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In his keynote speech, Federal Reserve Chair Jerome Powell warned that policy rates must rise and then stay high for some time, echoing a series of statements earlier in the day from his Fed colleagues that rates must become restrictive until prices begin to cool. Bullard Says Rates Working With Shorter Lags (9:40 a.m.) The Federal Reserve's rate hikes are working at shorter lags than in the past, said St. Louis Fed President James Bullard. Keywords: ALLTOP; BON; BUSINESS; COS; FIN; GLOBALMACR; GOV; INDUSTRIES; MARKETS; NORTHAM; REL; TOP; US; WORLD; WWTOP; WWTOPAM; WWTOPAS; WWTOPEU EN ALLTOP BON BUSINESS COS FIN GLOBALMACR GOV INDUSTRIES MARKETS NORTHAM REL TOP US WORLD WWTOP WWTOPAM WWTOPAS WWTOPEU RH88WMT1UM0X (Bloomberg) -- The number of hours worked per employee is at least as important a data point for policy makers as the employment rate, because it's a barometer of who's entering the workforce, according to a research paper presented to policy makers at Jackson Hole. [Extracted from the article]

Keywords: ALLTOP; BON; BUSINESS; COS; FIN; GLOBALMACR; GOV; INDUSTRIES; MARKETS; NORTHAM; REL; US; WORLD; WWTOP EN ALLTOP BON BUSINESS COS FIN GLOBALMACR GOV INDUSTRIES MARKETS NORTHAM REL US WORLD WWTOP RH88WMT1UM0X The findings in the paper are relevant for central banks as they project labor-market dynamics into the future when assessing and implementing policy, the authors said. In his keynote speech, Federal Reserve Chair Jerome Powell warned that policy rates must rise and then stay high for some time, echoing a series of statements earlier in the day from his Fed colleagues that rates must become restrictive until prices begin to cool. Bullard Says Rates Working With Shorter Lags (9:40 a.m.) The Federal Reserve's rate hikes are working at shorter lags than in the past, said St. Louis Fed President James Bullard. [Extracted from the article]

According to a researcher at the Bank of England (BOE), both the BOE and the Federal Reserve made a mistake by raising interest rates before starting to unwind quantitative easing (QE). The central banks began quantitative tightening (QT) only after raising rates to control inflation, which the researcher argues was the wrong approach. The researcher suggests that a rapid balance sheet unwind, involving active asset sales and passive maturities, can be just as effective as rate hikes in terms of overall monetary policy. The BOE has faced criticism for losses caused by QE, which taxpayers must cover, and the government has already transferred a significant amount of money to the BOE under an indemnity agreement. [Extracted from the article]

(Bloomberg) -- Central bank interest-rate increases have a substantial impact on innovation, which in turn can affect the productive capacity of an economy, according to a paper presented Friday at the Federal Reserve's annual economic policy symposium. Central banks around the world have raised interest rates to try and cool inflation that was in part driven by outsize demand as economies emerged from the Covid-19 pandemic. [Extracted from the article]

The Bank of Japan (BOJ) has experienced a record-breaking paper loss of ¥10.5 trillion ($70.7 billion) on its bond holdings, the largest loss since fiscal 2004. This poses a challenge for Governor Kazuo Ueda as he considers normalizing policy. The loss is not expected to deter Ueda from reducing stimulus if the bank's inflation goal is achieved, but it highlights the difficulties the central bank may face when it eventually moves towards an exit strategy. The BOJ's massive bond holdings, which make up over half of the central government's outstanding debt, are vulnerable to even a small increase in yields. On the other hand, the BOJ has seen unrealized gains from its holdings of exchange-traded funds, reaching a record ¥23.6 trillion. Despite the losses, Ueda has expressed confidence in the financial situation of central banks, emphasizing the need for responsible financial management to maintain credibility in the markets. [Extracted from the article]

Holzmann Tells Die Presse He Expects Somewhat Higher ECB Rates (1:15 p.m. NY) European Central Bank Governing Council member Robert Holzmann said interest rates will probably have to rise somewhat higher to get euro-area inflation back to target, according to Austria's Die Presse. George Says Time Needed to Declare Inflation Victory (4:40 p.m. NY) Former Federal Reserve Bank of Kansas City President Esther George said central banks have to wait and see whether they have done enough to curb inflation and that they can't yet declare victory. (Bloomberg) -- China remains embedded in US supply chains even as American firms have taken steps to reduce direct imports from the Asian country, according to a paper presented at the Federal Reserve's conference in Jackson Hole, Wyoming. In a speech to the gathering on Friday, Fed Chair Jerome Powell said the US central bank is prepared to raise interest rates further should the economy and inflation fail to cool. [Extracted from the article]

Kganyago Says Job "Not Yet Done" to Defeat Inflation (11:20 a.m. NY) South Africa's central bank governor warned that there are still risks to inflation, even as he acknowledged that the rate has come down significantly. (Bloomberg) -- Escalating federal borrowing needs may worsen structural deficiencies in the market for US Treasuries that were already on stark display during the 2020 Covid crisis, according to a paper presented to the Federal Reserve Bank of Kansas City's economic symposium. In a speech earlier, Fed Chair Jerome Powell said the US central bank is prepared to raise interest rates further if needed and intends to keep borrowing costs high until inflation is on a convincing path toward the Fed's 2% target. [Extracted from the article]

UK Gives 100 Days to Spend Last £14.5 Billion of Paper Banknotes (Bloomberg) -- The Bank of England said people holding £14.5 billion in old paper banknotes have just 100 days to spend or deposit the money before it becomes worthless. The UK central bank said about 477 million of Britain's last remaining banknotes printed on paper remain in the hands of the public but will cease to be legal tender after Sept. 30. [Extracted from the article]

(Bloomberg) -- Central bank interest-rate increases have a substantial impact on innovation, which in turn can affect the productive capacity of an economy, according to a paper presented at the Federal Reserve Bank of Kansas City's symposium. In a speech earlier, Fed Chair Jerome Powell signaled the US central bank is prepared to raise interest rates further if needed and keep borrowing costs high until inflation is on a convincing path toward the Fed's 2% target. Bullard, who resigned last month to become dean of Purdue University's business school, was an influential voice at the Fed who called for aggressive interest-rate hikes to fight the recent inflation surge. [Extracted from the article]

%USD, ALLTOP, BUSINESS, FRX, GLOBALMACR, GOV, MARKETS, NORTHAM, TOP, US, WORLD, GOVTOP RH8O1MT0G1KZ (Bloomberg) -- The Federal Reserve won't be able to curb inflationary pressures because they are rooted in expansionary fiscal policy, according to a paper presented at the central bank's annual Jackson Hole conference on Saturday. Keywords: %USD; ALLTOP; BUSINESS; FRX; GLOBALMACR; GOV; GOVTOP; MARKETS; NORTHAM; TOP; US; WORLD EN %USD ALLTOP BUSINESS FRX GLOBALMACR GOV GOVTOP MARKETS NORTHAM TOP US WORLD The Federal Reserve won't be able to curb inflationary pressures because they are rooted in expansionary fiscal policy, according to a paper presented at the central bank's annual Jackson Hole conference on Saturday. [Extracted from the article]

BOE Paper Says QE Portfolio May be Cut in Half to £400 Billion The BOE's latest weekly accounts show £888 billion of reserves, suggesting the BOE plans to cancel at least £400 billion worth as it runs down QE. (Bloomberg) -- The Bank of England expects to halve the size of its quantitative-easing portfolio to around £400 billion ($500 billion) over the next few years as commercial banks trim their demand for the safest of central bank assets, according to an internal BOE analysis. [Extracted from the article]

BOE Paper Says QE Portfolio May be Cut in Half to £400 Billion The BOE's latest weekly accounts show £888 billion of reserves, suggesting the BOE plans to cancel at least £400 billion worth as it runs down QE. (Bloomberg) -- The Bank of England expects to halve the size of its quantitative-easing portfolio to around £400 billion ($500 billion) over the next few years as commercial banks trim their demand for the safest of central bank assets, according to an internal BOE analysis. [Extracted from the article]

(Bloomberg) -- Economists Olivier Blanchard and Lawrence Summers said a paper by Federal Reserve Governor Christopher Waller that found a soft landing is a plausible outcome for the labor market "contains misleading conclusions, errors, and factual mistakes." The paper by Waller and his Fed research colleague Andrew Figura, released July 29, criticized the approach of research earlier in the month by Summers, Blanchard and Alex Domash that argued the central bank would be unlikely to achieve its goal without inflicting a "painful" spike in unemployment. Summers, Blanchard Say Waller "Soft-Landing" Paper Has Errors. [Extracted from the article]

(Bloomberg) -- Euro-area central banks face short-run losses but that shouldn't necessitate capital injections from governments, according to research from the International Monetary Fund. Shortfalls will be "material" at some national central banks, but such shortfalls won't be "so large and persistent as to necessitate capital support from member states", the researchers wrote. [Extracted from the article]

"We find it entirely unconvincing as support for the "soft landing" idea -- pushed mostly recently by Fed Chair Jerome Powell in his July press conference -- that vacancies can decline substantially taking pressure off inflation without driving unemployment way up", they said. (Bloomberg) -- Economists Olivier Blanchard and Lawrence Summers said a paper by Federal Reserve Governor Christopher Waller that found a soft landing is a plausible outcome for the labor market "contains misleading conclusions, errors, and factual mistakes." Summers, Blanchard Say Waller's "Soft-Landing" Paper Has Errors. [Extracted from the article]

(Bloomberg) -- Indian sovereign bonds slumped as the central bank's choice of relatively illiquid papers for its bond-purchase program disappointed traders. The yield on the 5.63% bond maturing in 2026 rose as much as 13 basis points to 5.89%, while the 6.64% 2035 bond yield climbed eight basis points. [Extracted from the article]

(Bloomberg) -- Keeping interest rates low in an effort to boost a weak economy, which the Federal Reserve has signaled it will do through at least 2023, may actually exacerbate wealth inequality between White and Black households, according to a new economic paper. The gains in stock prices that come with a low interest-rate environment and disproportionately benefit White Americans, far outweigh the job and income gains that Black citizens experience at the same time, according to the paper released Friday. "With the instruments available -- all of which work through effects on asset prices and interest rates -- a central bank would not be able to design policies for an income-gap reduction objective without increasing wealth inequality.". [Extracted from the article]

R0ZEX2DWLU6D (Bloomberg) -- The Federal Reserve took a key step toward the possible issuance of a U.S. digital currency, a move that the central bank said could dramatically alter the American financial system. Keywords: %USD; ALLTOP; BNK; BON; BUSINESS; COS; FIN; FRX; GLOBALMACR; GOV; INDUSTRIES; MARKETS; NORTHAM; TEC; TECSVC; TOP; US; WORLD; WWTOP; WWTOPAM; WWTOPEU EN %USD ALLTOP BNK BON BUSINESS COS FIN FRX GLOBALMACR GOV INDUSTRIES MARKETS NORTHAM TEC TECSVC TOP US WORLD WWTOP WWTOPAM WWTOPEU The Federal Reserve took a key step toward the possible issuance of a U.S. digital currency, a move that the central bank said could dramatically alter the American financial system. %USD, ALLTOP, BNK, BON, BUSINESS, COS, FIN, FRX, GLOBALMACR, GOV, INDUSTRIES, MARKETS, NORTHAM, TEC, TECSVC, TOP, US, WORLD, WWTOP, WWTOPAM, WWTOPEU. [Extracted from the article]

(Bloomberg) -- The introduction of a digital U.S. dollar could help democratize banking in poorer countries, but it also poses a risk to local currencies if it were readily accessible, according to former Indian central bank Governor Raghuram Rajan. Rajan's comments come as the Federal Reserve prepares to release a paper on digital currencies soon. [Extracted from the article]

(Bloomberg) -- Indonesia's central bank is on track to issue its own digital currency for banks to use, while considering ways to ensure it would be exchangeable across borders. The central bank will distribute the digital currency to large banks and payment service companies to sell to smaller banks for various retail transactions. [Extracted from the article]

Central bank publishes a paper on need for structural reforms "The degree to which structural reforms and technological advances can reverse the downward trend of the natural rate will be among the factors determining how challenging it is for central banks to reach their objectives in the future", the paper said. [Extracted from the article]

The Financial News report comes two days after a government adviser told reporters the PBOC has room to cut the RRR and there shouldn't be concerns about inflation. (Bloomberg) -- Expectations are falling that China's central bank will ease monetary policy by cutting the amount of cash banks have to hold in reserve, according to a front-page story from the central bank's own newspaper. [Extracted from the article]

(Bloomberg) -- Federal Reserve Chair Jerome Powell called for better regulation of cryptocurrencies and said the fact that the industry's shakeout failed to cause broader financial turmoil may not be the case in the future. Fed's Powell Says There's "Real Need" for Better Crypto Regulation Powell reiterated that the Fed is still deliberating on the idea of a digital currency and doesn't expect to decide on the issue for some time. [Extracted from the article]

Keywords: PBCZ@CH; ALLTOP; ASIA; ASIATOP; BUSINESS; CHINA; CORONAVIR; ECOTOP; FRX; GLOBALMACR; GOV; MARKETS; TOP; WORLD; WWTOP; WWTOPAS; WWTOPEU EN PBCZ@CH ALLTOP ASIA ASIATOP BUSINESS CHINA CORONAVIR ECOTOP FRX GLOBALMACR GOV MARKETS TOP WORLD WWTOP WWTOPAS WWTOPEU China needs to roll out more stimulus to boost economic growth as the recovery isn't solid and its momentum showed signs of slowing, according to Financial News, a newspaper backed by the central bank. PBCZ@CH, ALLTOP, ASIA, ASIATOP, BUSINESS, CHINA, CORONAVIR, ECOTOP, FRX, GLOBALMACR, GOV, MARKETS, TOP, WORLD, WWTOP, WWTOPAS, WWTOPEU. [Extracted from the article]

"We therefore believe that the next policy decision the BOJ takes will likely be a major one - such as changing long-/short-term policy rate targets or terminating yield curve control altogether." (Bloomberg) -- Japan's two-year yield rose above zero for the first time since 2015, bringing the global era of negative yields closer to an end. [Extracted from the article]

(Bloomberg) -- Japan's two-year yield rose above zero for the first time since 2015, bringing the global era of negative yields closer to an end. "We therefore believe that the next policy decision the BOJ takes will likely be a major one - such as changing long-/short-term policy rate targets or terminating yield curve control altogether.". [Extracted from the article]

(Bloomberg) -- South Africa's central bank is seeking feedback by Oct. 27 on three new papers published as part of its consultations with market participants over the transition to a new rand money-market benchmark to price short-term loans. The papers cover the bond, loan and money markets, the central bank said in a statement Thursday. [Extracted from the article]

The article reports that authorities in Rio de Janeiro, Brazil have cut lock on steel box ostensibly belonging to central bank of Iraq and mentions finding of cash not worth paper it was printed on. Topics dsicussed include views of police chief Fabricio Oliveira on the currency value, raw material for falsification of other bills and dispatch of treasure chest through another country.

China's central bank would benefit from greater transparency including regular press briefings and timely release of information, according to researchers at the International Monetary Fund. Their paper -- which doesn't necessarily reflect the IMF's official view -- looked at moves toward greater transparency by the People's Bank of China as its stewardship of the $12 trillion economy increasingly holds the potential to rattle global markets. [Extracted from the article]

A new research paper from the Federal Reserve Bank of Atlanta argues that the final phase of the US inflation fight will not be more difficult than previous phases. The paper suggests that the Federal Reserve does not need to approach the final phase differently from the rest. While Fed officials expect three rate cuts in 2024 as inflation falls, they have pushed back against expectations of immediate interest rate cuts. The Atlanta Fed economist warns that excessive concern over the final phase could lead to a policy error and increase the risk of a recession and unemployment. [Extracted from the article]

Digital central bank money for use by the general public could help monetary policy to reach the economy more directly, according to research by the European Central Bank. A central-bank issued digital currency would allow people in the euro area to deposit with it directly, providing a risk-free avenue for using money in an increasingly online economy, a publication by an ECB task force said Friday. "Depending on its specific features, central bank digital currency could either allow monetary policy to reach a wider range of economic actors more directly or weaken the tools available to the issuing central bank for the conduct of its monetary policy", the paper said. [Extracted from the article]

The paper reiterated that the PBOC will coordinate monetary policy with fiscal and industrial policies to boost market confidence and achieve stable growth. (Bloomberg) -- The People's Bank of China vowed to continue improving its structural monetary policy framework in a paper that highlighted the importance of targeted tools in helping an economy battered by Covid outbreaks. [Extracted from the article]

"With labor-market slack still below sustainable levels and inflation expectations modestly higher, we conclude that the Fed is unlikely to be able to avoid slowing the economy to return inflation to target", Bernanke and Blanchard wrote in their paper. The argument that Bernanke and Blanchard lay out in their paper about the evolution of inflation jibes with that put forward by Fed Chair Jerome Powell last week. (Bloomberg) -- The Federal Reserve needs to cool off the overheated labor market to tame inflation, though it's not clear how far unemployment must rise to achieve that, according to former Fed Chair Ben Bernanke and ex-International Monetary Fund Chief economist Olivier Blanchard. [Extracted from the article]

The central bank may eventually implement changes to the way its lending facilities operate, by altering the minimum fee charged and the borrowing limits per counterparty, given that a functioning repo market is essential to guarantee short-term funding for non-banks. A removal of the deposit-rate parameter on ECB PSPP purchases may further squeeze German general collateral and increase the specialness of the front-end of the German curve. The recent steepening of the bobl put option skew signals investors hedging against potential disappointment should the ECB refrain from removing the deposit rate floor while the collateral squeeze persists. [Extracted from the article]

"Deflationary Bias" May Afflict U.S. Economy, Fed Paper Says (1) The U.S. economy may be saddled with a "deflationary bias" after the last recession that makes it harder for the Federal Reserve to achieve its 2 percent inflation goal, according to research published this month by the central bank. Inflation stood at 0.6 percent in December and has been below the Fed's 2 percent goal for about 3 1/2 years, according to the personal consumption expenditures price index targeted by the central bank. [Extracted from the article]

"You need paper money to engender short-term riches to get us out of a crisis, but what ends up happening is it's hard to keep that in check", Sehgal said in an interview in New York on Wednesday. After carrying out unprecedented stimulus in the wake of the financial crisis, the U.S. Federal Reserve now stands out among major central banks in accepting a higher exchange rate as a sign of economic strength. [Extracted from the article]

Mario Draghi insisted the European Central Bank would only withdraw its highest-denomination banknote to combat crime, not to curb the use of paper money. Even if the ECB withdraws the 500-euro note, people will still be able to hoard the next-highest denomination of 200 euros if they want, Draghi told the lawmakers. [Extracted from the article]

(Bloomberg) -- Hostility and discrimination await women daring to encroach upon the male-dominated world of economics and central banking, according to papers presented at a European Central Bank conference on Monday. The research shows that the much-celebrated rise of Christine Lagarde -- a lawyer and politician, not an economist or central banker -- to become the ECB's first-ever female president is atypical for her gender. [Extracted from the article]

Marvin Goodfriend, a nominee to be a Federal Reserve governor, said he hoped to keep the U.S. central bank alert to future challenges while increasing transparency and accountability. Goodfriend is President Donald Trump's third nomination to the Fed Board in Washington as reshapes the leadership of the U.S. central bank. [Extracted from the article]

That's the view of former New Zealand central bank governor Graeme Wheeler and Bryce Wilkinson, a senior research fellow with the New Zealand Initiative think tank, who have co-authored a paper released Tuesday in Wellington titled: "How Central Bank Mistakes After 2019 Led to Inflation." White also says that Wheeler and Wilkinson are "surely right" in concluding that central banks could acknowledge what they believe they got wrong. [Extracted from the article]

That's the view of former New Zealand central bank governor Graeme Wheeler and Bryce Wilkinson, a senior research fellow with the New Zealand Initiative think tank, who have co-authored paper released Tuesday in Wellington titled: "How Central Bank Mistakes After 2019 Led to Inflation." (Bloomberg) -- Central banks are responsible for soaring inflation rates around the world and should admit that they over-stimulated economies during the pandemic. [Extracted from the article]

Researchers say forecasts based less on ECB inflation goal The ECB hasn't reached its inflation goal of just-under 2 percent since early 2013, even though it's cut interest rates below zero, pumped money into the economy through asset purchases and offered to pay banks to borrow cash. [Extracted from the article]

(Bloomberg View) -- Iceland Gets the First Jolt From Panama Leak: Leonid Bershidsky The leaders of Russia, China, Ukraine and other large nations will survive the exposure of their sometimes tenuous links to offshore accounts, but the political future of Prime Minister Sigmundur David Gunnlaugsson of Iceland is in question. [Extracted from the article]

Central bank governor says technology already exists to do it There's another quirk to having a central bank produce virtual currency, according to Rohde. [Extracted from the article]

While episodes of moderately faster inflation that are caused by an overheating economy can improve debt levels and public deficits, an external price shock - like the surge in energy costs following Russia's invasion of Ukraine - is more likely to leave them in a worse position, ECB economists said in a paper published on Monday. (Bloomberg) -- The nature of the euro area's current bout of inflation means the effect on government finances will probably be negative, especially in the longer run, according to European Central Bank research. [Extracted from the article]

(Bloomberg) -- Swollen government indebtedness - and the upward pressure that puts on interest rates - is here to stay, according to a paper presented at the Federal Reserve's conference in Jackson Hole, Wyoming. ECB's Kazaks Says Would Err on Side of Raising Interest Rates (3:20 p.m. NY) European Central Bank Governing Council member Martins Kazaks said it's better to err on the side of tighter monetary policy than allow the risk of reaccelerating inflation. In a speech to the gathering on Friday, Fed Chair Jerome Powell said the US central bank is prepared to raise interest rates further should the economy and inflation fail to cool. George Says Time Needed to Declare Inflation Victory (4:40 p.m. NY) Former Federal Reserve Bank of Kansas City President Esther George said central banks have to wait and see whether they have done enough to curb inflation and that they can't yet declare victory. [Extracted from the article]

(Bloomberg View) -- Bitcoin Isn't the Answer to Central Bank Woes: Leonid Bershidsky In March, Bank of England Deputy Governor Ben Broadbent discussed the idea of "central bank digital currency" in a speech that focused on the implications of shifting deposits to central banks, including the de-facto end to fractional reserve banking. Since, apart from RSCoin, there are no advanced digital currency proposals for central banks, there's little chance that any of these conservative institutions will adopt the blockchain anytime soon. [Extracted from the article]

According to researchers at Carmignac, the transition to a low-carbon economy will contribute to inflation over the next decade. They predict that the energy transition will add 1.6 percentage points to developed-market inflation each year, as the dirtiest fuels are phased out and new technologies are invested in. However, this inflationary impact is seen as preferable to the potential consequences of unmitigated climate change. Carmignac is one of several financial institutions examining the effects of climate change on global economic growth, inflation, and asset prices. [Extracted from the article]

According to researchers at Carmignac, the transition to a low-carbon economy will contribute to inflation over the next decade. They predict that the energy transition will add 1.6 percentage points to developed-market inflation each year, as the dirtiest fuels are phased out and new technologies are invested in. However, this inflationary impact is seen as preferable to the potential consequences of unmitigated climate change. Carmignac is one of several financial institutions examining the effects of climate change on global economic growth, inflation, and asset prices. [Extracted from the article]