs in Calgary over the next decade.

“The offence strategy is about diversification, but it’s also about digital transformation,” Moran said in an interview.

Economic growth in 2021 will also come from areas such as agriculture, health care and clean energy technology, said ATB chief economist Todd Hirsch.

“We need to embrace the fact that the world has changed,” Hirsch said after the event.

“We need to stop trying to get back on track. What we need to do is forge a brand new track.”

ATB vice president and chief economist Todd Hirsch at the Calgary Economic Development’s Outlook for 2021 virtual event on Tuesday, Oct. 20, 2020. Photo by Video frame grab

The track has to make sure unemployed Calgarians aren’t left behind. Thousands of people need a steady paycheque. Access to education, retraining and economic supports will be critical.

Mayor Naheed Nenshi said even if the city’s GDP increases next year, he’s concerned it will bring a jobless recovery along with it.

“The work we do in Calgary needs to be singularly focused on good, decent jobs,” he said in an interview.

Finally, here’s a positive economic note, even with fierce headwinds rocking the city.

“We do see 2021 as the start of a consistent recovery period,” said Goucher.

“We see conditions essentially improving on all fronts and it should lead to a stable recovery in Calgary from 2021 and on.”

After a gruelling 2020, the recovery can’t get here soon enough.

Chris Varcoe is a Calgary Herald columnist.

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China's fiscal revenues rise 4.7% in third-quarter as economy gains steam –



BEIJING (Reuters) – China’s fiscal revenues grew 4.7% in the third quarter from a year earlier, reversing a 7.4% drop in the previous quarter, the finance ministry said on Wednesday, as the country’s economic recovery picked up pace.

China’s economy in the July to September quarter expanded by 4.9% from a year earlier, weaker than analyst expectations but faster than the second quarter’s 3.2% growth.

For the first nine months of the year, fiscal revenues fell 6.4% from a year earlier to 14.10 trillion yuan ($2.12 trillion), while fiscal expenditures dropped 1.9% to 17.519 trillion yuan, the ministry said.

Liu Jinyun, a finance ministry official, told a briefing that tax receipts could get a boost from China’s continued economic rebound in the fourth quarter.

“The decline in accumulative fiscal revenues will gradually moderate,” he said.

The government is on track to cut taxes and fees by more than 2.5 trillion yuan in 2020, including 1.88 trillion yuan in the first eight months, the ministry said.

China has allocated 200 billion yuan in local government special bonds to help resolve risks at small banks, Wang Kebing, a second finance ministry official, told the briefing.

In July, China’s cabinet said it would allow local governments to use part of the money they raise from special bonds this year to recapitalise some small banks.

China’s local governments will be allowed to issue 3.75 trillion yuan in special bonds this year, up from 2.15 trillion yuan in 2019.

(Reporting by Kevin Yao, Writing by Gabriel Crossley; Editing by Ana Nicolaci da Costa and Christian Schmollinger)

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