Category Archives: Federal Reserve

Is this the end of the road for dollar dominance?

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In the short term, probably not, but with China weaponising the yuan stern challenges lie ahead

The recent sharp depreciation of the US dollar has led to concerns that it may lose its role as the main global reserve currency. After all, in addition to the Federal Reserve’s aggressive monetary easing – which threatens to debase the world’s key fiat currency even further – gold prices and inflation expectations have also been rising.

But, to paraphrase Mark Twain, reports of the dollar’s early demise are greatly exaggerated. The greenback’s recent weakness is driven by shorter-term cyclical factors. In the long run, the situation is more complicated: the dollar has both strengths and weaknesses that may or may not undermine its global position over time.

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Forget doom-laden headlines, the dollar has not gone into terminal decline | Barry Eichengreen

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Too much is being read into the greenback’s recent weakening against the euro

The dollar is in freefall! The global greenback is doomed! screamed recent headlines. Actually, such sensational headlines are “too sensational”, to echo that noted authority on currencies, Miss Prism, in Oscar Wilde’s The Importance of Being Earnest.

The dollar’s fall in July to a two-year low against the euro was the immediate impetus for these stories. In fact, the dollar’s recent slide is one in a series of readily explicable fluctuations. When the Covid-19 pandemic went global in March, the dollar strengthened on the back of safe-haven flows into US Treasuries, as it does at the start of every crisis. By May, the Federal Reserve, acting as global lender of last resort, had accommodated this mad scramble for dollars by pouring buckets of liquidity into financial markets and the greenback gave back its early gains.

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Fed warns more cash is needed as US figures reveal widening inequality

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  • Jerome Powell: pace of downturn ‘without modern precedent’
  • Lowest-paid Americans hit hardest by coronavirus pandemic

More evidence of how the coronavirus pandemic is widening income inequality has emerged after the Federal Reserve announced 40% of households earning less than $40,000 included someone who has lost a job since February.

Related: Coronavirus US live: gap grows between White House and experts over safety of reopening

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Markets plunge despite coordinated action by central banks

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Sharp losses recorded after US interest rate cut, as Bank of England hints at further support to combat turmoil

The FTSE 100 fell below 5,000 points on Monday and trading on Wall Street was suspended for the third time in a week as markets were gripped by mounting concerns over the threat of a global recession, despite a coordinated effort by central banks to protect growth and jobs.

In an escalation of the worst turmoil since the 2008 financial crisis, stock markets suffered further sharp losses on Monday despite dramatic action taken by the US central bank late on Sunday in an attempt to limit the economic impact of the coronavirus pandemic.

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Fed bids to shore up confidence after worst week in 12 years

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Pledges of help from EU, China and Germany plus declaration of US emergency produce mild rally after torrid week

The world’s most powerful central bank, the US Federal Reserve, is preparing a fresh attempt to shore up investor confidence despite a late rally on Wall Street on Friday that ended a torrid week for stock markets on a more positive note.

Fresh pledges of help from China, Germany and the European commission combined with Donald Trump’s declaration of a national emergency over coronavirus to reassure investors after an ordeal for equities on both sides of the Atlantic that echoed the depths of the banking crisis.

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Wall Street ends 11-year ‘bull market’ as coronavirus fears spread

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US stock markets have been on an unprecedented streak since 2009, a bull market of gains

Wall Street’s record-breaking 11-year “bull market” came to an end on Wednesday as fears about the spreading Covid-19 pandemic hit stock markets again.

US stock markets have been on an unprecedented streak since 2009, a bull market of gains. On Wednesday investors sold off shares across all sectors after the World Health Organization declared the outbreak a pandemic for the first time and criticized “alarming levels of inaction” by governments in corralling the virus.

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World economy is sleepwalking into a new financial crisis, warns Mervyn King

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Past crashes spawned new thinking and reform but nothing has changed since 2008 banking meltdown, says former Bank of England boss

The world is sleepwalking towards a fresh economic and financial crisis that will have devastating consequences for the democratic market system, according to the former Bank of England governor Mervyn King.

Lord King, who was in charge at Threadneedle Street during the near-death of the global banking system and deep economic slump a decade ago, said the resistance to new thinking meant a repeat of the chaos of the 2008-09 period was looming.

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‘No guts, no vision!’ Trump unhappy after Fed announces modest rate cut

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  • Central bank approves quarter-point interest rate reduction
  • Trump tweets: ‘Jay Powell and the Federal Reserve fail again!’

Under pressure from Wall Street and the White House, the Federal Reserve lowered interest rates on Wednesday for a second straight meeting, but declined to signal if it would continue to drop rates in the future.

Related: Ilhan Omar condemns Trump for spreading 'lies that put my life at risk'

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Trump escalates attacks on China and threatens to raise tariffs

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President ‘hereby orders’ US firms to seek alternative locations and suggests Fed Chair is an ‘enemy’

Donald Trump escalated his attacks on China on Friday, bumping up tariffs on Chinese imports and ordering US companies to leave China.

Trump’s announcements on Friday – all on Twitter – came after the president launched another blistering criticism of the Federal Reserve chairman, Jerome Powell, asking: “Who is our bigger enemy, Jay Powell or [China’s] Chairman Xi?”

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Dow Jones plunges 800 points as recession fears rattle markets

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  • Sharp declines come after Tuesday rally inspired by tariff delays
  • Trump urges Fed chief Powell to make further interest rate cuts

Signs of a global economic slowdown roiled the markets on Wednesday as shares dived and investors fled to bonds with such intensity that short-term yields rose above longer-term ones for the first time since the crisis of a decade ago – an inversion many market-watchers saw as a strong signal of an approaching recession.

Related: Inverted curve proves White House has won its battle with the Fed

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Federal Reserve snubs Trump by refusing to cut interest rates

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  • US rates held at 2.25% to 2.5%
  • President had called for ‘one point’ cut

The US Federal Reserve snubbed Donald Trump’s call for a cut in interest rates on Wednesday as the central bank noted economic activity was still rising at “a solid rate”.

After a two-day meeting the Fed board unanimously decided to hold rates steady at a range between 2.25% and 2.5%.

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Trump Fed pick was held in contempt for failing to pay ex-wife over $300,000

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Records obtained by Guardian show Stephen Moore reprimanded by judge for not paying alimony, child support and other debts

Stephen Moore, the economics commentator chosen by Donald Trump for a seat on the Federal Reserve board, was found in contempt of court after failing to pay his ex-wife hundreds of thousands of dollars in alimony, child support and other debts.

Related: Trump’s Federal Reserve pick owes $75,000 in taxes, US government alleges

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Global stock markets gain as investors predict cautious Federal Reserve – business live

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Central banks in spotlight amid Brexit uncertainty and growth concerns

The Bank’s reticence to raise rates has been hinted at by Gertjan Vlieghe and Silvana Tenreyro, two of the nine-member monetary policy committee.

Weaker growth prospects have come on top of concerns about Brexit, according to Martin Beck, lead UK economist at Oxford Economics, a consultancy. He expects a 9-0 vote to keep policy unchanged, saying:

The economy’s recent performance has been broadly in line with the MPC’s expectations. But public pronouncements by some committee members on downside risks have indicated a dovish shift around the pace of future rate hikes.

In light of the continued failure to get a Brexit deal through Parliament, Brexit uncertainty remains a key block on action by the MPC.

The Bank of England will also be in action later this week, with a monetary policy announcement on Thursday at midday.

Anything other than a unanimous vote to keep interest rates on hold would be a shock, for fairly obvious reasons.

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