Bloomberg
“U.S. Fourth-Quarter Growth Revised Down to 2.5% Annual Pace.”
The U.S. economy’s growth rate last quarter was revised slightly downward as inventories subtracted more than previously estimated, Commerce Department data showed Wednesday.
The latest results for GDP, the value of all goods and services produced in the U.S., show the economy ended the year on a solid note, despite the downward revision. Household and business spending remained robust.
Consumer spending, which accounts for about 70 percent of the economy, was the biggest contributor of growth in the fourth quarter, adding 2.58 percentage points. The report also showed wages and salaries were revised higher for the third and fourth quarters. Pay increased $97.4 billion in the third quarter, an upward revision of $18.3 billion. Fourth-quarter wages were revised up to $91.3 billion.
Business outlays were also solid, contributing 0.82 percentage point to growth. The latest results were boosted by residential investment and government spending as well.
Final sales to domestic purchasers, which strip out trade and inventories — the two most volatile components of the GDP calculation — climbed an unrevised 4.3 percent, the strongest since the third quarter of 2014.
Price data in the GDP report showed inflation near the Federal Reserve’s 2 percent goal. Excluding food and energy, the Fed’s preferred price index tied to personal spending rose an unrevised 1.9 percent.
Reuters
“Exclusive: U.S. regulators examine Wall Street’s Volcker rule wish list.”
U.S. regulators are considering changes to the “Volcker rule” that Wall Street has sought for years, including eliminating big banks’ responsibility to prove they do not trade on their own account, according to several regulatory and industry sources.
Other modifications being considered include: making it clearer which types of funds banks are banned from investing in, permanently exempting some foreign funds from the ban, and anointing a lead regulator to oversee the rule’s enforcement.
Part of the Dodd-Frank reform law passed after the 2007-2009 financial crisis, the Volcker rule aimed to prevent banks, such as Goldman Sachs (GS.N) and JPMorgan Chase (JPM.N), from making risky market bets while accepting taxpayer-insured deposits.
The rule forced many Wall Street banks to restructure their businesses, including overhauling their trading operations and hiving off billions of dollars’ worth of investment vehicles. Yet banks and some of their customers say the rule, which runs at more than 1,000 pages, is too much of a burden for the financial industry by limiting banks’ ability to facilitate investments and hedges for investors and depressing trading volumes in some assets.
Congress is now considering a bill that would exempt lenders with under $10 billion in assets from the rule, but larger banks are lobbying for changes in how the rule is interpreted and applied to them. Regulators are likely to release their proposals in coming months, in what is expected to be a milestone in President Donald Trump’s promised push for less regulation that could save Wall Street billions of dollars.
The Fed, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have joint responsibility for enforcing the rule and broadly agree it could be simplified.
BBC News
“Theresa May rejects EU’s draft option for Northern Ireland.”
An EU proposal for the Northern Ireland border threatens the «constitutional integrity» of the United Kingdom, Theresa May has said. The EU’s draft legal agreement proposes a «common regulatory area» after Brexit on the island of Ireland – in effect keeping Northern Ireland in a customs union – if no other solution is found. Mrs May said «no UK prime minister could ever agree» to this. The EU says the «backstop» option is not intended to «provoke» the UK.
Unveiling the draft agreement, EU chief negotiator Michel Barnier called on the UK to come up with alternatives. He said the text was «no surprise» and was just a legally-worded assessment of what had been agreed so far. Mr Barnier said the document contained «concrete and realistic solutions» in relation to the question of how to avoid a hard border once the UK leaves the EU’s customs union.
Other options – a UK-EU deal that means checks are not needed and technological solutions – will also be explored. Conservative Brexiteers have also said it is «completely unacceptable» and would effectively annex Northern Ireland.
There is also opposition to any role for the European Court of Justice after Brexit – the EU is proposing that disputes over the Brexit agreement in future years be settled by a «joint committee» which can refer to the EU’s court for a binding decision.
Downing Street said that overall the negotiations were «progressing well», adding that «it would be surprising at this point if we did agree on everything».
Labour says it would solve the Irish border question by entering into a new customs union with the EU, meaning checks are not needed as people and goods pass between Northern Ireland and the Republic.
Bloomberg
“Summers Warns Next U.S. Recession Could Outlast Previous One.”
The next U.S. recession could drag on longer than the last one that stretched 18 months. That’s the assessment of former Treasury Secretary Larry Summers.
With the economy in its ninth year of expansion, even if one were to take a hawkish view of upcoming Federal Reserve tightening, it would be some time before the level of interest rates rates gets high enough to allow them to again be reduced by the 500 basis points typical for a U.S. recession, Summers said at a conference in Abu Dhabi.
“That suggests that in the next few years a recession will come and we will in a sense have already shot the monetary and fiscal policy cannons, and that suggests the next recession might be more protracted,” he said during a panel with Bloomberg Television’s Erik Schatzker on Wednesday.
Later in an interview with Bloomberg Television, Summers said the economic situation the new Federal Reserve Chairman Jerome Powell faces is “a difficult balance between the legitimate desire to stimulate the economy and to get as much employment and growth as possible, and certainly to assure that inflation gets back to 2 percent.”
“At the same time I think he has to worry about the financial foundation for recovery if you’re the Fed chair, so I think there’s a balance to be struck,» Summers said.