Federal Reserve Study Contradicts Biden on Climate Risks to Banks

Joe Biden

The Federal Reserve concluded that weather disasters are “not very” bad for financial institutions despite the Biden administration’s warnings that climate change is an “emerging” threat to banks.

“We find that weather disasters over the last quarter century had insignificant or small effects on U.S. banks’ performance,” the report, published in November by the Federal Reserve Bank of New York, stated. “This stability seems endogenous rather than a mere reflection of federal aid.”

The report added that extreme climate events “actually boosts profits” for larger banks because of increased loan demand. In addition, smaller banks are adept at avoiding mortgage lending in flood prone areas using local knowledge of the region they are based.

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Biden to Renominate Jerome Powell for Second Term as Federal Reserve Chair

Jerome Powell

President Joe Biden will renominate Federal Reserve Chairman Jerome Powell to a second term leading the central bank.

The president, who was elected as a moderate, has faced pushback on Powell, who progressives feel is not tough enough on bank regulations or climate change policy.

Also in contention for the top job was Lael Brainard, who Biden will nominate to become the vice chair of the central bank’s board of governors.

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Fed Official Sees Inflation Slowing in 2022, Future Price Increases Wouldn’t Be ‘a Policy Success’

Federal Reserve Vice Chairman Richard Clarida said he expects the recent spike in inflation to dissipate as supply and demand imbalances ease and that future price increases in 2022 would cause problems for the central bank.

“I do continue to judge that these imbalances are likely to dissipate over time as the labor market and global supply chains eventually adjust and, importantly, do so without putting persistent upward pressure on price inflation and wage gains adjusted for productivity,” Clarida said in remarks prepared for delivery on Monday.

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Federal Reserve Scales Back Bond Purchases as Inflation Rises

The Federal Reserve announced Wednesday that it would begin scaling back its monthly bond purchases in November, marking the first step towards ending its pandemic stimulus as inflation surges.

The scaling of bond purchases, more commonly known as tapering, will start “later this month,” the Federal Open Market Committee (FOMC) said in a statement. The Federal Reserve will reduce its purchases by $15 billion each month — $10 billion less in Treasury bonds and $5 billion less in mortgage-backed securities — from the current $120 billion figure.

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Commentary: The Unemployment Rate Does Not Offer Guidance Now

The Labor Department’s official unemployment rate—the most well-known gauge of the labor market’s health—counts as unemployed only those who aren’t working but are actively seeking a job.

Yet there is very little that we can infer from the jobless rate about the health of the economy.  The unavoidable conclusion is that the only reason investors follow the calculation is because both Washington’s politicians and the Federal Reserve are expected to react to it.

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Federal Reserve Begins Taking Steps to Fight Growing Inflation

The Federal Reserve said in September that it would begin taking steps to combat growing inflation in the U.S. economy, according to notes from a Sept. 21 and Sept. 22 Open Market Committee meeting first obtained by The Wall Street Journal. 

The Federal Reserve will be scaling back its $120 billion monthly purchases of U.S. Treasury and mortgage securities due to the growing surge in inflation and strong consumer spending leading to heightened demand, according to minutes from a September meeting released Wednesday by the WSJ. The reduction in spending, commonly referred to as tapering, will begin in mid-November, and experts believe it could end by June, according to the meeting notes.

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Federal Reserve Governor Thinks Regulators Need to Tell Banks How to Deal with Climate Change

Federal Reserve Governor Lael Brainard believes financial regulators should tell banks how to tackle climate change as a way to monitor threats to the overall financial system, The Wall Street Journal reported.

Brainard outlined in a speech how the central bank should prepare for climate change events like flooding and wildfires, which she thinks could deliver a shock to the markets and economy.

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Inflation Hits Another Multi-Decade High After Fed Boosts Projection

A key economic index used by the Federal Reserve to measure inflation surged to another 30-year high in August as Americans continued to experience sticker shock.

The personal consumption expenditures (PCE) index increased 4.3% over the 12-month period ending in August, according to a Department of Commerce report published Friday. The figure represented the index’s highest increase since January 1991 when it surged at an annual rate of 4.5%, government data showed.

Minus energy and food prices, which are notoriously more volatile than other sectors, the PCE index increased at an annual rate of 3.6% in August, the Commerce Department reported. That is also the highest increase in more than 30 years.

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Federal Reserve Could Soon Lose Control of Inflation Like in 1960s, Economic Historian Says

Prominent economic historian Niall Ferguson said current inflation could be in line with where it was in the 1960s during the period that preceded a decade of high consumer prices, CNBC reported.

“What is interesting about disasters is that one can lead to another,” Ferguson said in a Friday interview with CNBC. “You can go from a public health disaster to a fiscal, monetary and potentially inflationary disaster.”

During the 1960s, inflation stayed low before shooting up in the 1970s, according to government economic data. Consumer prices ultimately peaked in 1980 before rapidly declining.

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Georgia Congresswoman Wants Federal Reserve to Bring ‘Equity’ to Banking and Housing

U.S. Representative Nikema Williams (D-GA-05) reportedly said this week that the Federal Reserve must deliver “equity, diversity, and inclusion” to the banking and housing industries while also eliminating what she said was a “racial wealth disparity.” Williams serves on the U.S. House Committee on Financial Services.

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Census, Fed Data on Minorities Challenge Critical Race Theory Narratives of White Suppression

Minorities have increased their mobility and financial standing over the last decade, according to federal data that challenges some of the narratives of the so-called Critical Race Theory spreading through schools and media.

While the Federal Reserve reports that “the typical white family has eight times the wealth of the typical black family and five times the wealth of the typical Hispanic family” it also acknowledges that African-American and Hispanic families have made significant gains.

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Key Inflation Measure Spikes Again, Hits Highest Level Since 1991

Person in white shirt, walking into Gap store

A consumer price measurement used by the Federal Reserve to track inflation spiked again in June and hit its highest level since 1991, government data showed.

The personal consumption expenditures (PCE) price index increased 4% over the 12 months between July 2020 and June, according to a Bureau of Economic Analysis report released Friday. Excluding volatile energy and food prices, the index spiked 3.5% in that same 12-month period.

The index increased 0.5% in June, in line with economists’ forecasts, CNBC reported.

“Inflation has increased notably and will likely remain elevated in coming months before moderating,” Federal Reserve Board Chair Jerome Powell said during a press conference this week. “As the economy continues to reopen and spending rebounds, we are seeing upward pressure on prices, particularly because supply bottlenecks in some sectors have limited how quickly production can respond in the near term.”

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Federal Reserve Chair: Inflation to be ‘Elevated for Months’

Jerome Powell

Federal Reserve Chairman Jerome Powell tried to calm lawmakers’ fears about rising inflation but also said it would probably remain elevated for months to come.

Testifying before Congress this week, Powell said the Federal Reserve was willing to step in to address the situation, but that inflation should level out next year.

“As always, in assessing the appropriate stance of monetary policy, we will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if we saw signs that the path of inflation or longer-term inflation expectations were moving materially and persistently beyond levels consistent with our goal,” Powell said in his prepared testimony.

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Red States Top Those with Lowest Unemployment Rates

"Come in, we're hiring!"

Republican-led states and Vermont reported the lowest unemployment rates in April, according to a new report by the U.S. Commerce Department. States led by Democratic governors recorded the highest jobless rates, according to the report.

Unemployment rates were lower in April in 12 states and the District of Columbia and stable in 38 states, according to the U.S. Bureau of Labor Statistics.

States with the highest unemployment rates in April were Hawaii (8.5%), California (8.3%), New Mexico and New York (both at 8.2%), and Connecticut (8.1%). All five states with the highest unemployment are run by Democratic trifectas, meaning Democrats control the governor’s office and both houses of the state legislature.

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Senate Republicans Expand Investigation into ‘Woke Mission Creep’ of Federal Reserve

Federal Reserve

Senate Banking Committee Republicans have expanded an investigation into regional Federal Reserve banks over their alleged “woke mission creep.”

Republicans on the Senate Banking Committee sent letters to regional Federal Reserve banks in Minneapolis, Boston and Atlanta demanding a briefing with leaders and documents related to a recent “Racism and the Economy” initiative, GOP staffers said during a press briefing Monday morning. Engaging in political advocacy is out of the Fed’s purview, the letters said.

“Of course, racism is abhorrent and has no place in our society…. I recognize the interest in studying economic disparities along demographic lines, such as race and gender,” Banking Committee Ranking Member Pat Toomey wrote in the letters sent Sunday.

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Inflation Increasing Quicker Than Expected, Former Treasury Secretary Larry Summers Says

Larry Summers

Top American economist Larry Summers is sounding the alarm on rising U.S. inflation, saying that it is ticking up quicker than he originally expected.

Inflation is increasingly a more concerning and larger threat as consumer prices continue to rise, former National Economic Council Director and Treasury Secretary Larry Summers told Axios on Monday. He also criticized the Federal Reserve’s policies, suggesting that its decision to keep interest rates low could harm the economy.

“Data are pointing more towards higher inflation than I expected, and sooner,” Summers told Axios. “With more inflation signs sooner than I would have expected.”

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