THE FEDERAL RESERVE

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REUTERS

"Black unemployment setback shows Fed's challenges targeting 'broad and inclusive' job growth"


By Jonnelle Marte and Ann Saphir

September 3, 2021

Sept 3 (Reuters) - Attaining its goal of maximum employment has always been a tall order for the Federal Reserve but broadening the scope of that objective to one that is also "broad and inclusive" has made the task tougher still, with Friday's payrolls report standing as a case in point.

Job gains in August were far more meager than expected largely due to the surge in coronavirus cases.

And even though the unemployment rate fell to a pandemic-era low of 5.2%, it did not drop for everyone.

The jobless rate rose for Blacks - to 8.8% from 8.2% - and they were the only major racial demographic group to see an increase.

That figure on its own creates tough optics for the Fed as it approaches a consequential meeting this month, especially as other data from the Labor Department suggest the Black employment recovery from last year's recession continues to progress - by some measures more so than for whites.

Black workers continued to notch strong gains in employment and in the labor force participation rate this year, while it appears improvements may be moderating for white workers.

For example, the share of Black people who are either working or looking for jobs, or the labor force participation rate, rose in August to 61.6% and is now equal to the participation rate for white workers - a metric where Black workers have historically lagged.

And the share of Black people who were employed in August, known as the employment to population ratio, reached 56.2%, up from 54.7% in January.

This was slightly more than the gains seen for white workers.

"That's an unambiguous improvement" for Black workers, Nick Bunker, an economist with Indeed Hiring Lab said in an email.

At 58.8%, the employment to population ratio for white workers is up from 57.9% in January.

Still, the trends in the unemployment rate are much less straightforward.

After last month's increase, the jobless rate for Black workers is still at crisis-era levels and is down just 0.4 percentage points from the start of the year.

The unemployment rate for white workers, at 4.5%, is below the national unemployment rate and down by 1.2 percentage points from January.

"Where that rise in unemployment came from is up for debate," said Bunker, noting it could have been driven by a rise in Black people trying to find work but not succeeding, or by an increase in the number of Black people who became unemployed.

Policymakers will need to watch what happens in the coming months as the U.S. labor market works through the effects of multiple shifts, including cuts to unemployment benefits, the Delta variant's drag on spending and travel and persistent challenges with childcare and schooling.

If the slowdown in hiring persists, that may not bode well for Black workers, which often face the deepest losses during downturns and the slowest recoveries, said Daniel Zhao, a senior economist with Glassdoor.

"Black workers are often first to be fired and last to be rehired, so if the recovery slows we might expect to see that the impact is more on Black workers," Zhao said.

Reporting by Jonnelle Marte and Ann Saphir; Additional reporting by Howard Schneider; Editing by Chizu Nomiyama

https://www.reuters.com/world/us/black- ... 021-09-03/
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REUTERS

"Fed officials say tapering could still get started this year"


By Jonnelle Marte

SEPTEMBER 8, 2021

(Reuters) -Two Federal Reserve officials said on Wednesday that the U.S. central bank could start trimming its massive asset purchases this year despite the slowdown in jobs growth seen in August.

"The big picture is that the taper will get going this year and will end sometime by the first half of next year," said St. Louis Fed Bank President James Bullard in an interview with the Financial Times here.

Bullard dismissed concerns that the labor market recovery was faltering after the U.S. economy in August created the fewest jobs in seven months.

He said the labor market could be “very strong” going into next year if the fight against the pandemic continues to improve.

Fed officials have said they would keep purchasing Treasury securities and mortgage-backed securities at the current pace of $120 billion a month until there is “substantial further progress” toward their goals for inflation and maximum employment.

New York Fed Bank President John Williams said on Wednesday he felt the standard was met for inflation, but he would like to see further improvement in the labor market before declaring substantial further progress toward the Fed’s employment goals.

“Assuming the economy continues to improve as I anticipate, it could be appropriate to start reducing the pace of asset purchases this year,” Williams said during a virtual event organized by St. Lawrence University.

Minutes from the Fed’s July meeting showed most policymakers agreed that they expect the central bank to begin reducing asset purchases this year.

That was before the Labor Department released data showing the U.S. economy added only 235,000 jobs in August, down sharply from roughly 1 million jobs added monthly in June and July.

Williams said he is more focused on job gains over time than month to month.

He said he will look at a range of indicators including the employment-to-population ratio and the labor force participation rate, for insight on labor market strength.

“We just have to see the data as it comes in,” Williams said during a video conference with reporters.

UNCERTAIN OUTLOOK

A report released by the Fed on Wednesday found the U.S. economy “downshifted slightly” in August as the renewed surge of the pandemic hit dining, travel and tourism.

Still, the Fed’s Beige Book, a compilation of anecdotes about the economy, showed persistently strong demand for workers with some employers struggling to hire because of high turnover, early retirements and challenges with childcare.

“The jobs are there, it’s that the workers may not want to take those jobs right now,” Bullard said.

The Delta variant’s spread is starting to pressure consumer spending and jobs growth, Williams said.

He expects the U.S. economy to grow by about 6% this year after adjusting for inflation, which he sees moderating next year to about 2%.

“The emergence and rapid spread of the Delta variant in parts of the country and around the world has introduced a new layer of uncertainty,” Williams said during the event with St. Lawrence University.

Bullard said the Fed should wind down its asset purchases by the end of the first quarter to give the central bank more “optionality” for adjusting interest rates.

Williams said the Fed will treat decisions on tapering separately from interest rate moves.

“I don’t see any decision we make in terms of tapering as indicating what the timing” will be for lifting rates, Williams told reporters.

Fed officials will meet again in two weeks on Sept. 21 and 22.

Reporting by Jonnelle Marte; Editing by Chizu Nomiyama and David Gregorio

https://www.reuters.com/article/usa-fed ... SL1N2QA2FX
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REUTERS

"U.S. economy 'downshifted slightly' in August -Fed's Beige Book"


By Howard Schneider, Ann Saphir

SEPTEMBER 8, 2021

WASHINGTON (Reuters) - The U.S. economy “downshifted slightly” in August as the renewed surge of the coronavirus hit dining, travel and tourism, the Federal Reserve reported Wednesday, but the economy overall remained in the throes of a post-pandemic rush of rising prices, labor shortages and stilted hiring.

“The deceleration in economic activity was largely attributable to a pullback in dining out, travel, and tourism in most Districts, reflecting safety concerns due to the rise of the Delta variant, and, in a few cases, international travel restrictions,” the Fed reported in its latest Beige Book compendium of anecdotal information about the economy.

Still the document, summing up information collected through Aug. 30 that will be part of the deliberations at the Fed’s Sept. 21-22 policy meeting, reported continued strong demand for workers and hiring made more difficult by “increased turnover, early retirements, childcare needs, challenges in negotiating job offers, and enhanced unemployment benefits."

"Some Districts noted that return-to-work schedules were pushed back due to the increase in the Delta variant.”

Jobs openings were so plentiful, the Atlanta Fed noted, that restaurants were beset by “ghosting coasting,” where employees take a job for few days then quit with no notice and move on to the next restaurant.

Prices, Fed officials reported, continued to rise.

“Inflation was reported to be steady at an elevated pace,” with Fed districts saying it was either moderate or strong, with costs for metals, freight, construction materials and other industrial staples rising in most districts.


“With pervasive resource shortages, input price pressures continued to be widespread,” the Fed reported, causing headaches across industries as disparate as beer brewing and wedding apparel.

“One contact reported refunding several bridal parties because dresses did not arrive on time for weddings,” the Richmond Fed reported.

In the St. Louis Fed district “a regional brewery reported that their supplier increased prices twice between order and delivery for a pallet of aluminum.”

The report describes a difficult landscape for the U.S. economy and the Fed heading into a fall season when it was hoped the recovery from the pandemic would take clearer shape.

The risks of sustained price increases remains real, rather than fading as quickly as Fed officials had hoped.

On the other hand “all Districts continued to report rising employment overall,” possibly alleviating concerns that weak job growth of just 235,000 new positions in August was the edge of a broader slowdown in employment given the spread of the coronavirus Delta variant.

Analysts had expected in excess of 700,000 new jobs last month.

HOPING FOR MORE CLARITY ON JOBS

Fed officials are grappling with when to reduce their $120 billion in monthly bond purchases as a first step in a coming shift to post-pandemic monetary policy, and while a decision remains likely this year the August job reading may require further confirmation that hiring will stay on track.

“The Delta variant is weighing on consumer spending and jobs, and the pace of growth appears to be slowing,” New York Fed president John Williams said Wednesday.

“I will want to see more improvement” in the labor market before deciding the economy is ready for the Fed to trim one of its signature pandemic programs, Williams said.

“It could be appropriate to start reducing the pace of asset purchases this year,” Williams said, but concluded “it’s clear that the pandemic is far from over, both in terms of its effects on health and its effects on the economy.”

New data released Wednesday showed the strength that had been building in the jobs market through the summer, with a record 10.9 million job openings in July.

That eclipsed the number of people unemployed and left some officials convinced hiring will remain strong and allow the Fed to begin its bond “taper” soon.

“There is plenty of demand for workers and there are more job openings than there are unemployed,” St. Louis Federal Reserve president James Bullard said in an interview published Tuesday in the Financial Times.

Reports from the Fed’s districts indicated that the August slowdown in job creation may have been driven more by trouble matching workers to positions at a wage they would accept rather than ebbing demand for new employees.

“Employment grew strongly but hiring demand continued to outstrip labor response by a wide margin,” the Minneapolis Fed reported.

“Workforce development professionals in Montana also highlighted housing and childcare affordability as major challenges faced by job seekers."

"COVID-19 exposure remained a big concern among workers and job seekers.”

Even as the consumer and business services sectors “deteriorated somewhat,” the San Francisco Fed reported, “labor shortages have severely reduced capacity at some hotels, airlines, and restaurants, with one hotel in the Mountain West having to close off several floors due to a lack of housekeeping staff.”

Reporting by Howard Schneider and Ann Saphir; Additional reporting by Lindsay Dunsmuir; Editing by Andrea Ricci

https://www.reuters.com/article/usa-fed ... SKBN2G4207
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Re: THE FEDERAL RESERVE

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CNBC

"Fed presidents Kaplan, Rosengren to sell individual stock holdings to address ethics concerns"


Hannah Miao @HANNAHMIAO_

PUBLISHED THU, SEP 9 2021

Federal Reserve regional presidents Robert Kaplan and Eric Rosengren said Thursday they will sell individual stock holdings amid ethics concerns regarding trading in 2020.

The Fed officials will sell all their stocks by Sept. 30 and put the proceeds in passive investments, they said in statements released Thursday.


“While my personal saving and investment transactions have complied with the Federal Reserve’s ethics rules, I have decided to address even the appearance of any conflict of interest by taking the following steps,” Rosengren, president of the Boston Fed, said.

The announcements come after the Fed officials faced scrutiny surrounding investment activity in a year when central bank actions propped up financial markets during the Covid pandemic.

A financial disclosure form from Dallas Fed President Kaplan raised eyebrows this week by revealing a number of trades in individual stocks last year including Apple, Amazon and Delta Airlines.


Kaplan owned a total of 32 individual stock, fund or alternative asset holdings, with 27 of those valued at more than $1 million at the end of 2020, according to the disclosure.

The form was first reported by The Wall Street Journal.

Rosengren and Kaplan serve as presidents of two of the Fed’s 12 regional banks that span the country.

The regional bank presidents take turns serving on the Federal Open Market Committee that sets rates policy.

https://www.cnbc.com/2021/09/09/feds-ro ... cerns.html
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Re: THE FEDERAL RESERVE

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CNBC

"Producer inflation accelerated in August, as wholesale prices rose record 8.3% from a year ago"


Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM

PUBLISHED FRI, SEP 10 2021

KEY POINTS

* The producer price index increased 0.7% in August from a month ago, above the 0.6% Dow Jones estimate.

* Final demand prices rose 8.3% from a year ago, the biggest increase on record going back to 2010.

* The move showed that inflationary pressures are likely to persist.


Prices that producers get for final demand goods and services surged in August at their highest annual rate since at least 2010, the Labor Department reported Friday.

The producer price index rose 0.7% for the month, above the 0.6% Dow Jones estimate, though below the 1% increase in July.

On a year-over-year basis, the gauge rose 8.3%, which is the biggest annual increase since records have been kept going back to November 2010.

That came following a 7.8% move higher in July, which also set a record.


The data comes amid heightened inflation fears fed by supply chain issues, a shortage of various consumer and producer goods and heightened demand related to the Covid-19 pandemic.

Federal Reserve officials expect inflationary pressures to ease through the year, but they have remained stubbornly persistent, with Friday’s numbers indicating that the trend likely will continue.

Excluding food, energy and trade services, final demand prices increased 0.3% for the month, below the 0.5% Dow Jones estimate.

Still, that left core PPI up 6.3% from a year ago, also the largest record increase for data going back to August 2014.

Final demand services rose 0.7% for the month, thanks to a 1.5% gain in trade services, or the margins received by wholesalers and retailers.

Transportation and warehousing costs surged 2.8%.

About one-third of the overall gain came from health, beauty and optical goods, which jumped 7.8%.

Prices related to outpatient hospital care held back the gains, falling 1.5%.

Prices for final demand goods rose 1% for the month, pushed primarily by a 2.9% gain in foods which in turn came from an 8.5% surge in meat prices.

Slaughtered poultry prices surged 11%.

Prices fell for iron, steel and diesel fuel.

https://www.cnbc.com/2021/09/10/august- ... ecord.html
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REUTERS

"Fed's Bowman encouraged still by recovery, taper likely this year"


By Howard Schneider

SEPTEMBER 9, 2021

WASHINGTON (Reuters) - U.S. Federal Reserve bank Gov. Michelle Bowman added her voice Wednesday to the growing number of policymakers who say the weak August jobs report will not throw off the central bank’s developing plan to trim its $120 billion in monthly bond purchases later this year.

“Even though some of the recent data may have been less strong than we expected we are still looking at very robust economic growth,” Bowman said at an online event organized by the American Bankers Association.

“We are very close to our goal on maximum employment..."

"If the data comes in as I expect that it will, it will likely be appropriate for us to begin the process of scaling back our asset purchases this year.”

Bowman becomes the fifth Fed official in the past two days to signal that the disappointing August jobs report on its own would not stop the Fed from beginning to pare its bond purchases later this year.

Some, including Atlanta Fed president Raphael Bostic, suggested the addition of just 235,000 jobs in August, compared to nearly a million per month in June and July, might delay a final decision.

But the momentum remained in favor of starting the bond taper, a process some Fed officials are eager to begin as a first step in exiting from pandemic-era emergency programs.

It’s a turn other central banks have already begun, including the European Central Bank, and the process would be more complicated globally the longer the Fed waits and the less clear its plans.

Fed officials have tied any change in policy to economic variables, particularly job growth, that could be weighed down by the current surge of coronavirus cases - a risk highlighted by the August employment report.

Bowman said one month of disappointing data should not be given too much weight.

“It is important not to take too much signal from a single data point as we might have seen last week from the labor market,” Bowman said.

Reporting by Howard Schneider; Editing by Chizu Nomiyama

https://www.reuters.com/article/usa-fed ... SKBN2G520X
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REUTERS

"Strained supply chains keep U.S. producer prices hot"


By Lucia Mutikani

September 10, 2021

Summary

* Producer prices increase 0.7% in August

* PPI accelerates 8.3% on year-on-year basis

* Core PPI gains 0.3%; rises 6.3% year-on-year


WASHINGTON, Sept 10 (Reuters) - U.S. producer prices increased solidly in August, leading to the biggest annual gain in nearly 11 years, suggesting that high inflation is likely to persist for a while as the unrelenting COVID-19 pandemic continues to pressure supply chains.

Strong demand and supply constraints were underscored by other data on Friday showing the pace of inventory accumulation at wholesalers slowed in July.

It is now taking wholesalers the fewest months in seven years to clear shelves.

"Supply chain bottlenecks have persisted longer and more intensely than most predicted at the beginning of this year, and widespread labor shortages are among the main input issues producers are dealing with," said Will Compernolle, a senior economist at FHN Financial in New York.

"This means consumer price inflation should remain elevated for a while."


The producer price index for final demand rose 0.7% last month after two straight monthly increases of 1.0%, the Labor Department said.

The gain was led by a 0.7% advance in services following a 1.1% jump in July.

A 1.5% increase in trade services, which measure changes in margins received by wholesalers and retailers, accounted for two-thirds of the broad rise in services.

Goods prices jumped 1.0% after climbing 0.6% in July, with food rebounding 2.9%.

Transportation and warehousing prices shot up 2.8%.

The latest global wave of COVID-19 infections, driven by the Delta variant of the coronavirus, has disrupted production at factories in Southeast Asia, key raw materials suppliers for manufactures in the United States.

Congestion at Chinese ports is also adding to the pressure on U.S. supply chains.

In the 12 months through August, the PPI accelerated 8.3%, the biggest year-on-year advance since November 2010 when the series was revamped, after surging 7.8% in July.

Economists polled by Reuters had forecast the PPI gaining 0.6% on a monthly basis and rising 8.2% year-on-year.

Stocks on Wall Street were lower.

The dollar was steady against a basket of currencies.

U.S. Treasury prices fell.

LOGISTICS DELAYS

Though surveys from the Institute for Supply Management this month showed measures of prices paid by manufacturers and services industries fell significantly in August, they remained elevated.

Factories and services providers still struggled to secure labor and raw materials, and faced logistics delays.

This was corroborated by the Federal Reserve's Beige Book report on Wednesday compiled from information collected on or before Aug. 30 showing "contacts reported generally higher input prices but, as with labor, they were mostly concerned about getting the supplies they needed versus the price."

The supply bottlenecks are making it harder for businesses to restock after running down inventories in the first half of the year.

In a separate report on Friday, the Commerce Department said wholesale inventories rose 0.6% in July after surging 1.2% in June.

Sales increased 2.0%.

At July's sales pace it would take wholesalers 1.20 months to clear shelves, the fewest since July 2014, from 1.22 in June.

"Producers are struggling to replenish their stockpiles against surging demand," said Matt Colyar, an economist at Moody's Analytics in West Chester, Pennsylvania.

With inventories tight, producers are easily passing on the higher costs to consumers.

Federal Reserve Chair Jerome Powell has steadfastly maintained that high inflation is transitory.


Though most economists share this view, some argue that strong wage growth from a tightening labor market suggests inflation could be more persistent.

"Today's data on wholesale prices should be eye-opening for the Fed, as inflation pressures still don't appear to be easing and will likely continue to be felt by the consumer in the coming months," said Charlie Ripley, senior investment strategist at Allianz Investment Management.

The Fed's preferred inflation measure for its flexible 2% target, the core personal consumption expenditures price index, increased 3.6% in the 12 months through July after a similar gain in June.

Data next week will likely show the consumer price index rising 0.4% in August and increasing 5.3% on a year-on-year basis, according to a Reuters survey.

High inflation and supply constraints, which tanked motor vehicle sales in August, have prompted economists to slash their third-quarter gross domestic product growth estimates to as low as a 3.5% annualized rate from as high as 8.25%.

The economy grew at a 6.6% rate in the second quarter.

"The danger with inflation is once prices go up, they don't go back down and the economy and producers and consumers all have to live in a costlier world where many don't have the means to do more than just barely survive," said Chris Rupkey, chief economist at FWDBONDS in New York.

There are, however, signs that inflation is likely nearing its peak.

Excluding the volatile food, energy and trade services components, producer prices rose 0.3%, the smallest gain since last November.

The so-called core PPI shot up 0.9% in July.

In the 12 months through August, the core PPI accelerated 6.3%.

That was the largest rise since the government introduced the series in August 2014 and followed a 6.1% increase in July.


Details of the PPI components, which feed into the core PCE price index, were mixed.

Healthcare costs fell 0.2%.

Portfolio management fees rose 1.1% and airline tickets increased 8.9% after soaring 9.1% in July.

"Soft medical services suggest that evidence of persistently stronger inflation in PCE may be more limited," said Andrew Hollenhorst, chief U.S. economist at Citigroup in New York.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci

https://www.reuters.com/business/us-pro ... 021-09-10/
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REUTERS

"Fed's Mester says she would still like to begin taper this year"


Reuters

September 10, 2021

Sept 10 (Reuters) - Cleveland Federal Reserve Bank President Loretta Mester said on Friday that she would still like the central bank to begin tapering asset purchases this year, joining the chorus of policymakers making it clear that their plans to begin scaling back support were not derailed by weaker jobs growth in August.

Reporting by Jonnelle Marte Editing by Chizu Nomiyama

https://www.reuters.com/business/feds-m ... 021-09-10/
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REUTERS

"U.S. consumers' inflation expectations highest since 2013, NY Fed says"


By Jonnelle Marte

September 13, 2021

Sept 13 (Reuters) - U.S. consumers' expectations for how much inflation will change over the next year and the coming three years rose last month to the highest levels since 2013, according to a survey released on Monday by the New York Federal Reserve.

Year-ahead inflation expectations increased for the 10th straight month to a median of 5.2% in August, according to the monthly survey of consumer expectations.

Inflation expectations over the next three years increased to a median of 4.0%. Both metrics are at the highest they've ever been for the survey, which was launched in 2013.


U.S. central bank officials are keeping a close watch on inflation expectations as they try to evaluate whether the pricing pressures triggered by the coronavirus pandemic will pass or have more lasting effects on the economy.

Some policymakers say ending the massive asset purchases the Fed launched last year to support markets and the economy sooner rather than later will give officials more options for responding down the road if inflation lasts longer than anticipated.

Several policymakers said they expect the Fed to begin winding those asset purchases down later this year despite a weakening in jobs growth in August.

The New York Fed survey showed that consumers are raising their expectations for how much more they may have to spend on housing, food and other essentials over the next year.

Expectations for how much home prices will increase over the next year dropped again in August for the third straight month, but were still elevated at a median of 5.9%, the survey found.

Food prices are expected to grow by 7.9% over the next year, up from 7.1% in July.

Rent is expected to increase by 10% over the next 12 months and the price of medical care is expected to rise by 9.7% over the next year - both up 0.2 percentage point from July.


The report is based on a rotating panel of 1,300 households.

Reporting by Jonnelle Marte; Editing by Paul Simao

https://www.reuters.com/world/us/us-con ... 021-09-13/
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CNBC

"Powell orders ethics review after Fed presidents disclosed multimillion-dollar investments"


Thomas Franck @TOMWFRANCK

PUBLISHED THU, SEP 16 2021

KEY POINTS

* Federal Reserve Chairman Jerome Powell directed staff to review the central bank’s ethics rules after several Fed presidents disclosed large investments and stock trades.

* News of Powell’s inquiry broke after Sen. Elizabeth Warren sent 12 letters to the Fed’s regional bank presidents demanding stricter ethics around stock buying.

* Documents revealed that Dallas Fed President Robert Kaplan traded Apple, Amazon and Delta Air Lines stock in 2020.


Federal Reserve Chairman Jerome Powell directed staff to review the central bank’s ethics rules for appropriate financial activities after disclosures that several senior central bank officials made multiple multimillion-dollar stock trades in 2020, while others held significant investments.

News of Powell’s inquiry broke after Sen. Elizabeth Warren sent 12 letters to the Fed’s regional bank presidents demanding stricter ethics from the nation’s top central bank officials.

The Massachusetts Democrat called on each Fed president to institute a ban on the ownership and trading of individual stocks by senior officials at each regional office.

Last week, financial disclosures filed by the Fed’s 12 regional presidents revealed some had actively traded in 2020, while others held million-dollar financial positions without making changes to their portfolios.

A Fed spokesman told CNBC that Powell last week ordered a “fresh and comprehensive look at the ethics rules around permissible financial holdings and activities by senior Fed officials.”

Powell ordered the review “because the trust of the American people is essential for the Federal Reserve to effectively carry out our important mission,” the spokesman said.

“This review will assist in identifying ways to further tighten those rules and standards."

"The Board will make changes, as appropriate, and any changes will be added to the Reserve Bank Code of Conduct.”

Documents released last week revealed that Dallas Fed President Robert Kaplan made multiple trades worth $1 million or more last year in individual stocks including Apple, Amazon and Delta Air Lines.

Boston Fed President Eric Rosengren held stakes in four real estate investment trusts and several purchases and sales of similar property-owning vehicles, according to filings.

He also held stock in Pfizer, Chevron and AT&T.

His investments were in the tens to hundreds of thousands of dollars.


Other Fed presidents, such as Richmond Fed President Thomas Barkin, disclosed little to no trading activity but several financial holdings in excess of $1 million.

His stakes included Coca-Cola stock worth more than $500,000 but less than $1 million.

Barkin’s largest holdings, worth $1 million or more, included a variety of exchange-traded and mutual funds overseen by outside managers.

He had, for example, a holding worth at least $1 million in Vanguard’s Energy Fund Admiral Shares, a mutual fund that invests in energy companies including ConocoPhillips, Marathon Petroleum and BP.

Even the appearance of self-dealing at the Fed could prove problematic to an institution tasked with the impartial oversight of U.S. employment and inflation.

The trades quickly came under scrutiny given the Fed’s critical role in managing the U.S. economy as well as its influence over interest rates and liquidity markets.


The Covid-19 pandemic and ensuing recession magnified the Fed’s power in 2020.

Congress allows the Fed, with the Treasury Department’s approval, to embark on a wide range of emergency lending measures to flush the economy with cash during times of crisis.

Rosengren, Barkin and Kaplan serve as presidents of three of the Fed’s 12 regional banks that span the country.

The regional bank presidents take turns serving on the Federal Open Market Committee, the Fed’s policymaking body that sets interest rates across the economy.

Amid the public backlash, both Kaplan and Rosengren have agreed to sell their individual stock holdings.

Separately, Warren sent letters to all of the Fed’s regional bank presidents demanding tighter restrictions on the type of financial activity officials can engage in.

Each letter, all dated Sept. 15, was similar to the next except for the two addressed to Kaplan and Rosengren.

“As the Fed took extraordinary actions to address the risks to the economy and the banking and financial systems from the COVID-19 pandemic, you and your colleague Eric Rosengren made extensive trades in individual stocks and real estate investment trusts,” Warren wrote in her letter to Kaplan.

That trading, she added, “has prompted concerns about conflicts of interest among high-level officials with far-reaching policymaking influence and extraordinary access to information about the economy.”

The Fed played a leading role in the U.S. economic recovery from the worst of the coronavirus recession.

Economists say that its political independence allowed it to move more quickly than Congress and that its monthly purchase of $120 billion in U.S. debt and mortgage-backed securities helped sustain countless businesses that saw business swoon last year.

Data also provided by Reuters

https://www.cnbc.com/2021/09/16/fed-chi ... rades.html
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