The Federal Reserve will continue to support the economy, its chair, Jerome H. Powell, pledged at a Senate hearing, even as concerns about inflation rise.
The American economy remains far from healed and the Federal Reserve is in no hurry to dial back its support, Jerome H. Powell, the central bank’s chair, told lawmakers during a closely watched hearing on Tuesday.
It’s a pledge Mr. Powell has made many times in the last 11 months, but on Tuesday it came against a tense backdrop: As Democrats try to move a $1.9 trillion relief package through Congress, Republicans argue that it’s too big and could lead to inflation that would hurt consumers and businesses. Markets have also begun to quiver, as investors worry that an overheating economy will prompt the Fed to pull back on its efforts to bolster growth.
Speaking before the Senate Banking Committee, Mr. Powell declined to weigh in on the Biden administration’s spending plans but pushed back on the idea raised by multiple Republican senators that the economy is on the cusp of running too hot. The economy is down nearly 10 million jobs since last February, inflation has been too low rather than too high in recent decades, and prospects for a rapid recovery — while brighter — remain far from assured, he said.
“The economic recovery remains uneven and far from complete, and the path ahead is highly uncertain,” Mr. Powell said. “There is a long way to go.”
The Fed plans to hold interest rates near zero, where they have been since March, while continuing to buy government-backed bonds at a pace of $120 billion a month as it waits for the economy to heal. Investors have grown concerned that the Fed might slow those bond purchases sooner rather than later if inflation begins to rise.
That worry is helping to push up interest rates on longer-term government debt; they rose to their highest point in a year this week. Those rates are the basis for corporate borrowings and mortgages, and their rise has set stock markets on edge as well.
But on Tuesday, Mr. Powell reiterated that the Fed plans to keep buying bonds until it sees “substantial further progress” toward its twin goals of full employment and stable inflation. America can “expect us to move carefully, and patiently, and with a lot of advance warning” when it comes to slowing that support, Mr. Powell said.
The reassurance seemed to help. The S&P 500 closed higher on Tuesday, snapping back from a loss of nearly 2 percent earlier in the day and breaking a weeklong losing streak.
“We’re in one of these market mania moments, in which there’s an intense focus on inflation” and “he was very sanguine, very calm,” said Julia Coronado, founder of MacroPolicy Perspectives and a former Fed economist. “He kept turning attention back to the labor market.”
Unemployment has come down sharply after surging last year, but the official unemployment rate remains nearly double its February 2020 level. And job losses have been more acute for members of minority groups and those with less education. Though spending has bounced back, activity in the service industry is still subdued.
Vaccines are feeding hopes for a stronger and more complete 2021 rebound. Prices are expected to rise temporarily in the coming months, both compared with the weak readings from last year and, potentially, as consumers spend down savings amassed during the lockdown on restaurant dinners and vacations.
But Fed officials have been clear that they do not expect inflation to pick up in a lasting way and that they plan to look past temporary increases when thinking about their policies. Price pressures have been stubbornly tepid, rather than too high, for decades and across many advanced economies.
Mr. Powell said on Tuesday that longer-running inflation trends do not “change on a dime” and that if prices start to rise in an alarming way, the Fed has the tools to fight that.
“I really do not expect that we’ll be in a situation where inflation rises to troubling levels,” Mr. Powell said. “This is not a problem for this time, as near as I can figure.”
He also pushed back on the idea that government spending is poised to send prices rocketing out of control.
“There perhaps once was a strong connection between budget deficits and inflation — there really hasn’t been lately,” Mr. Powell said. He noted that while he does expect inflation to jump around in coming months, there is a distinction between a temporary pop in prices and a sustained increase.
Still, he declined to weigh in on how much more government support is appropriate.
“I, today, will really stay away from fiscal policy,” he said near the very start of the hearing. He went on to tiptoe around or simply decline to answer questions about the minimum wage and the size and various components of the White House’s spending proposal. At one point, he was asked whether he would be “cool” with passing the spending bill or not.
“I think by being either cool or uncool, I would have to be expressing an opinion,” Mr. Powell said.
The Fed is politically independent and steers away from partisan issues, but it has been providing advice to policymakers in Congress and weighing in on socioeconomic disparities and financial risks tied to climate change over the last year. Some of that outspokenness has drawn Republican attention.
Senator Patrick J. Toomey, Republican of Pennsylvania, warned on Tuesday that the central bank should avoid moving beyond its core duties.
“As noble as the goals might be, issues such as climate change and racial inequality are simply not the purview of our central bank,” Mr. Toomey said.
Mr. Powell did talk about how strong labor markets help people on the margins — those who aren’t trained or those with criminal records — to succeed. He made it clear that the central bank is hoping to return to a strong labor market, like the one that preceded the pandemic.
The Fed’s bond purchases can help to bolster the economy by lowering longer-term interest rates and by prodding investors out of safer assets, like government bonds, and into stocks and other more active uses of their cash.
Mr. Powell said the economy over the last three months hasn’t “really been making” the substantial progress the Fed is looking for as a precondition for slowing its purchases, as job gains have slowed. But he said there’s an expectation that progress should “pick up as the pandemic subsides.”
When it comes to the Fed’s main interest rate, federal funds rate, which helps to guide borrowing costs across the economy, Mr. Powell also struck a cautious tone. The Fed wants to achieve full employment, hit 2 percent on inflation, and believe that the economy is on track for even faster price gains before raising that rate.
“Right now, our focus is on providing the economy the support it needs,” Mr. Powell said at one point, summing up his message.
Matt Phillips contributed reporting.
G7 to consider mechanism to counter Russian ‘propaganda’
By William James
LONDON (Reuters) -The Group of Seven richest countries will look at a proposal to build a rapid response mechanism to counter Russian “propaganda” and disinformation, British Foreign Secretary Dominic Raab told Reuters.
Speaking ahead of a G7 foreign ministers’ meeting in London, the first such in-person meeting for two years, Raab said the United Kingdom was “getting the G7 to come together with a rapid rebuttal mechanism” to counter Russian misinformation.
“So that when we see these lies and propaganda or fake news being put out there, we can – not just individually, but come together to provide a rebuttal and frankly to provide the truth, for the people of this country but also in Russia or China or around the world,” Raab said.
Russia and China are trying to sow mistrust across the West, whether by spreading disinformation in elections or by spreading lies about COVID-19 vaccines, according to British, U.S. and European security officials.
Russia denies it is meddling beyond its borders and says the West is gripped by anti-Russian hysteria.
“It’s time to think of why the countries which are sick to the core with propaganda, and which used it more than once to justify armed intervention and toppling of governments … accuse our country of their own sins,” Russian Foreign Ministry spokeswoman Maria Zakharova said on social media after Raab’s comments.
China says the West is a bully and that its leaders have a post-imperial mindset that makes them feel they can act like global policemen.
Britain has identified Russia as the biggest threat to its security though it views China as its greatest long-term challenge, militarily, economically and technologically.
Raab will meet U.S. Secretary of State Antony Blinken on Monday, kicking off a week of diplomacy aimed at reinvigorating the G7’s role and forming a wider bulwark against those it sees as undermining the rules-based international order.
“The scope for intense global cooperation, international cooperation with our American partners and indeed the wider G7, that we’re convening this week has never been greater,” Raab said.
He stressed that meeting in person – something only possible due to measures like daily testing of attendees – would make diplomacy much easier: “You can only do so much by Zoom.”
The G7 members are Britain, the United States, Canada, France, Germany, Italy and Japan and their combined gross domestic product is about $40 trillion – a little less than half of the global economy.
British and U.S. officials have expressed concern in recent months about growing strategic cooperation between Russia, the world’s largest country by territory, and China, the world’s fastest-growing major economy.
Asked about the concerns, Raab said: “What matters to us most is that we broaden the international caucus of like-minded countries that stand up for open societies, human rights and democracy, that stand for open trade.”
He said many of those allies wanted “to know how this pandemic started.” The coronavirus outbreak, which began in China in late 2019, has killed 3.2 million people and cost the world trillions of dollars in lost output.
Raab said some of the barriers between the G7 and other like-minded countries needed to be broken down, so that there could be a broader network of allies that stood up for open markets and democracy.
Britain has invited India, Australia and South Korea to attend this week’s meeting, running from Monday to Wednesday, and the full leaders’ summit in June.
Asked whether Britain could seek to join a separate grouping known as the Quad – the United States, Japan, Australia and India – Raab said there was no concrete proposal as yet, but Britain was looking at ways to engage more in the Indo-Pacific.
(Writing by William James and Guy Faulconbridge; Additional reporting by Vladimir SoldatkinEditing by Susan Fenton and Frances Kerry)
New Zealand says differences with China becoming harder to reconcile
By Praveen Menon
WELLINGTON (Reuters) -Differences between New Zealand and its top trading partner China are becoming harder to reconcile as Beijing’s role in the world grows and changes, Prime Minister Jacinda Ardern said on Monday.
The comments come as New Zealand faces pressure from some elements among Western allies over its reluctance to use the Five Eyes intelligence and security alliance to criticise Beijing.
In a speech at the China Business Summit in Auckland, Ardern said there are things on which China and New Zealand “do not, cannot, and will not agree”, but added these differences need not define their relationship.
“It will not have escaped the attention of anyone here that as China’s role in the world grows and changes, the differences between our systems – and the interests and values that shape those systems – are becoming harder to reconcile,” Ardern said.
“This is a challenge that we, and many other countries across the Indo Pacific region, but also in Europe and other regions, are also grappling with,” she added.
In comments that sparked some reaction among Western allies, Foreign Affairs Minister Nanaia Mahuta said last month she was uncomfortable expanding the role of Five Eyes, which includes Australia, Britain, Canada and the United States.
“This speech appears to be crafted to deflect surprisingly sharp and severe criticism from commentators after Mahuta’s remarks last month,” said Geoffrey Miller, international analyst at the political website Democracy Project.
However, the comments do not change New Zealand’s overall shift to a more China-friendly, or at least more neutral position, he said.
“Ardern and Mahuta are selling the new stance as New Zealand advancing an ‘independent foreign policy’ that is not loyal to any major bloc,” he added.
China, which takes almost one-third of New Zealand’s exports, has accused the Five Eyes of ganging up on it by issuing statements on Hong Kong and the treatment of ethnic Muslim Uyhgurs in Xinjiang.
New Zealand’s parliament on Tuesday is set to look at a motion put forward by a smaller party to declare the situation in Xinjiang as a genocide.
Ardern said New Zealand would continue to speak about these issues individually as well as through its partners, noting that managing the relationship with China is not always going to be easy.
China’s Ambassador to New Zealand, Wu Xi, who also spoke at the event warned that Hong Kong and Xinjiang related issues were China’s internal affairs.
“We hope that the New Zealand side could hold an objective and a just a position, abide by international law and not interfere in China’s internal affairs so as to maintain the sound development of our bilateral relations,” she said in her speech.
Beijing is engaged in a diplomatic row with Australia and has imposed trade restrictions after Canberra lobbied for an international inquiry into the source of the coronavirus. China denies the curbs are reprisals, saying reduced imports of Australian products are the result of buyers’ own decisions.
Over the weekend, U.S. Secretary of State Antony Blinken said China had recently acted “more aggressively abroad” and was behaving “increasingly in adversarial ways.”
When asked if New Zealand would risk trade punishment with China, as did Australia, to uphold values, Ardern said: “It would be a concern to anyone in New Zealand if the consideration was ‘Do we speak on this or are we too worried of economic impacts?'”
(Reporting by Praveen Menon; Editing by Lincoln Feast.)
Canada records C$282.56 billion budget deficit over first 11 months of 2020/21
OTTAWA, April 30 (Reuters) – Canada‘s budget deficit in the first 11 months of fiscal 2020/21 swelled to C$282.56 billion ($230.04 billion) from a deficit of C$6.98 billion in the year-ago period, as Ottawa spent heavily to fight the COVID-19 pandemic, the finance ministry said on Friday.
“The unprecedented shift in the government’s financial results reflects the severe deterioration in the economic situation and temporary measures implemented,” it said in a statement.
Year-to-date revenues dropped 14.1% reflecting a broad-based decline in tax and other revenues, which include items like Crown corporation profits. Year-to-date program expenses, meanwhile, jumped 81.6% largely due to emergency transfers to individuals, businesses and the provinces.
On a monthly basis, Canada posted a deficit of C$14.37 billion in February 2021, compared to the C$3.58 billion surplus recorded in February 2020.
Monthly revenues were down 9.3% on a decline in tax and other revenues. Program expenses climbed 58.1%, again on COVID-19 response measures.
(Reporting by Julie Gordon, 613-235-6745, Julie.email@example.com; Editing by David Ljunggren)
Canada sends medical supplies to India as COVID-19 overwhelms country’s health care – Global News
Coronavirus: What's happening in Canada and around the world on Wednesday – CBC.ca
The latest news on COVID-19 developments in Canada for Wednesday, May 5, 2021 – moosejawtoday.com
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