THE DAILY NEWS

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REUTERS

"U.S. consumer confidence at 17-month high; business spending on equipment strong"


Lucia Mutikani

July 27, 2021

Summary

* Consumer confidence ticks up to 17-month high in July

* Core capital goods orders increase 0.5% in June

* Core capital goods shipments rise 0.6%

* House prices accelerate in May


WASHINGTON, July 27 (Reuters) - U.S. consumer confidence inched up to a 17-month high in July, with households' spending plans rising even as concerns about higher inflation lingered, suggesting the economy maintained its strong growth clip early in the third quarter.

The economy's prospects were further brightened by other data on Tuesday showing a solid increase in new orders for manufactured capital goods in June despite supply constraints hampering production at some factories, indicating that business spending on equipment could remain strong for a while.

The reports could ease worries about a sharp slowdown in growth in the second half of the year as the boost from massive fiscal stimulus fades.

The economy is believed to have notched its second-fastest growth pace since 1983 in the second quarter.

"Higher confidence suggests that consumer spending should support robust growth in the second half of this year," said Priscilla Thiagamoorthy, an economist at BMO Capital Markets in Toronto.

The Conference Board said its consumer confidence index ticked up to a reading of 129.1 this month, the highest level since February 2020, from 128.9 in June.

Economists polled by Reuters had forecast the index would fall to 123.9.

Consumers' inflation expectations over the next 12 months dipped to 6.6% from 6.7% last month.

The Conference Board survey places more emphasis on the labor market.

The University of Michigan's survey of consumers showed sentiment falling in early July because of inflation concerns.

Consumer confidence held up despite the Delta variant of the coronavirus driving a surge in new infections mostly among the unvaccinated.

Confidence fell in the West South Central and West North Central states, as well as the Mountain region, which have low vaccination rates and are experiencing a surge in infections.

"The Delta variant does pose some downside risk, although we do not expect it to derail confidence entirely, given that its spread is uneven and largely concentrated in areas with low vaccination rates," said Pooja Sriram, an economist at Barclays in New York.

The survey's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, nudged up to 44.4 in July.

That was the highest level since 2000 and up from 44.2 in June.

This measure closely correlates to the unemployment rate in the Labor Department's closely watched employment report.

More households intended to buy long-lasting manufactured goods such as motor vehicles and household appliances such as refrigerators and television sets, which should help to underpin consumer spending and manufacturing, the survey showed.

Consumers were also keen to purchase homes.

Households are sitting on at least $2.5 trillion in excess savings accumulated during the pandemic.

Stocks on Wall Street were trading lower ahead of earnings reports from major companies and as the Federal Reserve held a two-day policy meeting.

The dollar slipped against a basket of currencies.

U.S. Treasury prices were higher.

SURGING HOUSE PRICES

In a separate report on Tuesday, the Commerce Department said orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 0.5% last month.

These so-called core capital goods orders gained 0.5% in May.

Shipments of core capital goods increased 0.6% after accelerating 0.9% in May.

Core capital goods shipments are used to calculate equipment spending in the government's gross domestic product measurement.

"Supply chain issues are holding back faster capacity adjustment, but business investment is showing no signs of slowing down or a lack of confidence in continuing strength in consumer demand," said Will Compernolle, senior economist at FHN Financial in New York.

Business investment on equipment has boomed during the pandemic, underpinning manufacturing, which accounts for 11.9% of the U.S. economy.

Consumer spending shifted to goods from services, with millions of Americans cooped up at home.

Record low interest rates and massive fiscal stimulus measures offered a further boost, causing supply constraints.

Though demand is reverting to services, with just under half of the population fully vaccinated against the coronavirus, spending on goods is likely to remain strong.

Business spending on equipment has recorded three straight quarters of double-digit growth.

Another solid quarter of growth is expected when the government publishes its advance estimate of GDP growth for the second quarter on Thursday.

According to a Reuters survey, GDP growth likely increased at an 8.5% annualized rate last quarter, an acceleration from the first quarter's 6.4% pace.

The anticipated growth in the second quarter would be the fastest since 1983 and could mark a peak in the current cycle.

Orders for durable goods, or items ranging from toasters to aircraft that are meant to last three years or more, advanced 0.8% in June after rebounding 3.2% in May.

They were held back by weak orders for motor vehicles and parts, which slipped 0.3%.

Motor vehicle production has been hit by a global semiconductor chip shortage.

Output of computers and electronic products has also been impacted.

Manufacturing and housing have enjoyed strong growth during the pandemic.

Soaring home prices are, however, threatening to slow the housing market momentum.

A third report showed the S&P/Case Shiller composite index of 20 metropolitan areas accelerated 17.0% on a year-on-year basis in May, the largest gain since August 2004.

That followed a 15.0% increase in April.


Surging house price inflation was highlighted by a fourth report showing the Federal Housing Finance Agency (FHFA) house price index rose a record 18.0% in May from a year ago after vaulting 15.8% in the 12 months through April.

"Homebuying affordability has deteriorated sharply, pricing some buyers out of the market," said Nancy Vanden Houten, lead economist at Oxford Economics in New York.

Reporting by Lucia Mutikani Editing by Andrea Ricci, David Holmes and Paul Simao

https://www.reuters.com/world/us/us-cor ... 021-07-27/
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REUTERS

"U.S. stocks, real U.S. bond yields slip as Fed meets; China tremors"


By Koh Gui Qing

JULY 26, 2021

NEW YORK (Reuters) -U.S. stocks fell from record highs on Tuesday while real U.S. bond yields hit all-time lows, as a sell-off in Chinese shares, economic growth concerns and the Federal Reserve’s policy meeting put investors on guard and drove profit taking.

Unsettled by events in China overnight, where share prices skidded on concerns about the impact of a recent tightening in government regulations, global stock markets pulled back on Tuesday as volatility spiked.

In the United States, investors turned cautious as they awaited the Fed’s policy statement at the close of its two-day meeting, which began on Tuesday.

All eyes will be on what Fed Chair Jerome Powell says at a post-meeting news conference on Wednesday at 2 p.m. EDT (1800 GMT), especially in relation to inflation, economic growth, interest rates and when the Fed will likely start reducing its purchases of government bonds.

Some investors worry that the fast-spreading Delta variant of the coronavirus may thwart the global economic recovery, at a time when inflation in countries such as the United States has accelerated faster than expected.

A stalled economic recovery and rising price pressures would complicate monetary policy, and force central banks to balance the objectives of supporting growth and tempering price rises.

“There is some concern over where we are on monetary policy,” said Peter Kenny, founder of Kenny’s Commentary LLC and Strategic Board Solutions Llc in New York.

“There’s no question that the Fed is going to address the elephant in the room, and that is inflation,” Kenny said.

“It appears that inflation is not transitory.”


Analysts agree that low interest rates are generally a boon for equities and any sign of a faster-than-expected tightening in the Fed’s policy - whether raising interest rates or tapering bond purchases - could rattle the stock market.

The Dow Jones Industrial Average ended down 0.2% at 35,059 points, and the S&P 500 shed 0.5% to end at 4,401 points.

The Nasdaq Composite slid 1.2% to 14,660 points, its biggest one-day drop since May 12, hurt by some bets that the earnings growth of tech stocks is already priced into valuations.

The pan-European STOXX 600 index finished 0.54% lower and MSCI’s gauge of stocks across the globe shed 0.81%.

Still, losses on Wall Street and in Europe were modest compared with overnight declines in China.

The blue-chip Chinese CSI300 index plunged 3.5%, while the Hang Seng Tech index tumbled almost 8%, losing a whopping 17% in just three days.


In keeping with the muted mood in markets, the yield on 10-year Treasury inflation-protected securities (TIPS) hit an all-time low of -1.147% before rebounding to -1.129%.

Real, or inflation-adjusted, bond yields across major economies have fallen in recent sessions, which analysts attribute to growing concern about the economic outlook, as well as technical factors such as hefty bond-buying by central banks.

The yield on 10-year Treasury notes was down at 1.238%.

Currency investors also played it safe before the Fed meeting outcome.

The dollar, which has risen broadly for more than a month on expectations that, as the economy strengthened, the Fed would tighten its policies, gave up some gains on Tuesday as investors shunned big bets before Powell’s remarks.

The dollar index fell 0.17%, and a softer dollar lifted the euro by 0.16% to $1.1821.

The somber mood led oil prices to give up earlier gains.

U.S. crude settled 0.36% lower at $71.65 per barrel and Brent was at $74.48, down 0.03% on the day.

The slight risk aversion amongst investors benefited bullion.

Spot gold added 0.1% to $1,799.64 an ounce.

U.S. gold futures gained 0.28% to $1,799.50 an ounce.

Cryptocurrencies, a barometer of investors’ risk appetites, also succumbed to the cautious overtone in markets and pared earlier gains.

Bitcoin last rose 1.8% to $37,960.44, recouping some losses after Amazon.com Inc offered a qualified denial of a weekend news report that said it was preparing to accept cryptocurrencies.

Reporting by Koh Gui Qing; additional reporting by Carolyn Cohn, Dhara Ranasinghe, Sujata Rao in London and Alun John in Hong Kong; editing by Steve Orlofsky, Leslie Adler and Jonathan Oatis

https://www.reuters.com/article/us-glob ... SKBN2EX066
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FOX NEWS

"Democratic-led cities efforting for defunding police spent millions on private security"


Jack Durschlag 

27 JULY 2021

Despite efforts to defund police, these Democrat-led cities spent millions on private security for mayors

As crime surges across the nation, Democratic mayors in approximately 20 U.S. cities that have called for defunding the police have received millions in taxpayer funds towards their own personal security details, according to a new report.

New data compiled by Forbes auditor Open the Books through Freedom of Information Act requests reveals that the city of Chicago, for example, spent $17.3 million between 2015 and 2020 to guard "unnamed city officials."

Despite Mayor Lori Lightfoot's claims that she is opposed to cutting funding for the police, records show the city quietly cut 400 police officer positions in 2020 while the cost of her security detail hit an all-time high of $3.4 million for 22 officers, according to the report.


Chicago reportedly spent $2.8 million for 17 officers in 2019; $2.8 million for 16 officers in 2018; $2.7 million for 20 police officers in 2017; and $2.9 million for 16 officers in 2016.

In San Francisco, $12.4 million was reportedly spent between 2015 and 2020 to protect Mayor London Breed as the city said it would divest $120 million from its police budget over two years to be put towards health programs.

Security detail spending for Breed amounted to $1.7 million in 2015; $417,489 in 2016; $2.5 million in 2017; $2.7 million in 2018; $2.5 million in 2019; and $2.6 million in 2020.

In New York, the city council approved slashing $1 billion from its $6 billion police budget, with $354 million to be reallocated to mental health, homelessness and education services.

However, spending on Mayor Bill de Blasio's security detail reportedly cost taxpayers $358,000 during his failed presidential bid.


In Baltimore, approximately $3.6 million was spent in 2020 for police to cover Mayor Brendon Scott, State's Attorney Marilyn Mosby and Police Commissioner Michael Harrison, despite about $22 million being eliminated from the city's police budget, according to Fox Baltimore.

The mayor's protection unit reportedly cost the city nearly $2 million last fiscal year, while protection for the state's attorney cost $1.3 million and the police commissioner cost $464,948.

In other developments:

- James Craig calls out Democrats who want to defund police: Hire social workers as your private security

- Concha rips pro-defund police Dem Cori Bush for spending $70k on security: ‘Rules for thee, not for me’

- ‘Hypocrite’ Rep. Bush wants to defund your police, while dishing out $70k on private security: Gowdy

- Sen. Kennedy blasts Biden for 'not telling the truth' about Dems wanting to defund police

https://www.msn.com/en-us/news/us/democ ... d=msedgntp
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THE WALL STREET JOURNAL

"Capitol Police Officer Describes Fighting 'Hand to Hand, Inch by Inch' in Jan. 6 Testimony"


Alexa Corse 

28 JULY 2021

WASHINGTON — Police officers who defended the Capitol on Jan. 6 described a harrowing confrontation with rioters, in testimony at a House select committee’s first public hearing Tuesday.

The hearing represents the beginnings of the committee’s efforts to investigate the events on Jan. 6, when then-President Donald Trump’s supporters stormed the U.S. Capitol, temporarily interrupting the certification of President Biden’s victory in the November election over Mr. Trump.


Capitol Police officer Aquilino Gonell said that he and fellow officers were beaten repeatedly and that he thought he would die.

“We fought hand to hand, inch by inch,” he testified.

Mr. Gonell said that he is troubled by any effort to play down the severity of the attack.

“There is a continuous and shocking attempt to ignore or try to destroy the truth of what truly happened that day, and to whitewash the facts,” he said.


The panel has been the subject of bitter partisan divisions.

Most Republicans voted against both the formation of the panel and a previous effort to establish a bipartisan commission, pointing to existing congressional and law enforcement probes.

The Democratic-led panel’s chairman, Rep. Bennie Thompson (D., Miss.), said that the committee’s work is necessary because the threat hasn’t gone away.

“We know that efforts to subvert our democracy are ongoing,” Mr. Thompson said at the start of the hearing.

The panel plans to go beyond security failures to look at communications between Congress and the executive branch and examine the role of individuals in the events.

Mr. Thompson has said the panel won’t hesitate to subpoena members of Congress or Mr. Trump and will try to enforce the subpoenas in court if necessary.


Four law-enforcement officers are testifying Tuesday: Mr. Gonell and Harry Dunn of the Capitol Police, and Michael Fanone and Daniel Hodges from Washington, D.C.’s Metropolitan Police Department.

The officers testifying have spoken publicly before about the Jan. 6 attack.

But by bringing them before the select committee, Democrats hope to bring more attention to what rank-and-file law-enforcement officers endured and the violence of the riot.


Last week, Democratic and Republican party leaders clashed over the panel’s makeup.

The panel comprises seven Democrats and two Republicans picked by Speaker Nancy Pelosi (D., Calif.): Reps. Liz Cheney of Wyoming and Adam Kinzinger of Illinois, both of whom had voted to impeach Mr. Trump for inciting insurrection.

Ms. Cheney delivered the second opening statement, signaling that she is taking a prominent role on the committee.

“We cannot leave the violence of Jan. 6 — and its causes — uninvestigated,” she said.


Mrs. Pelosi rejected two appointees chosen by House Minority Leader Kevin McCarthy (R., Calif.): Rep. Jim Banks (R., Ind.), chairman of the conservative Republican Study Committee, and Rep. Jim Jordan (R., Ohio), the top Republican on the House Judiciary Committee.

Mr. McCarthy pulled his other three selections in response, and said House Republicans will conduct their own investigation.

House GOP lawmakers held a press conference before the hearing to accuse Mrs. Pelosi of being responsible for the security failures on Jan. 6, and of refusing to answer questions about it.

“Unfortunately Speaker Pelosi will only pick people onto the committee that will ask the questions she wants to ask,” Mr. McCarthy said.

“That becomes a failed committee and a failed report, a sham no one can believe.”


Mrs. Pelosi’s office said that the Capitol Police Board and congressional committees are responsible for overseeing the Capitol Police, not the speaker herself.

Mr. Trump, who has denied wrongdoing, was impeached in the House but acquitted in the Senate.

He has slammed the select committee as highly partisan and has suggested Mrs. Pelosi should investigate herself.

About 140 Capitol and D.C. police officers were injured on Jan. 6 while defending Congress, the Capitol Police union previously said.

Some officers say that months later they are still suffering physical and mental harm related to the attack.

One Capitol Police officer was assaulted during the attack and suffered a stroke.

He died the day after the riot of natural causes, according to the medical examiner’s office in Washington, D.C.

Two other officers died by suicide after responding to the riot, officials have said.

Write to Alexa Corse at alexa.corse@wsj.com

https://www.msn.com/en-us/news/politics ... d=msedgntp
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THE DAILY MAIL

"AOC says she wants to 'abolish our carceral system'"


Brian Stieglitz For Dailymail.Com 

28 JULY 2021

Alexandria Ocasio-Cortez called for the abolition of the 'carceral system' in the US during a campaign event in Ohio over the weekend.

The Democratic Squad member was campaigning for congressional candidate Nina Turner on Saturday when she said: 'I want to abolish our carceral system that's designed to trap black and brown men.'


'I want justice.'

'I want peace, and I want prosperity.'

'That's what I want,' Ocasio-Cortez added during her speech in Cleveland for the co-chair of Bernie Sander's 2020 presidential campaign.

The country's carceral system refers to its approach to criminal justice and punishment of criminals.

Ocasio-Cortez has long fought for drastic changes to the system that she says unfairly targets black and brown people.

A statement on her official government website reads that she 'is committed to dismantling our system of mass incarceration and ending the school-to-prison pipeline.'

According to the website, her criminal justice reform goals include federally legalizing marijuana, ending for-profit prisons, releasing all individuals incarcerated for nonviolent drug offenses, ending cash bail, and launching independent investigations for every case in which someone is killed by law enforcement.

Ocasio-Cortez shares similar views as Turner, who is running to represent Ohio's 11th congressional district.

The seat was vacated in March by Marcia Fudge, who became President Biden's Secretary of Housing and Urban Development.

Turner's campaign is supporting policies like AOC's Green New Deal, Medicare for all, the cancellation of student debt and a $15 per hour minimum wage.

There are 15 candidates - 13 Democrats and two Republicans - vying for the seat.

The 11th district often sways left, so the winner of the Democratic primary may likely determine the winner of the general election.

The Democratic and Republican primaries will be held on August 3, though early voting started two weeks ago.

'This isn't about Nina vs any opponent; this is about the people versus big money,' she said at the event according to WJW.

The congresswoman continued, 'This is a deep blue seat.'

'It's a deep blue seat.'

'Districts like Ohio's 11th should be leading the country on issues.'

'They are opportunities, they are very rare opportunities, very rare districts like this one that can take and be visionary.'

She added, 'If there is anywhere where you can afford to have somebody be bold.'

'If there is any district where you can afford to have somebody who is going to bespeak not only a certain truth to power but stand up and help create a vision that provides
provision.'

'If there is any district where it can be done in the great state of Ohio, it's Ohio 11th district.'

Turner's canvas launch included four different events in Cleveland and Cleveland Heights to help rally volunteers for the last week and a half until the primary.

'Canvasses are where the fight gets won.'

'Right here is where the work happens and I love being where the work happens.'

'Where we actually get our hands dirty in the work of knocking on our doors and having conversations with our neighbors and building actual community.'

'There's no replacement for that,' said Ocasio-Cortez.

One of Turner's opponent's, Cuyahoga County Councilwoman Shontel Brown, a moderate, told WJW in response to Ocasio-Cortez's rally, 'The contrast in this race could not be clearer.'

'Shontel Brown is the only candidate who from day one can work with the Biden administration and our house majority to deliver good-paying jobs, affordable healthcare, and affordable prescription drugs to northeast Ohio.'

Brown, who has been endorsed by Hillary Clinton and House Majority leader Jim Clyburn, also canvassed on Saturday in the west side of Cleveland and held a community cookout in Cleveland Heights Sunday afternoon.

She told WJW, 'I couldn't be more excited that we have an administration that's talking about things through a lens of equity, equality and inclusion so when you're talking about trillions of dollars in infrastructure, that is going to create many job opportunities so we need someone who can be at the table who can make sure we get those resources back into the 11th Congressional District.'

https://www.msn.com/en-us/news/politics ... d=msedgntp
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RIGZONE

"Oil Increases as Healthy Demand Decreases Supply"


by Bloomberg | Jill R. Shah

Wednesday, July 28, 2021

Oil advanced to the highest level in two weeks after declining stockpiles of U.S. crude, gasoline and distillate signaled healthy demand during the nation’s summer driving season.

Futures rose 1% in New York on Wednesday.

A U.S. government report showed crude supplies slid to the lowest since January 2020 and distillate stockpiles posted the biggest decline since April.

Fuel inventories fell by more than 2 million barrels last week, the data showed.

U.S. demand is “pretty healthy from an inventory perspective,” said Brian Kessens, a portfolio manager at Tortoise, a firm that manages roughly $8 billion in energy-related assets.

While the delta variant bears watching, in the U.S. “to date, it hasn’t had any impact on mobility at all,” he said.

Global oil prices have rallied this year with an economic recovery underway following vaccine campaigns.

However, the delta variant’s recent surge is posing a threat to the commodity’s rally -- and short-term demand -- as a rapidly rising case count has led many countries to impose restrictions.

“The oil market is just waiting for the moment to get the all-clear signal that the delta variant risk is just a blip on the overall outlook,” said Ed Moya, senior market analyst at Oanda Corp.

Deutsche Bank sees Brent prices at $72 in the second half of this year, as speculative interest wanes but the market remains supported by deficits averaging 900,000 barrels per day through the rest of the year, said analyst Michael Hsueh in a recent note to clients.

Prices

West Texas Intermediate for September delivery rose 74 cents to settle at $72.39 a barrel on the New York Mercantile Exchange.

Brent for September settlement gained 26 cents to end the session at $74.74 on the ICE Futures Europe exchange.

The EIA data also showed jet fuel demand rising in the U.S., with the moving average climbing to about 1.5 million barrels a day, the highest since March 2020.

Inventories at the nation’s largest storage hub in Cushing, Oklahoma, slid to the lowest level in more than a year.

Meanwhile, returns from converting crude into gasoline have surged in recent weeks from the U.S. to Asia, where they’ve hit the highest level since April 2019.

However, the spread of the delta variant has presented a challenge to refiners ready to put the worst of the Covid-19 pandemic behind them.

Processors want to cash in on better margins, but are wary that renewed demand weakness could lead to a surplus of fuels and sink profits again.

With assistance from Grant Smith and Elizabeth Low.

https://www.rigzone.com/news/wire/oil_i ... 6-article/
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CNBC

"Treasury yields little changed after Fed makes no move on asset purchases"


Tanaya Macheel @TANAYAMAC Vicky McKeever @VMCKEEVERCNBC

PUBLISHED WED, JUL 28 2021

Treasury yields were little changed after the Federal Reserve concluded its two-day meeting of the Federal Open Market Committee on Wednesday by keeping interest rates in a target range near zero, as expected.

The yield on the benchmark 10-year Treasury note dipped by less than 1 basis point to 1.229% at 4 p.m. ET.

The yield on the 30-year Treasury bond ticked down less than a basis point to 1.887%.

Yields move inversely to prices and 1 basis point equals 0.01 percentage points.

Fed Chairman Jerome Powell cautioned in a press conference that while the economy is making progress toward its goals, there’s a ways to go before the central bank will adjust its easy policies.

However, the FOMC noted that the economy has made “progress” on the Fed’s dual employment and inflation goals, opening the door a little further on tapering.

“With its July 28 statement, the FOMC has started the tapering clock,” said PNC Chief Economist Gus Faucher.

“The committee said that the economy has made progress toward its goals of full employment and inflation averaging 2% over the longer run, but not the ‘substantial’ further progress that it is looking for before it begins to reduce its purchases of long-term assets."

"The statement also said that the committee will continue to assess progress toward these goals at future meetings.”

Powell reiterated that “we’re on a very clear path to a strong job market,” but maintained “we have some ground to cover on the labor market side.”

“I think we’re some way away from having had substantial further progress toward the maximum employment goal,” he said.

“I would want to see some strong job numbers."

"That’s kind of the idea.”


The shorter end of the curve including rates on 1-year Treasury bills were little changed after the Fed decision.

While concerns grow about the spread of the delta variant of Covid-19, Powell also said he expects the real-world effects to be milder than they were after the initial outbreak, in part due to more people receiving the vaccine.

“We’ve kind of learned to live with it,” he said of Covid.

“A lot of industries have kind-of improvised their way around it."

"We’d like to get back to the way things were, and I hope to some extent we will over time.”

— CNBC’s Patti Domm and Jesse Pound contributed to this market report.

Data also provided by Reuters

https://www.cnbc.com/2021/07/28/us-bond ... ision.html
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CNBC

"Fed holds rates near zero, says economy has gotten better even with pandemic worries"


Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM

PUBLISHED WED, JUL 28 2021

The Federal Reserve on Wednesday held its benchmark interest rate near zero and said the economy continues to progress despite concerns over the pandemic spread.

As expected, the Federal Open Market Committee concluded its two-day meeting by keeping interest rates in a target range between zero and 0.25%.

Along with that, the committee said in a unanimously approved statement that the economy continues to “strengthen.”

Despite the optimism about the economy, Chairman Jerome Powell said the Fed is nowhere near considering a rate hike.

“Our approach here has been to be as transparent as we can."

"We have not reached substantial further progress yet,” he said.

“We see ourselves having some ground to cover to get there.”

“Substantial further progress” on inflation and employment is the benchmark the Fed has set before it will tighten policy, which would mean slowing and ultimately stopping monthly bond purchases and ultimately raising interest rates.


The statement noted only that “progress” has been made, and the FOMC will continue to watch conditions to see how close they get to the Fed’s goals.

The notation that “progress” has been made towards the Fed’s goals on employment and inflation was nevertheless seen as a nod that changes to policy, particularly regarding the monthly bond purchases, could be on the way.

“The Fed has started the tapering clock,” said PNC chief economist Gus Faucher.

Markets had been watching for the Fed’s views on the spread in the Covid-19 delta variant, but Powell and his fellow officials were relatively sanguine at least in terms of the threat the virus poses to the economy.

Stocks shaved some losses during Powell’s remarks, with the Dow negative but the S&P 500 and Nasdaq in the green.

Powell noted the rising threat that the pandemic is posing but said he does not see it having a major economic impact.

“What we’ve seen is with successive waves of Covid over the past year and some months now, there has tended to be less in the way of economic implications from each wave,” Powell said at his post-meeting news conference.

“We will see if that is the case from the delta variety.”

“We’ve kind of learned to live with it,” he said later.

In a separate move, the Fed said it would establish two standing repo facilities, one for domestic markets and the other for foreign and international authorities.

The facilities allow institutions to exchange high-quality collateral, primarily Treasurys in the case of the domestic offering, for reserves.

With the Fed likely on hold relative to interest rates at least until late-2022, investors have been looking for clues as to when the monthly bond purchases might start to be pulled back.

The central bank currently is buying at least $120 billion a month in bonds, with at least $80 billion going to Treasurys and another $40 billion floor on mortgage-backed securities.

Critics say the Fed’s mortgage purchases are helping stoke another housing bubble, with prices at record levels even though sales have tailed off amid tightening supply.

Some Fed officials have said they would be willing to entertain cutting back on mortgages first.

Powell, though, has said several times that the mortgage purchases are having only a minimal effect on housing.

He said Wednesday that he does not expect the Fed to begin reducing its mortgage purcahses ahead of the Treasurys tapering.

On the broader economy, the Fed has kept its foot to the accelerator despite some of the fastest post-World War II growth the U.S. has ever seen.

Second-quarter GDP numbers are out Thursday, with the Dow Jones estimate at 8.4% annualized growth for the April-to-June period.

That would be the fastest pace since early 1983, not counting last year’s outsized Q3 growth as the economy reopened from the pandemic shutdown.

The Fed has faced growing inflation fears, with consumer prices running at their highest since just before the financial crisis of 2008.

However, officials insist the current surge is temporary and will abate once supply chain bottlenecks ease, demand returns to normal levels, and certain items, particularly used car prices, also get back to baseline.

Heading into this week’s meeting, markets were pricing in zero chance of any rate increases this year.

However, the likelihood of a 2022 hike rose from 54.4% before the meeting to 62% afterward, with futures fully pricing in the first hike by March 2023, according to CME’s FedWatch tool and Reuters.

https://www.cnbc.com/2021/07/28/fed-dec ... -2021.html
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REUTERS

"TREASURIES-Yields fall as Fed talks about tapering but sets no timeline"


By Karen Brettell

JULY 28, 2021

NEW YORK, July 28 (Reuters) - U.S. Treasury yields fell on Wednesday after the Federal Reserve flagged ongoing discussions around the eventual withdrawal of monetary policy support but gave no details on when it is likely to reduce bond purchases.

The U.S. economic recovery remains on track despite a rise in coronavirus infections, the U.S. central bank said in a new policy statement that remained upbeat.

Fed policymakers, in a unanimous statement, also said they were moving ahead with discussions about when to reduce the central bank's bond-buying program, a precursor to eventually raising interest rates.

"The Fed took another small step forward in their patient and methodical path towards tapering of their bond buying program," Jason England, global bonds portfolio manager at Janus Henderson Investors said in a note.

In a news conference following the release of the statement, Fed Chair Jerome Powell said the U.S. job market still had "some ground to cover" before it was time to pull back from the economic support the U.S. central bank put in place in the spring of 2020 to battle the coronavirus pandemic's economic shocks.

"I think there's important stuff that Powell would rather see such as how the end of the pandemic jobless benefits go, how school reopenings go ... and how the Delta variant evolves over the next couple of months," said Lou Brien, a market strategist at DRW Trading in Chicago.

Powell also said that when the Federal Reserve does begin to reduce its bond purchases it will likely cut purchases of mortgage-backed securities at the same pace as Treasuries.

Benchmark 10-year yields fell to 1.228%, after briefly rising to a session high of 1.278% immediately after the statement.

The yield curve between two-year and 10-year notes flattened to 102 basis points.

Fed funds futures traders are pricing for rate hikes to begin in March 2023.

The Fed is widely expected to announce a taper this year with bond reductions not likely to begin until year-end of early next year.

Some analysts expect that an announcement could come at the Fed's August Jackson Hole Economic Symposium, while others see that as too soon.

Powell said on Wednesday he is in the process of writing a speech to be delivered at the Jackson Hole conference but declined to say what his remarks will focus on.

The Fed also said on Wednesday that higher inflation remained the result of "transitory factors," meaning it was not an imminent risk.

Some Fed officials have warned that rising price pressures may be persistent.

Breakeven rates on five-year Treasury Inflation-Protected Securities, a measure of expected annual inflation for the next five years, rose to 2.63%.

The Fed also announced that it will establish two standing repo facilities, one domestic and one for foreign and international monetary authorities, to backstop money markets during times of stress.

(Editing by Sandra Maler)

https://www.reuters.com/article/usa-bon ... SL1N2P434X
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REUTERS

"UPDATE 1-Powell says Fed likely to taper asset purchases 'at the same time'"


By Reuters Staff

JULY 28, 2021

WASHINGTON, July 28 (Reuters) - The Federal Reserve will likely reduce its monthly purchases of mortgage-backed securities and Treasuries simultaneously when it is time to pare back its support for the U.S. economy, though policymakers are debating whether to wind down the buying of MBS at a faster pace, Fed Chair Jerome Powell said on Wednesday.

Some U.S. central bank policymakers have said they want to end their monthly $40 billion of MBS purchases faster than the $80 billion in Treasuries because of the hot U.S. housing market.

“There really is little support for the idea of tapering MBS earlier than Treasuries."

"I think we will taper them at the same time,” Powell said in a news conference after a two-day policy meeting that marked the Fed’s first “deep dive” into when and how it could start reducing its asset purchases.


“The idea of reducing MBS purchases at a somewhat faster pace than Treasuries does have some attraction for some people - others not so much,” he added.

“I think it’s something that we’ll be continuing to discuss.”

A Fed decision to cut its purchases of both Treasuries and MBS simultaneously would show that the central bank is probably following the same playbook it used when it began tapering its asset purchases in 2014, said Tom Garretson, senior portfolio strategist at RBC Wealth Management.

“To change the approach from the last cycle would muddy the messaging and there’s no benefit to it,” Garretson said.

“The market expectation was that they would go at the same time.”


(Reporting by Howard Schneider and Ann Saphir with David Randall in New York; Editing by Leslie Adler and Paul Simao)

https://www.reuters.com/article/usa-fed ... SL1N2P434T
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