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ECB policymakers set out wish list for strategic rethink By Reuters

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© Reuters. FILE PHOTO: FILE PHOTO: European Central Bank (ECB) President Christine Lagarde gestures as she addresses a news conference on the outcome of the meeting of the Governing Council, in Frankfurt

By Francesco Canepa

FRANKFURT (Reuters) – Five European Central Bank policymakers, including President Christine Lagarde, floated proposals on Wednesday for changing how the ECB goes about the business of steering price growth in the euro zone.

With the ECB in the middle of its first strategic review in nearly two decades, proposals ranged from buying more green bonds to letting inflation overshoot the symbolic 2% threshold — to doing nothing at all.

The ECB has undershot its goal of keeping price growth “below but close to” 2% for nearly a decade. And just as the coronavirus pandemic causes prices to fall, it is now debating whether and how to change that target.

Policymakers speaking at different events throughout the day acknowledged that some of the reasons for the sluggish price growth were beyond their control but their responses sometimes differed.

French central bank governor Francois Villeroy de Galhau proposed saying that the ECB would “accept inflation higher than 2% for some time without mechanically” tightening policy, in a bid to boost expectations about future price growth .

This would be a variation on the Federal Reserve’s new goal, which is a 2% inflation rate on average over an unspecified period. It would give the ECB greater flexibility by not tying it to an arithmetic mean.

His Finnish peer Olli Rehn argued roughly along the same lines, calling for “a clearly and genuinely symmetric” target accompanied by forceful action to correct any deviation in either direction.

However, ECB board member Yves Mersch was unconvinced that the ECB’s target needed changing as it had proven successful over a 20-year horizon.

He also argued new structural forces, such as global supply chains and a more tenuous relationship between unemployment and price growth, meant that old economic models were now outdated.

“We cannot continue to chase ghosts that do not exist any more,” Mersch said.

GOING GREEN

Lagarde had kicked off proceedings in the morning, throwing her weight behind the idea that the ECB would favour green bonds when buying corporate credit to make up for the market’s failure to do so.

This would imply ditching the ECB’s sacred principle of market neutrality, which forces it to buy company bonds in proportion to their outstanding amounts, as suggested by ECB board member Isabel Schnabel recently.

“In the face of what I call the market’s failures, (there) is also a question we have to ask ourselves as to whether market neutrality should be the actual principle to drive our… asset purchases programme,” Lagarde told a United Nations event.

Her green push was echoed by Austrian central bank governor Robert Holzmann, who said later the ECB was “prepared to navigate hitherto unchartered waters” to tackle climate change.

“Climate change does concern many aspects of monetary policy, including inflation, economic growth, interest rates and the transmission channels of our instruments,” Holzmann added.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Threats to U.S. Treasury market liquidity still exist, Fed says By Reuters

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© Reuters. FILE PHOTO: Federal Reserve Board building on Constitution Avenue is pictured in Washington

By Kate Duguid

NEW YORK (Reuters) – The U.S. Treasury market still runs the risk of abrupt freezes in liquidity like the one seen in March and April, as the COVID-19 pandemic roiled the financial system, a member of the Federal Reserve Bank of New York’s Market Committee said on Friday.

The market shock in March, which helped drive yields across maturities to all-time lows, was “truly an exceptional event,” Lorie Logan said in a speech to the Brookings-Chicago Booth Task Force on Financial Stability.

“However, while it is tempting to dismiss it as a once-in-a-lifetime shock, it is important to take time to reflect and assess if lessons can be learned that could make the Treasury market even more resilient to future shocks.”

The Treasury market is the deepest and most liquid in the world. Nevertheless, at the start of the coronavirus pandemic, a large number of investors tried to sell off their Treasury holdings only to find a limited number of buyers.

The major sellers were mutual funds, which sold off more than $200 billion of their Treasury holdings in the first quarter, foreign accounts, which sold off roughly $161 billion between February and April, and hedge funds.

The buyers, Treasury market primary dealers, reported that customer transaction volumes increased from $400 billion a day in February to $650 billion a day in mid-March. In the market for buying and selling all Treasuries save for the most recently issued, the spread between the prices asked and those bid rose to an all-time high, nearly 30 times their normal level.

Primary dealers were prior to the selloff holding historically high volumes of Treasury debt, and were therefore unable to take on more, explained Logan. The Fed stepped in and began purchasing Treasury debt, which returned liquidity to the market.

But primary dealers currently hold even more Treasury debt than they did at the beginning of the pandemic, and could, in the event of another bout of forced selling, face the same problem absorbing all the Treasury supply on offer.

To pay for the stimulus package passed by Congress earlier this year – among other government-funded programs – the Treasury Department has issued a record $15.5 trillion through the end of September. Issuance could rise in the coming months if a fresh round of stimulus funding is passed.

“Ongoing increases in the stock of Treasuries may result in greater peaks in the demand for intermediation,” said Logan.

Not mentioned in the speech was the possibility of market volatility around the U.S. election on Nov. 3.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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Europe braces for lengthy battle with COVID By Reuters

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© Reuters. People wearing face masks are pictured at Schloss Strasse shopping street as the coronavirus disease (COVID-19) outbreak continues in Berlin

By Benoit Van Overstraeten and Nathan Allen

PARIS/MADRID (Reuters) – Europe faces a lengthy battle against the coronavirus at least until mid-2021, France warned on Friday, as anxious governments introduced ever more restrictions to curb the disease once again accelerating through the continent.

Europe’s daily infections have more than doubled in the last 10 days, reaching a total of 7.8 million cases and about 247,000 deaths, as a second wave right before winter has crushed economic revival hopes.

“When I listen to scientists I see that projections are for at best until next summer,” French President Emmanuel Macron said during a visit to a hospital near Paris.

France, which passed 1 million cases on Friday with a new record daily total of more than 42,000, has been one of the hardest-hit nations and has imposed curfews.

COVID-19 patients already occupy nearly half of France’s 5,000 intensive care beds and one of the government’s advisers warned the virus was spreading more quickly than in spring.

Further curbs are underway by governments desperate to avoid a repeat of blanket lockdowns that brought some control in March and April but strangled economies.

“We are all afraid,” said Maria, a 73-year old pensioner in the Slovakian town of Dolny Kubin, where officials were piloting a testing scheme. “I see what’s happening and it is terrifying.”

Belgium, another of the worst-hit countries, whose foreign minister went into intensive care this week, further limited social contact and banned fans from sports matches.

In the Czech Republic, with Europe’s highest per capita infections, Prime Minister Andrej Babis moved to sack his health minister for apparently flouting rules on masks after a meeting in a restaurant that should have been closed.

In Spain, which passed the 1 million case milestone earlier this week, two regions, Castilla and Leon and Valencia, urged the central government to impose night-time curfews.

‘FOLLOW PRECAUTIONS’

Official data show Spain already has the highest number of cases in Europe but the real picture may be even worse according to Prime Minister Pedro Sanchez, who said a nationwide antibody study suggested the total may be over 3 million.

“If we don’t follow precautions, we are putting the lives of those we love most at risk,” he said.

How long governments will be able to resist lockdowns is uncertain. The governor of Campania, the southern Italian region around Naples which has already imposed a curfew and shut schools, called for a total lockdown, saying “half measures” were not working.

“It is necessary to close everything, except for those businesses that produce and transport essential goods,” Vincenzo De Luca said.

While health services have not so far been overwhelmed to the extent they were in the first wave, authorities have warned of a likely surge in demand for intensive care beds as colder weather forces more people indoors and infections spread.

Italy’s top public health body said the situation was approaching critical levels in many regions and said complete tracing of contact chains had become impossible.

With its own hospitals under increasing strain, the Netherlands began transferring patients to Germany again, after dozens were treated in its larger neighbour during the earlier phase of the crisis.

But public support seen at the start of the crisis has steadily eroded amid a welter of often contradictory public information on the latest restrictions and growing fears about the economic costs.

Underlining the threat, a business survey showed service sector companies cutting back heavily as more and more consumers stayed home, raising the likelihood of a double dip recession this year in Europe’s single currency zone.





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Biden says he would if elected mandate masks in interstate transportation By Reuters

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© Reuters. FILE PHOTO: U.S. Democratic presidential candidate Joe Biden looks on as he talks to reporters while leaving, following the final 2020 U.S. presidential campaign debate, at Nashville International Airport in Nashville

By David Shepardson

WASHINGTON (Reuters) – Democratic presidential candidate Joe Biden on Friday said he would mandate masks in all interstate U.S. transportation if elected after the Trump administration rejected requirements.

“As president I will mandate mask wearing in all federal buildings and all interstate transportation because masks save lives – period,” Biden said in a speech in Delaware. “Wearing masks is not a political statement, it is a scientific imperative.”

On Monday, the U.S. Centers for Disease Control and Prevention (CDC) issued a “strong recommendation” that all passengers and employees on airplanes, trains, subways, buses, taxis and ride-share vehicles wear masks to prevent the spread of COVID-19.

The interim CDC guidance urges facial coverings at transportation hubs like airports and train stations, saying masks “will protect Americans and provide confidence that we can once again travel more safely even during this pandemic.”

Airlines, U.S. passenger railroad Amtrak and most public transit systems and U.S. airports require all passengers and workers to wear facial coverings, as do ride-sharing firms Uber (N:) and Lyft (O:).

Delta Air Lines (N:) said in a memo made public Friday that it had banned 460 people to date for failing to wear masks.

The White House has rejected calls from U.S. health experts to mandate masks in transportation.

Reuters reported in July that administration officials had held extensive talks about whether the Health and Human Services Department should issue an order requiring masks at U.S. airports, train and transit stations and onboard airplanes, trains and transit services before opting not to proceed.

In July, the White House opposed legislation that sought to mandate all airline, train and public transit passengers and workers wear masks, saying it was “overly restrictive.” It added that “such decisions should be left to states, local governments, transportation systems, and public health leaders.”

Earlier this month, the U.S. Transportation Department rejected a petition that sought a mask mandate at airports and for U.S. airlines, saying the department believes “there should be no more regulations than necessary.”

A White House spokesman did not immediately respond to a request for comment on Biden’s remarks.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.





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