Publications

The Wall Street Journal reports that Federal Reserve Bank of Dallas President Robert Kaplan believes the Fed should begin shrinking its balance sheet “very soon.”  The statement comes in advance of the Fed’s September policy meeting, after which officials are expected to announce the balance sheet reduction, though persistently weak inflation has forced some officials to reevaluate that timeline. WSJ

According to the Wall Street Journal, some large U.S. companies oppose a proposal by Congressional Republicans to establish a minimum corporate tax on both domestic and foreign profits. The companies said in a comment letter to the Senate Finance Committee that the proposed tax would disproportionately burden American companies and favor foreign-based firms. WSJ

Sam Fleming of the Financial Times reports that Cleveland Fed President Loretta Mester believes recent, weak inflation is not a sign of weakness in the U.S. economy and should not interrupt the current pace of rate hikes. Mester also contended that the Fed should act to raise interest rates to get ahead of any sudden inflation spikes. FT

According to the Financial Times, national economic council head Gary Cohn affirmed that President Trump’s agenda in the coming weeks will revolve around pitching tax reform to the American people. Though the administration would like to see tax reform enacted in 2017, few expect that it will happen given that congressional leaders and the White House have not yet settled on a plan. FT

The Financial Times reports that Robert Kaplan, president of the Federal Reserve Bank of Dallas, advises against watering down stress tests for large American banks. Kaplan says that deregulating banks at a time of soaring asset valuations could encourage risk-taking and unsustainable debt levels. FT

The Wall Street Journal writes that financial markets have begun signaling growing concerns about a possible U.S. government debt default.  Yields on Treasury bills maturing shortly after the end of the debt-limit deadline have climbed above yields for longer-dated Treasuries, suggesting concerns that investors may not be paid on time if Congress fails to raise the debt ceiling. WSJ

The Washington Post reports that a new Energy Department report on the electricity grid includes recommendations for regulatory changes that would bolster coal and nuclear power plants. The report also notes that cheap natural gas has been the primary driver of coal and nuclear plant shutdowns, rebutting the notion that environmental regulations or renewable energy sources were leading factors. WaPo

According to the Wall Street Journal, Fitch Ratings said yesterday that a failure to raise the debt ceiling in a “timely manner” would spur a review of the U.S.’ credit rating.  Even if Congress manages to raise the debt ceiling before the end of September, Fitch says that brinkmanship over the debt limit could cause a downgrade of the country’s credit rating.  WSJ

According to the Wall Street Journal, the U.S. and South Korea completed talks on the Korea-U.S. free trade agreement without resolution. The U.S. administration sought to reduce its trade deficit in goods with South Korea, while South Korea argued that its deficit in services trade with the U.S. demonstrates the mutual gains from the existing agreement. WSJ

The Wall Street Journal reports that banks are taking on a record level of assets that will not mature or change rates for more than five years, signaling expectations of low interest rates for an extended period of time. While holding these far-dated assets may not be problematic now, banks may suffer losses if long-term interest rates rise substantially or consumers’ creditworthiness begins to deteriorate. WSJ

Richard Rubin of the Wall Street Journal writes that large U.S. companies are reaching out to employees and customers to promote the benefits of corporate tax reform. While firms and lawmakers have been unable to agree upon a comprehensive tax reform plan as of yet, they continue to highlight the benefits of a lower corporate tax rate, which could spur investment and create new jobs. WSJ

The Wall Street Journal reports that Senate Majority Leader Mitch McConnell says there is “zero chance” that the U.S. would fail to raise the debt ceiling this fall. While the Department of the Treasury says that its current funding will last until the end of September, further delays in raising the debt ceiling could raise interest rates and accelerate that timeline. WSJ

Eric Morath of the Wall Street Journal writes that new research from the Federal Reserve Bank of San Francisco attributes recent, sluggish wage growth to retiring “baby boomers”. The researchers argue that the departure of these older, higher-paid workers masks the healthy wage growth of workers who remain in the labor force. WSJ

The Financial Times reports that despite a lengthy global economic expansion, cross-border capital flows in 2016 were only one-third of their level in 2007. Even with low borrowing costs and a healthier global financial system, cross-border lending has fallen due to decreased risk appetite and a shift towards long-term foreign direct investment. FT