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With economy and credit rolling along, Fed unlikely to alter bond-buying By Reuters

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© Reuters. FILE PHOTO: St. Louis Fed President James Bullard speaks about the U.S. economy during an interview in New York

By Howard Schneider

WASHINGTON (Reuters) – Houses are being built and sold across the United States. Autos are moving off lots. Corporations are raising money and overall financial conditions remain easy.

Expectations were high in September that the U.S. Federal Reserve, as it rolled out a new monetary policy approach and continued battling a recession, would ramp up its bond purchases to further boost the economy. But the economy has stubbornly flashed a different signal: steady as it goes.

The labor market is clawing back jobs each month, albeit at a slowing pace, while other data continues to surprise in a positive way. U.S. retail sales in September, for example, rose an unexpectedly strong 1.9% from the prior month, and at nearly $550 billion are 3.7% above pre-pandemic levels, the sort of outcome that may make the U.S. central bank hesitant to tinker with its current $120 billion in monthly purchases of government bonds and mortgage-backed securities (MBS).

Graphic: The Fed’s QE rescue https://graphics.reuters.com/USA-FED/QE/oakvenzqypr/chart.png

With financial markets steady and credit readily available, people and firms “do buy houses, buy cars and order equipment and software,” Fed Vice Chair Richard Clarida said this week, ticking off some of the transactions easy monetary policy traditionally expects to encourage, and which the Fed would fret about if found wanting.

Graphic: Financial conditions tightened, then eased https://graphics.reuters.com/USA-FED/QE/qzjpqakeqpx/chart.png

“Right now we have got a good policy in place,” St. Louis Fed President James Bullard said during a panel on the sidelines of the International Monetary Fund and World Bank annual meetings on Friday. “We have our (quantitative easing) program in a place with a substantial amount of purchases. I think that is appropriate.”

Interest rates on U.S. Treasury bonds remain at record low levels, holding down related types of credit including 30-year home mortgages.

Graphic: Interest rates hit bottom https://graphics.reuters.com/USA-FED/QE/jznvnjezlvl/chart.png

More broadly, even with the outcome of the coronavirus pandemic in doubt and millions of workers sidelined because of the crisis, Bullard and other Fed officials have upgraded their economic forecasts in recent weeks. Closely watched indicators on credit markets and inflation expectations are at least holding steady if not improving.

Graphic: Cheap credit fuels a partial rebound https://graphics.reuters.com/USA-FED/QE/oakpenzayvr/chart.png

LIMITS TO BOND PURCHASES

If the economy in the spring seemed teetering towards the worst set of outcomes – a more long-lasting recession followed by rounds of loan defaults and a subsequent financial crisis – it landed on a road to recovery.

“With the economy evidently on the good path, the (Federal Open Market Committee) won’t take any further meaningful policy action unless something bad happens,” William Nelson, a former Fed official who is now chief economist at the Bank Policy Institute, wrote this month, referring to the Fed’s policy-setting committee.

That “something” could well occur.

Fed officials have been blunt about the risks from an ongoing pandemic, including a drop in household income from the lapse of unemployment insurance benefits or other developments that cause the recovery to sputter out.

Fed asset purchases aim to bolster the economy in different ways. By increasing demand for riskier bonds, for example, they hold down a variety of related interest rates, and make borrowing cheaper. They often lift stock and other asset prices, generating a “wealth effect” that triggers spinoff economic activity.

A top Fed economist recently estimated the Fed would need to buy another $3.5 trillion of securities to offset the impact of the pandemic and the recession it triggered. Others have argued more is needed to prove the central bank is serious about meeting its 2% inflation target.

But the Fed has bought about $3 trillion of Treasuries and MBS since the recession began, and locked in an open-ended promise to keep buying at least $120 billion more each month, a faster pace than was used to fight the 2007-2009 financial crisis and recession. In its last policy statement, the Fed said that amount is already helping sustain the “accommodative” financial conditions it has promised to keep in place indefinitely.

The economy is by no means repaired from the shock it suffered in March and April, when lockdowns to control the spread of the virus were imposed. Initial claims for unemployment insurance jumped back to near 900,000 in the week ending Oct. 10, and even as he lauded a stronger-than-expected recovery this week, Clarida acknowledged a deep gash remains, particularly for unemployed or sidelined workers.

But of the two large levers used to manage the U.S. economy – monetary conditions controlled by the Fed and government spending controlled by Congress – Fed officials feel theirs is doing what it can for now.

At this point, Fed officials have noted, the need is to get money directly into the pockets of unemployed workers needing to make mortgage payments, businesses waiting for customers to return, or local governments needing to pay workers.

Bond-buying won’t do that.

“We expect the recovery to continue in coming months, albeit at a more modest pace, and we do not think that Fed officials will see a need to provide additional accommodation,” Goldman Sachs (NYSE:) economists wrote in an analysis this week.

Even if things go bad, in an environment of already low interest rates and weak household demand, changes in the Fed’s asset purchases are “not a particularly effective” response.





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Economy

Zeta regains hurricane strength, set for Louisiana landfall By Reuters

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© Reuters. Residents prepare for the arrival of Hurricane Zeta in New Orleans

(Reuters) – Zeta has strengthened again into a hurricane and is expected to make landfall in southeastern Louisiana on Wednesday afternoon, the U.S. National Hurricane Center (NHC) said.

Hurricane Zeta, located about 365 miles (585 km) south-southwest of the mouth of the Mississippi River, is packing maximum sustained winds of 75 mph (120 kph), the NHC 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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Israeli-Japanese VC fund Aristagora raises $60m

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The fund focuses on deep technologies and will invest $500,000 to $1.5 million as an initial investment in each selected initiative.


Israeli-Japanese seed-stage tech investment Aristagora VC has announced its first $60 million fund. The fund focuses on deep technologies and will invest $500,000 to $1.5 million as an initial investment in each selected initiative. As a fund with deep financial capabilities, Aristagora VC will support its portfolio companies’ growth through next-stage funding rounds and will serve as a feeder for later-stage and growth-stage funds and will focus on multi-stage exit strategies.

Aristagora VC will also bring another significant advantage to its portfolio companies. As one of the fund’s active general partners hails from Japan and manages private equity and investment activities in Tokyo, the fund will also provide a foot in the door for its portfolio companies to make connections and secure significant business relationships within the Japanese market, known to be hard for foreigners to penetrate..

The fund’s Israeli managing partners are Anat Tila Cherni and Moshe Sarfaty, both experience venture capital investors, while the chairman of the fund’s Investment Committee is Gideon Ben-Zvi. The fund’s fourth partner, Takeshi Shinoda, operates out of Japan and Singapore.

He said, “From my vantage point in Japan, I know exactly what needs to be done to penetrate the Japanese and Asian markets. My local team and I will ensure that the fund’s portfolio companies are brought to the local market at the right time and in the best possible way. We will help Israeli entrepreneurs with their diverse Israeli mentalities to adapt themselves to the local market while also holding on to the many benefits that led us to focus on the Israeli market in the first place.”

Published by Globes, Israel business news – en.globes.co.il – on October 27, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020



Aristagora VC partners  / Photo: Doron Latzter

Aristagora VC partners / Photo: Doron Latzter



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Australians Favor Clean Energy to Boost Economy Over Gas Plan By Bloomberg

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© Bloomberg. An NSW Rural Fire Service volunteer douses a fire during back-burning operations in bushland in New South Wales, Australia in 2019.

(Bloomberg) — Most Australians would prefer investment in clean energy to help lift the economy out of its Covid-induced recession to the government’s plan for a “gas-fired” recovery.

Just 12% of respondents in a survey commissioned by The Australia Institute supported the emphasis on gas in driving the revival, compared with 59% who said they would prefer renewable power to be central. The findings reflect growing concerns in a country ravaged by one of its worst bushfire seasons on record earlier this year, according to the climate-focused think tank.

“There is one clear message: most Australians want more renewables and less fossil fuels,” said Richie Merzian, AI’s climate and energy director. “That means phase out coal-fired power stations, bypass a gas-fired transition and plug into renewables to power their future.”

Prime Minister Scott Morrison’s government has backed fossil fuels and refused to set any target to reach zero emissions even as key export markets including China and Japan pledge to intensify their efforts. U.K. Prime Minister Boris Johnson urged Morrison to take “bold action” on climate change, including a net-zero goal, in a phone conversation between the two leaders on Tuesday, the Sydney Morning Herald paper reported.

Last month, the government rolled out a suite of energy policy initiatives aimed at helping the economy pull out of its first recession in 30 years. They included incentives to develop new gas resources and pipeline infrastructure and a promise to build a new gas-fired generation plant if private operators didn’t commit to replacing a retiring coal power station.

Around 80% of those surveyed said Australia was already experiencing the impact from climate change, while 82% were concerned that global warming would make bushfires worse in the years ahead.

Opinion polls in Australia often show strong support for tougher action to combat climate change, but the evidence suggests that does not necessarily translate to votes. In the 2019 national election, the opposition Labor Party fought on a strong green platform, including a climate target that went beyond the country’s Paris Agreement commitments, yet the pro fossil fuels center-right Liberal Party still won with a bolstered majority.

The survey, conducted in July by YouGov on behalf of AI, questioned about 2,000 people spread evenly across Australia’s states and territories.

(Updates with U.K. Prime Minister comments in fourth paragraph)

©2020 Bloomberg L.P.

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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