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Fed sees no rate increases until 2023; Deutsche tells U.S. workers to stay home

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Zero until 2023

The Federal Reserve said it has no plans to raise interest rates over the next three years. “In new projections released Wednesday, all 17 officials said they expect to keep rates near zero at least through next year, and 13 projected rates would stay there through 2023,” the Wall Street Journal reported.

The Fed said it won’t raise rates “until it sees evidence of a tight labor market and inflation reaches 2% ‘and is on track to moderately exceed 2% for some time.’”

“Although the U.S. economy has bounced back faster than the Fed predicted at the outset of the coronavirus crisis, the recovery is still far from complete and vulnerable to the uncertain health outlook and waning support from fiscal policy,” the Financial Times said. “This has prompted Fed officials to debate ways to reinforce their support for the economy, rather than begin to withdraw it.”

“By scrapping their old practice of raising rates in response to a drop in unemployment and an expectation that inflation would rise — and instead requiring inflation to show up in real life as a precondition for higher rates — central bankers are committing themselves clearly to their new policy strategy and to a long period with borrowing costs near zero,” the New York Times commented.

The central bank’s updated projections for economic growth and employment released Wednesday “suggest Fed leaders are growing more optimistic about the recovery than they were earlier this summer,” the Washington Post said.

“The recovery has progressed more quickly than generally expected,” Powell said at a news conference after the meeting. “Even so, overall activity remains well below its level before the pandemic, and the path ahead remains highly uncertain.”

Indeed, although the “economy is in better shape than the Federal Reserve thought it would be, its policy makers aren’t celebrating,” the Journal added. “In their post-meeting statement, they emphasized that the economy remains much worse off than it was at the start of the year. The dour take on the economy and the dovish shift in the statement might reflect the likelihood that, from here on out, gains in the economy will be harder-fought than in the late spring and early summer and that there remains a risk of the economy slumping anew.”

Powell also said the Fed is considering changes to its Main Street Lending Program “to make it more available to borrowers, but the law limits how much additional risk the central bank can take on,” American Banker’s Hannah Lang reports.

Remain home

Deutsche Bank “told U.S. employees they don’t have to return to the office until July 2021,” the Journal reported. In a memo to employees, Americas chief of staff Matthias Krause acknowledged New York’s “’success in containing Covid’ but added that workers have ‘understandable concerns about public transportation, cleanliness, security and other quality of life issues.’”

“Deutsche Bank’s plans contrast with the strategy of JPMorgan Chase, which last week told most senior employees of the sales and trading operation that they and their teams should return to the office by Sept. 21. JPMorgan often sets the tone for Wall Street, but in this case competitors aren’t following. Some are even taking the opportunity to pitch their work-from-home flexibility to lure talent from other banks. UBS told some senior employees in sales and trading that they wouldn’t follow the steps of JPMorgan on a conference call Monday.”

In fact, JPMorgan’s return to the office got off to a bad start, as the bank “sent some of its workers home this week after an employee in the bank’s trading unit tested positive for the coronavirus,” the New York Times said. “The employee was not one of those asked to return, and those plans still stand.”

Wall Street Journal

Deal or no deal?

Stripe, the fast-growing payments firm, “is offering to pay its employees a cool $20,000 to leave San Francisco, New York or Seattle. The catch? It would cut their pay by 10% once they do.”

Charged

The U.S. Justice Department charged two Russian nationals with defrauding “three cryptocurrency exchanges and their customers, resulting in losses of at least $16.8 million.” The two men were charged in federal court in San Francisco “with aggravated identity theft, conspiracy to commit computer fraud and conspiracy to commit money laundering, among other charges, for their alleged roles in a sophisticated hacking and market-manipulation scheme.”

Quotable

“Effectively we’re saying rates will remain highly accommodative until the economy is far along in its recovery.” — Federal Reserve chair Jerome Powell, announcing that the Fed is likely to keep interest rates at or near zero until 2023 at the earliest even if inflation rises above the Fed’s 2% target for “some time.”

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