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The U.S. and China may be—maybe—stepping back from the brink, President Trump wants the Fed to cut interest rates to at least zero, and the European Central Bank is expected to go deeper into negative-rate territory today. Let’s dive into the day’s key economic news.
Let’s Make a Deal
China is looking to narrow the scope of its negotiations with the U.S. to only trade matters, putting thornier national-security issues on a separate track in a bid to break deadlocked talks with the U.S., Lingling Wei and Chao Deng report.
- Chinese officials are hoping that such an approach would help both sides resolve some immediate issues and offer a path out of the current impasse.
- The shift comes as President Trump on Wednesday delayed tariffs on some Chinese imports, an apparent goodwill gesture.
- U.S.-China talks broke down in May, and have been further complicated by non-trade-related matters including U.S. arms sales to Taiwan and Chinese accusations of American involvement in Hong Kong’s protests.
- In preparation for a new round of talks scheduled to take place in Washington early next month, Chinese negotiators are making plans to boost purchases of U.S. agricultural products, giving American companies greater access to China’s market and bolstering intellectual-property protections.
WHAT TO WATCH
The European Central Bank releases a policy statement at 7:45 a.m. ET, and ECB President Mario Draghi holds a press conference at 8:30 a.m. ET. Economists broadly expect the ECB to reduce its key deposit rate but expectations for a bond-purchase program have been eroding.
U.S. consumer prices in August are expected to rise 0.1% from a month earlier and 1.8% from a year earlier. Excluding food and energy, prices are expected to climb 0.2% and 2.3%. (8:30 a.m. ET)
U.S. jobless claims are expected to fall to 215,000 from 217,000 a week earlier. (8:30 a.m. ET)
The federal budget deficit for the first 11 months of fiscal year 2019 is expected to reach $1.067 trillion, the Congressional Budget Office forecasts. (2 p.m. ET)
Treasury Secretary Steven Mnuchin participates in a moderated discussion at the DealBook DC Strategy Forum at 5 p.m. ET.
TOP STORIES
Money for Nothing
President Trump renewed his call for lower interest rates and his criticism of the Federal Reserve, pressing for the central bank to cut short-term rates to “ZERO, or less,” Kate Davidson and Catherine Lucey report.
- For weeks, Mr. Trump has pushed for lower rates to help cushion the economy against fears of a broader global slowdown. On Wednesday, he introduced a different argument, saying they would allow the U.S. to lock in lower interest rates for a longer period of time.
- Some economists, including one of Mr. Trump’s former advisers, warned that his push for lower short-term interest rates might make it harder to lock in lower long-term rates, because it could send up long-term Treasury yields.
- Debt-servicing costs are one of the fastest growing drivers of federal spending: Interest payments have increased nearly 10% so far this fiscal year, totaling $497.2 billion through July, roughly $1.6 billion a day.
The Gig is Up
California lawmakers passed landmark employment legislation that challenges the business model of “gig-economy” companies. The legislation, which intends to force companies to reclassify certain contract workers as employees, is considered a serious threat to Uber and Lyft, already losing billions of dollars a year combined, as their business models have relied on flexible labor and minimal worker costs. Under the bill, the drivers could be entitled to benefits that include a minimum hourly wage and workers’ compensation. Uber said it didn’t plan to change its practices in response to the measure; Lyft in a message to its drivers said they “may soon be required to drive specific shifts, stick to specific areas, and drive for only a single platform,” Alejandro Lazo and Sebastian Herrera report.
Retail Apocalypse Now
The pace of retail bankruptcies and store closures in the U.S. has accelerated so far this year. More retail bankruptcy filings are expected in the second half of the year, and bricks-and-mortar stores will continue to close at a higher rate, according to a report released Wednesday by professional services firm BDO USA LLP. Talk of a retail apocalypse has echoed throughout the industry for years as shoppers abandon the nation’s malls and flock to online sellers, Aisha Al-Muslim reports.
Brexit: What Could Go Wrong?
The British government described potential shortages of fuel and medicines, long traffic jams at ports and rising food prices in a report outlining its “reasonable worst-case scenario” if the U.K. left the European Union without a deal to smooth its exit. “Protests and counter protests will take place across the U.K. and may absorb significant police resource,” the document said. The U.K. is due to leave the EU on Oct. 31, but that date now looks uncertain after a majority of lawmakers voted to pass a law forcing the government to request a delay if there’s no exit deal, Max Colchester and Stephen Fidler report.
I Think I’m Turning Japanese
Japan is opening up. But not too much. One of the world’s most immigration-resistant countries is trying to attract workers needed for jobs ranging from apple picking to airport baggage handling. To do that, Japan is imposing strict rules in an effort to head off the kind of social and political turmoil that migration has brought to the U.S. and Europe. In many cases, foreign workers in Japan can’t bring family members and can’t stay longer than five years. Most programs require Japanese-language proficiency. Only in the most labor-starved industries can foreigners secure a path to permanent residency—and the government can cut off the flow if the shortage eases, Alastair Gale and River Davis report.
WHAT ELSE WE’RE READING
Beijing’s hostility toward the U.S. started long before the trade war. “Since Xi Jinping came to power in 2012, China has been a far less welcoming place for foreigners, especially foreign businesses, than it claims to be. Meanwhile, amid countless examples of unacceptable behavior by Chinese authorities inside the country’s borders, the Chinese government’s propaganda apparatus is operating at full steam in claiming that Chinese citizens and companies are being treated unfairly abroad. The new milieu in bilateral relations also stems, in part, from the United States’ long overdue reaction to the inequitable ways in which China treats U.S. persons and companies at home and overseas,” Austin Lowe writes in Foreign Policy.
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