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Illustration: Aïda Amer/Axios
Today's interest rates decision in the face of global economic turmoil but strong U.S. data is going to be dicey enough — but Fed chair Jerome Powell and the FOMC may also need to announce a comprehensive bond-buying program on top of that.
Driving the news: Following an emergency $53 billion repurchase agreement operation on Tuesday, the New York Fed announced it would hold another repo auction today for as much as $75 billion.
Why it matters: Market participants worry this is a sign there's a widespread lack of liquidity in the repo market, which is used by large, systemically important financial institutions to quickly borrow cash in exchange for securities like U.S. Treasuries.
The big picture: The Fed could indicate it plans to stabilize the level of reserves at today's FOMC meeting, meaning it increases its bond purchases, a process that "will look, walk and talk like quantitative easing," says Gennadiy Goldberg, senior U.S. rates strategist at TD Securities, a primary dealer that does business directly with the Fed.
What they're saying: Tuesday was the fourth time in the past year the repo rate has jumped to abnormally high levels, following episodes in December, April and on Monday.
What's next: Analysts at Bank of America Merrill Lynch see "substantial risks" that the Fed announces outright bond purchases to stabilize the repo market. That could mean $150 billion of additional Treasury purchases, bringing the total to $400 billion in the next year.
If Powell cuts U.S. overnight interest rates today, not only will he be fighting hawkish members of his rate-setting committee, but the supposedly data-dependent Fed will be fighting the data as well.
What's happening: Geopolitical tensions in the Middle East are rising and economic readings from China and the eurozone have continued to deteriorate since the Fed's last meeting — but U.S. data has been strong and even potentially inflationary.
Now what? While most analysts and money managers say they still expect a rate cut, Fed fund futures prices show the market is growing less certain.
U.S. industrial production jumped by the most in a year last month, rising by 0.6% and showing that perhaps the trade war isn't having as dire an impact on the U.S. economy as feared.
The big picture: The U.S. manufacturing sector remains in a recession, largely as a result of the U.S-China trade war, but Tuesday's numbers show that it has not yet fallen off a cliff.
Between the lines: The pickup in August's data was due almost entirely to the mining sector, which rose 1.4%. The GM strike could complicate things for the September reading, as it could idle factories and impact the overall reading.
The labor market is so strong that not only are millennial and Gen Z employees ghosting their employers as they leave jobs, but they're also ghosting new jobs because they've gotten a better offer, CNN reports.
What's happening: "People are getting multiple offers in a market like today, and they are not showing up on their first day of work," Paul McDonald, senior executive director at staffing firm Robert Half, tells CNN's Kathryn Vasel.
By the numbers: Research from recruitment firm Randstad US found that 66% of U.S. managers have had an experience with candidates who accepted a job offer and then backed out or simply disappear before their start date. The practice was dubbed “ghosting” after gaining notoriety in online dating, CNBC notes.
My thought bubble: Kids these days have no respect.
Major foreign investors added to their holdings of U.S. stocks but slightly cut their Treasury bonds in July, data from the Treasury department released Tuesday shows.
Of note: China reduced its share in July and foreign holders overall cut their Treasury holdings to $6.63 trillion.
Worth watching: Japan increased its holdings of U.S. Treasuries to $1.13 trillion, a 3-year high, maintaining its spot as the largest single foreign holder of U.S. government debt for a second straight month.
Data also showed that foreigners purchased a net $24.26 billion in U.S. stocks, adding to their American equity exposure for a second straight month. Prior to June, foreign investors had sold U.S. stocks for 13 months in a row.