Date: December 17, 2019
Fed Alumni Fear Crisis Risk in Simultaneous Cuts to Rules, Rates
“The Federal Reserve is running the risk of fomenting an eventual financial crisis by easing banking regulations at the same time that it’s cut interest rates. So say some former Fed officials, including ex-Vice Chairman Alan Blinder and financial stability experts Daniel Tarullo and Nellie Liang. They worry that the combination of looser credit and laxer rules will prompt financial institutions and investors to pile on leverage and take excessive risks. While that may spur economic growth in the short run, it could end up triggering a recession once the speculative bets are unwound. “When you lower rates and put incentives in place to increase borrowing, it should not be surprising that risks will increase,” said Liang, former director of the Fed’s financial stability division. “That means this is not the right time to be also significantly loosening financial regulations.” ”
U.K. Wages Cool, Vacancies Fall in Brexit-Hit Labor Market
“The U.K. labor market and manufacturing sector displayed further signs of nervousness around the now-postponed Oct. 31 deadline to leave the European Union and in the run-up to last week’s general election. Vacancies fell below 800,000 for the first time in two years and wages grew at their slowest annual pace since 2018, the Office for National Statistics said Tuesday. Employment rose marginally, leaving the jobless rate unchanged. A separate survey showed factory output plunged the most since the financial crisis in the fourth quarter.”
China Plans to Buy Ethanol, Count Hong Kong Trade in U.S. Pledge
“Further details are emerging on how China would increase imports from the U.S. by as much as $200 billion over the next two years in order to meet its commitments under the phase one trade deal announced last week. That accord, yet to be officially signed, includes reaching purchases of $40 billion to $50 billion per year in agricultural commodities, a level some analysts have doubted is feasible. To help attain that figure, Beijing plans to restart purchases of ethanol by lifting or waiving trade war tariffs on the fuel, said people familiar with the matter, who asked not to be identified discussing the plans.”
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