The Federal Reserve unveiled a major update to its policy statement this week, indicating that it will leave interest rates on hold near zero until the economy has regained full employment, inflation has risen above 2 percent, and those price gains look to be headed even higher.
While that guidance lays the groundwork for years of growth-stoking monetary policy, Neel Kashkari from the Federal Reserve Bank of Minneapolis wanted to do even more and was one of two votes against the statement. He would have pledged to keep rates low until core inflation — which strips out volatile fuel and food — had exceeded 2 percent on a sustained basis.
“I would have preferred the Committee make a stronger commitment to not raising rates until we were certain to have achieved our dual mandate objectives,” Mr. Kashkari wrote in an explanation of his dissent published Friday.
The Fed’s new guidance, had it been in place following the Great Recession, would only have slightly delayed the central bank’s timing on rate increases, he said. Inflation did briefly rise above 2 percent in 2017. He argued that the revamped language should not include a reference to full employment, which is nearly impossible to gauge in real time.
Mr. Kashkari’s colleague, Robert S. Kaplan from the Federal Reserve Bank of Dallas, joined him in dissenting. But Mr. Kaplan did so for a very different reason: He wanted the central bank to retain more flexibility, rather than indicating that actual achievement of 2 percent inflation was a necessary condition for raising rates. That would create leeway to raise rates earlier.
The statement revamp came after the Fed reworked its long-run policy goals last month, making changes that would embrace periods of faster inflation and which enshrined modesty when it came to judging labor market hotness.
“They’re sort of on two sides of the discussion,” Jerome H. Powell, the Fed’s Chair, said of the dissents at his post-meeting news conference. “We’re the first major central bank to adopt this framework. There’s no cookbook.”
CaixaBank and Bankia agreed late Thursday to merge in a deal that would form Spain’s largest bank and end the government’s majority control over Bankia, the institution that was at the heart of Spain’s financial crisis and 2012 banking bailout.
The all-share agreement was presented as a merger, but CaixaBank, which is based in Barcelona, will account for about two-thirds of the new bank’s combined assets, worth 665 billion euros, or $785 billion. The combined institution, with an expected 20 million customers, will keep the CaixaBank name.
The transaction comes after both banks have reported sharp drops in first-half earnings, at a time of record-low interest rates and as the coronavirus pandemic has plunged Spain into one of the deepest recessions in Europe.
Many analysts expect the continued pressure on banks’ margins to force further consolidation in the sector. A merger between CaixaBank and Bankia “could revive moves by other banks to gain scale or strengthen their franchises or business models to remain competitive,” Fitch Ratings said in a note to investors earlier this month.
Bankia was formed as a seven-way merger intended to consolidate savings banks, known as cajas in Spain, which were crippled by bad loans, a result of the bursting of the country’s construction bubble after the onset of the world financial crisis in 2008.
But instead of shoring up Spain’s financial sector, Bankia ended up posting the largest banking loss in the country’s history and requiring about €22 billion in rescue funding, as part of a European banking bailout that the Spanish government was forced to negotiate in 2012. As a result, the government also took over Bankia, which was then slimmed down to return it to profit.
The pandemic has had devastating consequences for a wide variety of occupations, but housekeepers have been among the hardest hit.
Seventy-two percent of them reported that they had lost all of their clients by the first week of April, according to a survey by the National Domestic Workers Alliance. The fortunate had employers who continued to pay them. The unlucky called or texted their employers and heard nothing back. They weren’t laid off so much as ghosted, en masse.
“We plateaued at about 40 percent employment in our surveys of members,” said Ai-jen Poo, executive director of the alliance. “And because most of these people are undocumented, they have not received any kind of government relief. We’re talking about a full-blown humanitarian crisis, a Depression-level situation for this work force.”
The pandemic has laid bare not just the vulnerability of housekeepers to economic shocks but their total lack of leverage. Several workers said they had clients who would not let anyone clean who has had Covid-19; others know clients who will hire only Covid survivors, on the theory that after their recovery, they pose no health risk. Housekeepers are often given strict instructions about how they can commute, and are quizzed about whether and how much they interact with others. But they have no idea whether their employers are taking similar precautions. Nor, in many cases, are they accorded the simple decencies that are part of formal employment.
“It would be nice to have at least two days’ notice when someone cancels on you, either to let you know or compensate you for your time,” said Magdalena Zylinska, a housekeeper in Chicago who helped lobby for a Domestic Workers’ Rights bill that passed in Illinois in 2017. “I think a lot of people don’t realize that if I don’t work, I don’t get paid and I still have to buy food, pay bills, utilities.”
The editors and reporters for the DealBook newsletter sift through a lot of company reports and listen to many corporate conference calls. These are some of the things that caught our notice this week:
💥 “I think the word ‘unprecedented’ gets way overused this year, 2020, and you use the figure of speech ‘earth shattering,’ which I don’t actually think we can use in 2020 because it might actually literally happen.” — Paul Jacobson, chief financial officer of Delta Air Lines, on not tempting fate
😠 “My team told me that I came across a bit too stern in my opening remarks on Monday, so feedback is always welcome, and I hope I wasn’t putting anybody off.” — Bernard Looney, chief executive of BP, on his presentation style
🍩 “A lot of our early morning traffic that used to be in that 6 to 9 a.m. window for us has really shifted into that 10 to 2 or 10 to 1. People are coming out a little later., Maybe they need a break from their Zoom.” — Kate Jaspon, chief financial officer of Dunkin’ Brands, on changing workday patterns
🏰 “The Barbie Dreamhouse movie was the number-eight most watched content in its first week on Netflix across all genres, not just kids.” — Ynon Kreiz, Mattel’s chief executive, on pandemic pastimes
🌯 “Our portion sizes are much more consistent because there’s not somebody pointing at every single pan and … the crew will see just the way that a customer is looking at them and think, ‘Oh, I better put another scoop in.’” — Jack Hartung, chief financial officer of Chipotle, on the benefits of online orders
U.S. stock futures were choppy on Friday, signaling volatility on Wall Street when trading starts, as uncertainty about the coronavirus’s impact on businesses continued to weigh on stocks. Wall Street closed lower on Thursday, with the S&P 500 down 0.8 percent, led by a decline in tech stocks.
Global markets were mixed. European indexes had no strong direction, with France’s CAC-40 down 0.1 percent and the benchmark Stoxx Europe 600 0.1 percent higher. In Asia, China’s Shanghai Composite gained 2.1 percent while Japan’s Nikkei rose 0.2 percent. On Wall Street, futures predicted the S&P 500 would rise modestly when trading starts.
Oil markets gained slightly after Saudi Arabia reminded fellow oil producers to abide by production quotas. The yield on a U.S. 10-year Treasury notes fell one basis point, while gold gained 0.6 percent.
The upsurge in coronavirus cases in Europe has caused airlines to scale back their schedules after reopening for service during the summer. The discount carrier Ryanair on Friday became the latest airline to blame changing government policies for a pullback in service, as it announced a 20 percent cut in capacity for October. Varying restrictions have left customers hesitant about making travel plans, it said. Ryanair shares fell more than 4 percent.
In the United States, more than 790,000 unemployment claims were filed last week, the Labor Department reported Thursday — a lower number than the week before but still reflecting an extraordinarily high pace of layoffs that exceeds the worst levels of past recessions.
Two Goldman Sachs employees have tested positive for the virus, according to a company official, as more workers have returned to the firm’s downtown Manhattan headquarters in recent weeks. One works in one of the firm’s revenue producing businesses and the second is employed in its back-office division, known internally as “the federation.” The two workers sit on different floors. The cases at Goldman, which company officials believe came from exposure outside the office, come just days after JPMorgan Chase sent workers home after they came in contact with a stock-division employee who was confirmed to have the virus.
Blue Bell Creameries must pay $17.25 million in criminal penalties for shipments of contaminated products linked to a 2015 listeria outbreak, a federal court in Texas declared on Thursday. The fines constitute the largest-ever criminal penalty following a conviction in a food safety case, according to the Department of Justice. Blue Bell pleaded guilty in May to two misdemeanor counts of distributing adulterated ice cream products. Prosecutors in the case charged that the company dispensed products that were manufactured under unsanitary conditions.
Walmart, the nation’s largest private employer, said on Thursday that it was raising wages for 165,000 of its workers, as it revamps leadership roles in its stores. The pay increases, which will affect about 11 percent of the company’s United States employees, come as Walmart is undergoing a transformation to be a more digitally focused retailer and seeks to reward and retain its more skilled workers. The starting wages for bakery and deli employees will increase to $15 an hour from $11 an hour, while pay is also being raised by $1 an hour for many employees in the company’s auto car centers.