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Richard H. Clarida, the Federal Reserve vice chair, said in a speech on Monday that the central bank was in the middle of a “robust evolution” that means it will no longer raise interest rates to cool off economic growth based solely on the level of the unemployment rate.
Low joblessness by itself “will not, under our new framework, be a sufficient trigger for policy action,” Mr. Clarida said, noting that other considerations — like financial stability concerns or evidence that inflation is likely to run hot — could still prompt rate hikes.
“This is a robust evolution in the Federal Reserve’s policy framework,” he said, adding that economic models that guess at the labor market’s limits “can be and have been wrong.”
Fed Chair Jerome H. Powell announced last week that he and his colleagues were ending a year-and-a-half long review of their monetary policy strategy, and the Fed updated a guiding document that sets out its long-run policy framework. Among the most important changes, the Fed said that rather than worrying about “deviations” from full employment, the central bank would now be concerned about “shortfalls.”
While that might seem like semantics, it indicated a significant shift: The Fed is formally ditching its long-held practice of lifting borrowing costs to cool down the economy and fend off future inflation when the unemployment rate drops below a certain level, the one that economists use to signify “full employment.”
Officials have become increasingly modest about their ability to guess where that line in the sand might be, after joblessness fell to 50-year-lows but inflation stagnated below the central bank’s 2 percent goal. The move sets the stage for long periods of very low interest rates, and codifies a transition that has taken hold over the last two years.
The Fed also announced that it would pursue a strategy to hit 2 percent inflation as an average over time. That’s a change from the Fed’s old approach, which was always trying to return inflation to 2 percent.
Mr. Clarida offered no exact details in his prepared remarks about how high above 2 percent the Fed would allow prices to run. He hinted that the Fed would update its economic forecasts — which regularly predict inflation stopping at exactly 2 percent — before the end of the year.
Stocks on Wall Street wavered Monday, as the S&P 500 closed out its best month since April. Through Friday, the index was up more than 7 percent in August — a month during which the index climbed to a record.
On Monday, stocks were flat in early trading.
Shares of Tesla and Apple rose in early trading, as their stock splits took effect. The stock splits will make it less expensive to own individual stocks in the companies, putting them in reach of retail investors. Tesla, which announced a 5-for-1 split earlier this month, closed at $2,213.40 on Friday. Apple, which is doing a 4-for-1 split, closed Friday at $499.23.
European markets rose on Monday, with indexes in Germany and France up about 1 percent. The markets in Britain were closed for a public holiday.
Asian markets were mixed on Monday, with Japan’s Nikkei ending the day up more than 1 percent, while other benchmark indexes were in negative territory. Japanese stocks jumped after Berkshire Hathaway, which is owned by the legendary investor Warren Buffett, bought stakes in five of Japan’s biggest trading companies, including Mitsubishi and Mitsui.
Investors were encouraged by the Federal Reserve’s move last week to relax its approach to inflation. The announcement by the Fed chair, Jerome H. Powell, at the annual Jackson Hole summit signaled that the central bank would keep interest rates low while focusing on fostering a strong labor market.
But coronavirus cases around the world continued to increase, with the United States on Sunday surpassing six million confirmed infections, almost a quarter of the 25 million global recorded cases.
For months, airlines have been waiving change fees to encourage hesitant travelers to fly again. Now, United Airlines is doing away with the charges altogether, at least for flights within the United States.
In an email to customers on Sunday, United said it was permanently dropping change fees, effective immediately, for most customers flying domestically. The change would apply to all standard economy and premium seats, but not to low-price basic economy seats that come with additional restrictions.
“When we hear from customers about where we can improve, getting rid of this fee is often the top request,” United’s chief executive, Scott Kirby, said in a recorded message to customers. Southwest Airlines also does not charge change fees.
United said it would continue to waive change fees through at least the end of the year for international travel and for passengers holding basic economy tickets. And, starting in 2021, every United customer will be allowed to fly standby for free on an earlier flight on their scheduled day of travel if a seat is available, the airline said.
The announcement comes as airlines prepare themselves for a recovery that is expected to take years to unfold. Air travel is currently down about 70 percent compared to last year, according to federal data, and carriers have been doing all that they can to stand out from one another and attract what few customers remain, from waiving fees to touting cleaning regimens and stringent mask requirements.
💰 Wall Street is eager for Zoom to report earnings after the market closes today. Last quarter will be a tough act to follow for the videoconferencing company: One analyst called it the “the greatest quarter in enterprise software history.” Investors also want to see how the pandemic is affecting Campbell Soup and the workplace messaging servicing Slack, which both report earnings on Thursday.
🏛 In a series of speeches, Fed officials will explain the implications of the central bank’s momentous announcement last week that it will tolerate higher inflation to foster a stronger labor market. Richard Clarida, the Fed’s vice chair, speaks today; Lael Brainard, a Fed governor, speaks on Tuesday (followed by a panel discussion featuring the former Fed chairs Ben Bernanke and Janet Yellen); and the New York Fed president John Williams speaks on Wednesday.
📈 The biggest economic news is due on Friday, with the release of the monthly U.S. jobs report. Economists expect that the U.S. economy added 1.4 million jobs in August, and that the unemployment rate dropped below 10 percent. Both would be big improvements, but far from restoring all the jobs lost during the pandemic. Similar trends are playing out in the European Union, which releases its latest jobs numbers on Tuesday, and in Canada, which reports on Friday.
Theater executives are betting that a Covid-19 vaccine will arrive and that studios will soon return to their decades-old system of releasing movies. “There is significant pent-up demand” for the theater experience, one executive said.
“The New Mutants” is the most expensive Hollywood film to be released since March and is trial balloon for whether people are ready for theatrical releases. Its reception suggests that the road ahead for Hollywood will be anything but easy, Brooks Barnes reports.
“It felt odd,” Shawn Mitchell, 25, said about returning to the movies as he left Regal Sunset Station on Thursday. “It was harder to just zone out during the movie. Now you’re more aware of what’s happening around you in the theater.”
Was that the sound of someone shaking kernels in the bottom of a popcorn bucket — or a dry cough? (Whew, popcorn.) Were any workers monitoring the theater as the movie played and reminding patrons that they had to wear masks if they weren’t eating or drinking? (Not that I ever saw.) Is that woman sitting nearby seriously going to watch the entire film with her mask dangling from one ear? (Yup.)
By the end of the 98-minute movie, many of the attendees were mask free, their popcorn long since munched. At one point, my mind wandered away from the mutants trying to escape a marauding computer-generated bear. I couldn’t stop thinking about a trailer for a coming disaster movie that had played before the film in which a voice had instructed: “Seek shelter immediately! Seek shelter immediately!” I comforted myself by tightening my own mask and using some Clorox wipes to make a little pillow for my head on the reclining seat.
But no one else seemed concerned. “I’m young and healthy, so I’m not really worried about it,” said a mask-free Malary Marshall, 24, before the movie started.
When the pandemic hit, the task of saving the economy was an opportunity for Treasury Secretary Steven Mnuchin to transform himself from an unremarkable Treasury secretary into a national hero.
Mr. Mnuchin, a former banker and film financier, sought advice from his former Goldman Sachs colleagues, a cable-TV host, a Hollywood superagent, a disgraced Wall Street tycoon and Newt Gingrich. Unburdened by his own ideology and with a detail-disoriented boss, Mr. Mnuchin worked with Democrats to devise and pass the landmark stimulus bill.
Afterward, President Trump hailed Mr. Mnuchin as a “great” Treasury secretary and “fantastic guy.”
The acclaim didn’t last.
Mr. Mnuchin is the rare cabinet secretary who does not seem to have strong political beliefs. He offers opinions when asked, even when he knows Mr. Trump will disagree, and then executes whatever the president decides. He appears to have little stake in particular outcomes. Does he agree or disagree with Mr. Trump’s stance on a given issue? In Mr. Mnuchin’s view, that is irrelevant. He is there to follow orders.
Mr. Mnuchin is a self-proclaimed micromanager. Career members of the tax policy staff rarely met with Treasury secretaries in previous administrations; they are regularly called to brief Mr. Mnuchin. On March 2, as financial markets were in upheaval, Mr. Mnuchin held a one-hour meeting about the “grain glitch,” a technical wrinkle in the 2017 tax law.
Until the second week of March, Mr. Mnuchin, like most people in the Trump administration, regarded the coronavirus as a minor threat to the U.S. economy. But then, as investors panicked, he shifted into crisis mode.
Companies can stop withholding payroll taxes from employees’ paychecks beginning Sept 1. But those employees would still have to pay the tax through larger withholdings — and less take-home pay — by April. That guidance, released by the Treasury Department in coordination with the Internal Revenue Service on Friday evening, said that “the affected taxpayer may make arrangements to otherwise collect the total applicable taxes from the employee,” suggesting companies can hold workers liable for the tax even if they leave the company.
The Bank of England’s new head, Andrew Bailey, said Friday that his central bank was “not out of firepower,” noting that it could cut interest rates below zero if necessary. Mr. Bailey underlined that he and his colleagues saw negative rates as a possible tool to stoke economic growth at a time when interest rates were already at very low levels across advanced economies.
Investigators have charged big spenders with cheating the Paycheck Protection Program for small businesses. But more fraud lies below the surface, and it will be harder to find. The Justice Department has made at least 41 criminal complaints in federal court against nearly 60 people, who collectively took $62 million from the P.P.P. by using what law enforcement officials said were forged documents, stolen identities and false certifications.