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Fed still in crisis-fighting mode as recovery appears to moderate

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Fed still in crisis-fighting mode as recovery appears to moderate 1

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) – The Federal Reserve on Wednesday left its key overnight interest rate near zero and made no change to its monthly bond purchases, pledging again to keep those economic pillars in place until there is a full rebound from the pandemic-triggered recession.

That hasn’t happened, and in the statement released after the end of their latest two-day meeting, U.S. central bank policymakers flagged a worrying slowdown in the pace of the recovery.

In a news conference after the meeting, Fed Chair Jerome Powell noted the economy’s resilience, with major industries like housing, financial services and others adapting to the coronavirus pandemic with new technologies and strategies.

But the economy also lost jobs in December, a large chunk of the workforce will likely remain sidelined until the health crisis eases, and Powell said the Fed’s rescue effort will not end until those Americans are working again.

“You cannot adapt motels, sports venues, movie theaters, restaurants, bars,” to function during a pandemic, Powell said. “That is millions and millions of people. You are just going to have to defeat the pandemic … We have not done it yet. We need to finish the job. It is within our power to do that as a country this year.”

His language marked a shift in the Fed’s rhetoric to both take full account of the potential boost to the economy that could come through widespread vaccinations and immunity, and to acknowledge the long slog the country faces on the road back to full employment.

Coronavirus vaccines were just being approved when the Fed held its last policy meeting in December. About 25 million doses of vaccine have been administered since then – Powell said he had taken the first of two shots – and the Biden administration is moving to accelerate distribution.

The sense of an approaching endgame to the crisis prompted the Fed to remove a reference in its statement to “medium term” risks from the pandemic, the most tangible incorporation so far of the impact of the vaccine into the central bank’s thinking.

“The risks are in the near term, frankly,” as the U.S. vaccine program ramps up and new disease variants threaten to spread more quickly, Powell told reporters. “There is good evidence to support a stronger economy in the second half of this year.”

The Fed’s decision to leave its benchmark overnight interest rate in a target range of 0 to 0.25% and to keep buying at least $80 billion of Treasury bonds and $40 billion of mortgage-backed securities each month was unanimous.

‘ACCOMMODATIVE’ STANCE

The Fed’s worries about the pace of the recovery put even more weight behind its pledge to keep monetary policy in an “accommodative” stance for what may be months or even years to come.

While largely hailed as a new and welcome commitment to the country’s labor force, the promise of cheap and plentiful credit has also sparked criticism that Fed policy has inflated asset prices, and stock markets in particular, to unsustainable levels.

Powell said on Wednesday that efforts by a central bank to “lean against” potential asset bubbles could do more harm than good.

He specifically declined to comment on the soaring share price of video game retailer GameStop Corp, which has surged in recent days as the result of a battle between retail investors and professional investors shorting the stock.

The Fed chief stressed that the central bank prefers to use macroprudential tools, including stress tests and liquidity levels, to address financial stability risks, and did not think those risks were presently outsized.

“We don’t really think we’d be successful in every case in picking the exact right time to intervene in markets,” Powell said. “We monitor financial conditions very broadly, and while we don’t have jurisdiction … over many areas in the non-bank sector, other agencies do.”

‘NOTHING MORE IMPORTANT’

The United States lost jobs in December, and many indicators of hiring and spending have stalled since the surge in coronavirus infections began in the fall.

The Fed said again that it would leave its bond-buying program untouched until there has been “substantial further progress” towards recovery and would keep the federal funds rate near zero until inflation hits its 2% target and is expected to stay there.

U.S. stocks fell further after the release of the Fed statement and Powell’s comments, with the benchmark S&P 500 index closing down about 2.6%, its biggest one-day percentage drop in three months.

Yields on U.S. Treasury securities remained lower on the day, and the dollar ticked higher against a basket of trading partner currencies.

“Both dials of Fed policy, forward guidance on rates and asset purchases, will be left on an ultra-dovish setting for ‘some time,'” said JP Morgan economist Michael Feroli. “It’s a long way to taper-ary,” he said of any Fed decision to trim bond purchases.

(Reporting by Howard Schneider; Additional reporting by Stephen Culp and Jonnelle Marte in New York and Ann Saphir in San Francisco; Editing by Dan Burns and Paul Simao)

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Bitcoin, ether hit fresh highs

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Bitcoin, ether hit fresh highs 2

SINGAPORE (Reuters) – Bitcoin hit a fresh high in Asian trading on Saturday, extending a two-month rally that saw its market capitalisation cross $1 trillion a day earlier.

The world’s most popular cryptocurrency rose to an record $56,620, taking its weekly gain to 18%. It has surged more than 92% this year.

Bitcoin’s gains have been fuelled by evidence it is gaining acceptance among mainstream investors and companies, such as Tesla Inc, Mastercard Inc and BNY Mellon.

Ether, the second-largest cryptocurrency by market capitalization and daily volume, hit a record $2,040.62, for a weekly gain of about 12%.

Ether is the digital currency or token that facilitates transactions on the ethereum blockchain. In the crypto world, the terms ether and ethereum have become interchangeable.

Ether futures contracts launched on derivatives exchange CME earlier this month.

(Reporting by Vidya Ranganathan; Editing by William Mallard)

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World Bank pushing for standard vaccine contracts, more disclosure from makers

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World Bank pushing for standard vaccine contracts, more disclosure from makers 3

By Andrea Shalal

WASHINGTON (Reuters) – The World Bank is working to standardize COVID-19 vaccine contracts that countries are signing with drug makers, and is pushing manufacturers to be more open about where doses are headed, as it races to get more vaccines to poor countries, the bank’s president said on Friday.

World Bank President David Malpass told Reuters he expected the bank’s board to have approved $1.6 billion in vaccine funding for 12 countries, including the Philippines, Bangladesh, Tunisia and Ethiopia, by the end of March, with 30 more to follow shortly thereafter.

The bank is working with local governments to identify and fill gaps in distribution capacity, after they purchase vaccines under a $12 billion World Bank program, and also to standardize the contracts they are signing with manufacturers, he said.

The bank’s International Finance Corp, its private financing arm, has $4 billion to invest in expanding existing production plants or building new ones, including in developed countries, but needs more data on where current production is headed, he said.

“We are eager to be investing in new capacity, but it’s hard to do because you don’t know how much of the existing capacity is already committed to the various off-takers,” Malpass said in an interview with Reuters. New or expanded plants could be used to produce other types of vaccinations in the future, he said.

The bank’s funds could be used to expand plants in advanced economies, if the production was earmarked for developing nations, he said.

Malpass welcomed Friday’s pledge by the Group of Seven rich countries to intensify cooperation on the pandemic, saying it could help jump-start deliveries of vaccines to poorer countries, which are lagging far behind rich countries in getting shots in arms.

Data compiled by Our World In Data, a scientific online publication, showed Israel was leading the world in COVID-19 vaccinations, with nearly 82 of 100 people vaccinated, while India and Bangladesh reported less than one person per 100, Many African countries have not started at all.

Malpass said he was heartened by news about new vaccines coming down the road, and about Pfizer Inc and BioNTech SE seeking permission to store their vaccine at higher temperatures, which would ease another obstacle to deliveries in lower-income countries.

(Reporting by Andrea Shalal; Editing by Heather Timmons and Leslie Adler)

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Google to evaluate executive performance on diversity, inclusion

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Google to evaluate executive performance on diversity, inclusion 4

By Paresh Dave

(Reuters) – Alphabet Inc’s Google will evaluate the performance of its vice presidents and above on team diversity and inclusion starting this year, the company said on Friday in one of several responses to concerns about its treatment of a Black scientist.

Timnit Gebru, co-leader of Google’s ethical artificial intelligence research team, said in December that Google abruptly fired her after she criticized its diversity efforts and threatened to resign.

Alphabet and Google Chief Executive Sundar Pichai ordered a review of the situation. While Google declined to share specific findings, the company announced on Friday it will engage human resources specialists during sensitive employee departures.

Pichai in June said that by 2025, Google aims to have 30% more of its leaders come from underrepresented groups, with a focus on Black, Latinx and Native American leaders in the United States and female technical leaders globally. About 96% of Google’s U.S. leaders at the time were white or Asian, and 73% globally were men.

As a result of the investigation, the company also expanded a commitment announced in June to devote more resources to retaining and promoting existing employees, including by expanding a team addressing disputes among workers and their managers.

The diversity component of executive performance reviews was not previously announced, and the company did not immediately share details about what would be measured and how pay would be affected.

Alphabet for years had rejected proposals from shareholders and employees to set diversity goals and tie executive pay to them.

Irene Knapp, a former Google employee who advocated for one such proposal at a 2018 shareholder meeting, said on Friday, “I am pleased that they met our demand from 2018, which was a bare minimum that should have been easy to do immediately.”

Evaluating managers on diversity goals is becoming more commonplace. McDonald’s Corp on Thursday tied executive bonuses to diversity.

(Reporting by Paresh Dave; Editing by Cynthia Osterman)

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