Good day. The Bank of Korea is the first major central bank in Asia to start withdrawing pandemic-era stimulus measures. The central bank raised its base rate today, after keeping it at a record low for 15 months and signaled that it would further dial back its easy-money policy amid an economic recovery. Later today, the European Central Bank is set to release the minutes of its July 21-22 meeting. The ECB last month signaled that it would support the eurozone economy by keeping interest rates low for longer. The ECB also reiterated its pledge to buy eurozone debt under an emergency bond-buying program through at least March 2022.

Now on to today's news and analysis.

Top News

Bank of Korea Raises Repo Rate After 15 Months

South Korea's central bank increased the benchmark seven-day repurchase rate by 25 basis points to 0.75% from its historically low 0.50% that had been in place since May 2020, and signaled that it would further scale back policy support amid an economic recovery.

Bank of Korea said it "will gradually adjust the degree of monetary policy accommodation as the Korean economy is expected to continue its sound growth" amid higher inflationary pressure. The bank's decision was largely viewed as aiming to curb surging household debt and cool property prices.

The bank said it expects the economy to expand 4% this year, unchanged from its upgraded outlook in May, and expects inflation to average 2.1%, higher than its earlier estimate of 1.8% for 2021.

U.S. Economy

Durable-Goods Orders Dropped Slightly in July

New orders for products meant to last at least three years decreased 0.1% to a seasonally adjusted $257.2 billion in July as compared with June. Economists surveyed by The Wall Street Journal had estimated a 0.5% decline.

Jobless Claims Likely Held Near Pandemic Low, Despite Delta Variant

Jobless claims likely held near a pandemic low last week, a sign that the job-market recovery remains on sound footing despite uncertainty surrounding the Delta variant of Covid-19.

Only a Fraction of Covid-19 Rental Assistance Has Been Distributed

Since December, Congress has appropriated $46.6 billion to help tenants who were behind on their rent. As of July 31, just $4.7 billion had been distributed to landlords and tenants, the Treasury said.

Key Developments Around the World

Delta Variant's Spread Clouds Outlook for Emerging-Market Debt

The spread of the highly contagious Delta variant of Covid-19 across Asia is weighing on emerging-market debt in the region. In recent months, investors have been demanding higher returns on bonds from Southeast Asian nations with relatively low vaccination rates.

El Salvador Gets Ready for a Risky Bitcoin Experiment

In less than two weeks, El Salvador will become the first country to adopt bitcoin as a national currency. No one knows what comes next. The impoverished nation is defying warnings against using volatile crypto asset as official currency alongside the U.S. dollar.

Taliban Takeover Is a Boon for Cash-Strapped Iran

Iran has restarted fuel exports to Afghanistan that were disrupted by fighting between the Taliban and forces under the now deposed Afghan government, providing critical dollars to the sanctions-crushed Iranian economy.

Financial Regulation Roundup

SEC's Gensler Taps Wall Street Critic Barbara Roper as Senior Adviser

Securities and Exchange Commission Chairman Gary Gensler named an outspoken investor-protection advocate, Barbara Roper, to his inner circle of advisers Wednesday, the latest sign he is gearing up to take a more adversarial approach toward Wall Street.

U.S. Probing Deutsche Bank's DWS Over Sustainability Claims

U.S. authorities are investigating Deutsche Bank AG's asset-management arm, DWS Group, after the firm's former head of sustainability said it overstated how much it used sustainable investing criteria to manage its assets.

Regulators Scrutinize a Robinhood Marketing Ploy: Free Shares

Online brokerage Robinhood Markets Inc. has for years given customers a free share of stock for opening an account or referring friends. The practice could soon cost the company a lot more money.

Forward Guidance

Thursday (all times ET)

Bank of Mexico releases August meeting minutes

7:30 a.m.: European Central Bank releases July 21-22 meeting minutes

8:30 a.m.: U.S. Commerce Department releases second estimate of second-quarter GDP

11 a.m.: European Central Bank's Schnabel speaks on virtual roundtable on ECB's strategy review organized by German Finance Ministry

Friday

Kansas City Fed hosts virtual Jackson Hole Economic Policy Symposium

8:30 a.m.: U.S. Commerce Department releases July personal income and outlays; U.S. Commerce Department releases July advance economic indicators report

10 a.m.: Fed's Powell speaks on economic outlook at virtual Jackson Hole Economic Policy Symposium; University of Michigan releases final August U.S. consumer sentiment

Research

Treasury Yields Still Haven't Priced In Fed's Inflation Framework

The bond market hasn't fully priced in the framework the Federal Reserve put in place a year ago to allow inflation to overshoot a 2% target to make up for past shortfalls, Capital Economics said in a research report released Wednesday. "While yields have risen over the past year as the economy has recovered, we suspect they still do not fully reflect the implications of the new policy framework, and the inflationary pressures more generally," the report said. The market will need to adjust, the report added, noting "we think that as it becomes apparent that above-target inflation is proving more persistent, long-dated U.S. yields may rise, as investors require higher compensation for inflation and/or discount a tighter real stance of monetary policy." Capital Economics predicted the 10-year Treasury yield will rise from its current 1.3% to 2.5% by the end of 2023.

-- Michael S. Derby

Basis Points

The intraparty fracas over a $3.5 trillion budget outline has left Democrats girding for more difficult negotiations this fall as progressives and centrists begin sparring on details of their broad healthcare, education and climate plan.

The U.S. Treasury Department has given humanitarian groups a green light to provide aid to Afghanistan, easing concerns that sanctions on the Taliban could prevent the country from getting the food and other supplies it needs to stem a growing economic crisis.

Belgium's business confidence indicator fell from 10.1 in July to 7.6 this month, data from the National Bank of Belgium showed. July's reading was the highest since the indicator in its current composition was introduced in 1980. (Dow Jones Newswires)

Brazil's 12-month inflation rate rose from mid-July through mid-August as bad weather pushed the cost of electricity and food higher, lifting consumer prices 0.89% between July 16 through August 15, the fastest pace for the measure in any August since 2002, and 9.3% from a year earlier, Brazil's Institute of Geography and Statistics said. (DJN)

Brazil recorded a current-account deficit of $1.6 billion in July, compared with a $2.8 billion surplus in June, the country's central bank said, adding that the 12-month current-account deficit reached $20.3 billion in July, from a revised $19.4 billion the month before. (DJN)

Mexico posted a $6.3 billion current account surplus in the second quarter, compared with a $757 million deficit a year earlier, the Bank of Mexico said. (DJN)

Mexico's economic recovery continued in the second quarter, as gains in services helped expand gross domestic product by a seasonally adjusted 1.5% from the previous quarter, the National Statistics Institute said. The increase was unchanged from a preliminary estimate at the end of July, while first-quarter GDP growth was revised from 0.8% to 1.1%. (DJN)

Consumer sentiment in Germany is expected to weaken in September as a rise in Covid-19 cases and inflation sour households' mood, according to data from GfK. The market-research group forecasts consumer sentiment will decline to minus 1.2 points in September from minus 0.4 points in August. Economists polled by The Wall Street Journal are projecting a smaller drop to minus 0.8 points. (DJN)

U.K. car manufacturing fell 38% in July, the first drop since February, as global chip shortages, the 'pingdemic' and summer shutdowns hurt production, an industry body said. (DJN)

(END) Dow Jones Newswires

08-26-21 0847ET