Aurelia Butler

WASHINGTON (Reuters) – The Federal Reserve said on Thursday it was seeking feedback on how it operates its “discount window,” which is intended to provide emergency lending to banks in times of stress.The Fed said it wanted comments on various aspects of how banks deal with the window, including the collection of legal documentation, pledging and withdrawing collateral, and extending credit. The central bank said the input will inform its efforts to keep the tool “effective and efficient.”The solicitation marks the latest effort by the Fed to tweak the discount window, which banks have long resisted utilizing out of concern that it carries a stigma that could undermine stability in times of stress.The Fed’s inquiry does not include any suggested changes, but central bank officials and other regulators have discussed making changes to the discount window to improve its utility, such as requiring banks to place cash or other assets with the Fed as collateral in case emergency borrowing is needed in the future. The Fed is giving the public 90 days to provide feedback.Fed data released in April found that less than half of U.S. banks had established borrowing capacity via pledged collateral at the discount window, despite persistent calls from regulators that it can be a helpful tool to navigate stressful periods. More

The economy added a net 22,100 jobs in August, fully driven by part-time employment, Statistics Canada said.Analysts polled by Reuters had forecast a jobless rate of 6.5% and net job additions of 25,000 in August.The Canadian dollar strengthened to C$1.3467 to the U.S. dollar, or 74.26 U.S. cents, up 0.3% on the day.Canada’s economy had been losing steam under the pressure of high interest rates, and most of the growth seen earlier in the year was primarily led by increase in population. But as GDP growth has lagged population growth, unemployment has crawled up, stoking fears of a recession. Canada’s unemployment rate has risen by 1.6 percentage points since January 2023, which some economists have called alarming and pressed for deeper rate cuts to prop up growth.The rise in unemployment was largest amongst the youth aged 15 to 24 on a year over year basis and the rate of joblessness this summer amongst them was highest in eight years.The Bank of Canada this week trimmed its key policy rate by 25 basis points to 4.25%, its third such move in a row and Governor Tiff Macklem said that deeper rate cuts could be implemented if the economy needed support.Slow employment growth was one of the reasons that could temper robust GDP growth projections for the third quarter, he said during his remarks.Financial markets trimmed their expectations of a rate cut in October to 93% from 98% before Friday’s announcement. Traders are fully pricing in two 25 basis point rates cut by December.The employment rate, or the number of people with jobs out of the total working age population of 15 years and older, has been steadily falling and hit 60.8% in August, Statscan said. It has fallen in 10 out of the last 11 months.The average hourly wage growth of permanent employees slowed to an annual rate of 4.9% in August from 5.2% in July, the statistics agency said. The wage growth figure, which has been partly responsible for keeping inflation high, is closely watched by the BoC. More

NEW YORK (Reuters) – Federal Reserve Bank of New York President John Williams said Friday that a better balanced economy has opened the door to cutting rates, with the full course of action to be determined by how the economy performs. “With the economy now in equipoise and inflation on a path to 2 percent, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate,” Williams said in the text of a speech prepared for delivery before a gathering held at the Council on Foreign Relations in New York.“The stance of monetary policy can be moved to a more neutral setting over time depending on the evolution of the data, the outlook, and the risks to achieving our objectives,” he said. The central banker spoke immediately after the release of August jobs data. The movement of the jobless rate had been closely watched given its recent gradual drift upwards and unexpected July increase, which had raised fears that what had been a strong rate of hiring in the U.S. economy was running out of gas. In his speech, Williams said the rise in the jobless rate largely represents a retreat from overheated conditions, and that it remains historically low. He said the jobless rate will likely end the year around 4.25% and then move back down to its longer run level of around 3.75%. The state of the job market has loomed into greater prominence for the Fed in a climate where inflation pressures have been easing enough to open the door to rate cuts starting in September. At the end of August, Fed Chairman Jerome Powell said “the time has come for policy to adjust,” adding “the direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”Over recent weeks, Fed officials have refrained from providing firm guidance over the size of the almost certain cut to come at the Federal Open Market Committee meeting scheduled for Sept. 17-18. Financial markets broadly expect around a quarter percentage point cut in what is now a 5.25% to 5.5% federal funds rate target, with more cuts coming after that. A number of Fed officials have said they see a gradual path of easing but have been mum on what might happen at any given meeting. “I think a slow, methodical approach down is the right way to go,” Philadelphia Fed leader Patrick Harker told Reuters on Aug. 22. Williams also said in his speech that falling inflation pressures are likely to see inflation ease to a 2.25% rise this year and to just above 2% next year. More

According to LSEG data, investors disposed of a net $11.73 billion worth of U.S. equity funds during the week, registering a fourth weekly outflow in five weeks.A lackluster U.S. manufacturing reporton Tuesday reignited investor concerns about economic growth, ahead of the crucial non-farm payrolls report due at 8:30 a.m. ET (1230 GMT). This upcoming report could provide further insights into the economic situation and influence the potential magnitude of an interest rate cut this month.By segment, U.S. large cap funds observed a weekly net sale of $4.28 billion, the biggest in three weeks. Small-cap, mid-cap and multi-cap funds also posted outflows, valued at $1.77 billion, $1.34 billion and $667 million, respectively.The technology sector faced about $879 million worth of net sales, the biggest weekly outflow in six weeks. Investors, meanwhile, bought financial sector funds for the fourth successive week, worth about $418 million. Investors, meanwhile, funneled a net $45.81 billion worth of investments into the safety of U.S. money market funds, extending their purchases into a fifth consecutive week.U.S. bond funds, meanwhile, attracted inflows for the 14th week in a row, recorded at $2.23 billion on a net basis.US short-to-intermediate investment-grade, general domestic taxable fixed income and municipal debt funds saw significant purchases, worth about $3.28 billion, $2.03 billion and $963 million, respectively.Short-to-intermediate government & treasury funds, meanwhile, witnessed about $5.53 billion worth of net selling, reversing a net $4.84 billion worth of inflow in the prior week. More

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WHY IT’S IMPORTANTRepublicans in Congress have long vowed to rescind the 10-year IRS funding passed in 2022, arguing that it would unfairly harass Americans on their taxes. Republican presidential candidate Donald Trump vowed on Thursday to rescind all unspent funds from the Inflation Reduction Act, which include billions of dollars earmarked for the IRS.The IRS has planned to spend about $10.6 billion of those funds through end of the 2024 fiscal year, which concludes on Sept. 30, leaving nearly $50 billion that could be recouped. But budget forecasters say that doing so would increase the federal budget deficit by more than $100 billion over a decade because the agency would forego stepped-up enforcement.BY THE NUMBERS:The Treasury said that in the first six months of a new initiative to target 125,000 wealthy individuals who have not filed tax returns since 2017, it has collected $172 million from 21,000 non-filing taxpayers.Another initiative to target wealthy individuals with more than $1 million in income and $250,000 in unpaid, recognized tax debts has brought in $1.1 billion to Treasury coffers.KEY QUOTESU.S. Treasury Secretary Janet Yellen said the audit rate for millionaires fell by 80% due to budget cuts at the IRS.”During the previous (Trump) administration, as audit rates on high-income taxpayers fell, the share of audits on taxpayers with incomes under $200,000 increased,” Yellen said in remarks to be delivered at an IRS service center in Austin, Texas. “In 2019, the top one percent of Americans was estimated to owe over one-fifth of unpaid taxes, leaving ordinary Americans to shoulder the burden.” More