Federal Reserve Bank of St. Louis leader James Bullard said higher inflation is coming to the U.S. economy, but didn’t indicate that would be a worrisome development.

The veteran central bank official said a host of forces were joining to put upward pressure on today’s weak price growth, in a virtual appearance Friday. He didn’t say how high he expects inflation to go and whether the shift would require a monetary policy response to keep the increase contained.

The Federal Reserve issued new guidance to banks Friday in an effort to improve access to new business loans through its $600 billion Main Street Lending Program.

The Fed is relying on banks to underwrite loans to qualified small and midsize businesses under the novel effort to reach firms that aren’t large enough to access corporate funding markets, which the central bank has also backstopped.

The...

Large states in the Northeast and West logged some of the highest unemployment rates in the nation in August, while many of their Southern and Midwestern neighbors saw lower rates of joblessness despite significant coronavirus outbreaks over the summer.

The jobless rate in more than half of states was below the national average of 8.4% in August, according to a Labor Department report that provides details on the job market in all 50 states. Many of those states—including Arizona, South Carolina and Texas—recorded a surge...

Atlanta Fed leader Raphael Bostic said Friday he’s optimistic that the economics profession can do better in addressing racial inequality.

With persistent and large wealth gaps between white and black households, Mr. Bostic said the economics profession must change so that it can better understand why these disparities exist and how they can be remedied.

“The...

Can words take the place of actions? The Federal Reserve hopes so. On Wednesday it issued a policy statement promising to get inflation above 2%. In their accompanying projections, officials indicated that would mean keeping interest rates near zero at least until 2024 and until unemployment falls to 4%.

“This very strong forward guidance, very powerful forward guidance that we have announced today will provide strong support for the economy,” Chairman Jerome Powell told reporters. To drive the point home, he used the word “powerful” 10 times in the press conference.

This forward guidance was a logical consequence of the central bank’s announcement last month that it was now targeting average inflation of 2%. Since inflation is now below 2%, that will mean getting it above 2% and keeping it there for some time to come.

For forward guidance—words, as opposed to policy actions—to work, it has to persuade investors that the Fed will keep interest rates at...

WASHINGTON—The Federal Reserve pledged to support the economic recovery by setting a higher bar to raise interest rates and by signaling it expected to hold rates near zero for at least three more years.

In new projections released Wednesday after a two-day policy meeting, all 17 officials who participated said they expect to keep rates near zero at least through next year, and 13 projected rates would stay there through 2023.

The...

The Federal Reserve releases a statement at the conclusion of each of its policy-setting meetings, outlining the central bank’s economic outlook and the actions it plans to take. Fed watchers closely parse changes between statements to see how the Fed’s views are evolving. This tool compares the latest statement with its immediate predecessor and highlights […]

New Federal Reserve guidance over the future path of rates fell short of what was needed, Minneapolis Fed leader Neel Kashkari said Friday.

“I strongly support” the new guidance, Mr. Kashkari said explaining his vote. But he also said, “while I believe the statement is a positive step forward...I would have preferred the Committee make a stronger commitment to not raising rates until we were certain to have achieved our dual mandate objectives.”

The central banker was one of two regional bank presidents who voted against the outcome of the rate-setting Federal Open Market Committee on Wednesday. Then, officials held their short-term rate target steady and said that they would keep their short-term target rate very low until the job market had reached its maximum sustainable level, and inflation had risen to 2% and was on a path to moderately overshoot that goal.

The FOMC statement said Mr. Kashkari instead preferred that the Fed would pledge to hold...

WASHINGTON—The Federal Reserve will analyze large banks’ ability to withstand two coronavirus-related recession scenarios as part of a second round of stress tests later this year, the central bank said Thursday.

Unlike an earlier round of stress tests this year, the Fed will release the results of the tests for each bank, rather than providing aggregate results for the group. That means investors and the public will have a better understanding of the health of each of the 33 lenders when it comes to lending through the downturn.

The Federal Reserve Bank of New York said its second-in-command, Michael Strine, will retire early next year, capping a period of change in the bank’s leadership.

Mr. Strine, 54 years old, is the New York Fed’s chief operating officer and first vice president and serves as an alternate member of the interest-rate-setting Federal Open Market Committee. The bank said he would step down Feb. 28, at the end of his five-year term. The bank also said he would stop day-to-day work at the bank in early November to facilitate a smooth...

Good day. Lawmakers clashed at a congressional hearing over whether the Federal Reserve has done enough to backstop municipal finances as state and local governments face historic budget shortfalls. Meanwhile, the Fed revealed details of a second round of stress tests for banks to be held later this year, while the New York Fed said its second-in-command, Michael Strine, will leave next year when his term ends. Elsewhere, the Bank of Japan and the Bank of England were among several institutions that held monetary policy steady yesterday. 

 Now on to today’s news and analysis.

By delivering new forward guidance when Federal Reserve officials were also marking up their near-term growth outlook, the central bank avoided a potential communications mishap on Wednesday.

In 2011 and 2012, the Fed strengthened its forward guidance regarding the path of interest rates at times when its economic outlook was also growing darker. This carried the risk of communicating that the economic outlook had grown so awful that the Fed was being forced to provide more stimulus, something that could hinder rather than...

Federal Reserve forecasts released Wednesday show officials have no worry inflation will take off at any point over the next few years despite hoping price pressures will rise from low levels. But new research from the Council on Foreign Relations warns that data on bank reserves points to higher inflation. “We know that when our balance-sheet-to-reserves gap measure began rising in 2010 it took eight months for inflation to rise 1 percentage point from the time it subsequently bottomed out,” Benn Steil and Benjamin Della Rocca write. “If inflation should rebound at the same pace now, we are looking at 2% Core PCE inflation,...

Bank of Canada Senior Deputy Gov. Carolyn Wilkins will leave her position as the central bank’s second-in-command when her seven-year term expires next spring, the bank’s board of directors said Thursday.

The board said it would launch a search process to select the next senior deputy governor after Ms. Wilkins informed it that she doesn’t intend to seek a second term. Ms. Wilkins, 56 years old, has been in the role since May 2014, appearing alongside former governor Stephen Poloz and, more recently, Gov. Tiff Macklem, to...

WASHINGTON—About one million homeowners have fallen through the safety net Congress set up early in the coronavirus pandemic to protect borrowers from losing their homes, according to industry data, potentially leaving them vulnerable to foreclosure and eviction.

Homeowners with federally guaranteed mortgages can skip monthly payments for up to a year without penalty and make them up later. They must call their mortgage company to ask for the relief, known as forbearance, though they aren’t required to prove hardship.

LONDON—The Bank of England kept policy on hold and signaled that it is prepared to take further action to support the U.K. economy if rising coronavirus cases undermine recovery.

The statement highlights how central banks are alert for any sign that a rebound this summer is losing steam as public-health worries re-emerge. Governments in some parts of Europe are imposing new restrictions on social interactions aimed at slowing resurgent coronavirus infections while avoiding a repeat of costly nationwide lockdowns imposed in...

New applications for unemployment benefits held steady last week, reflecting that layoffs remain historically high amid the pandemic despite summer hiring.

Weekly initial claims for jobless benefits fell by 33,000 to a seasonally adjusted 860,000 in the week ended Sept. 12, the Labor Department said Thursday. The number of people collecting unemployment benefits through regular state programs, which cover most workers, decreased by 916,000 to about 12.6 million for the week ended Sept. 5.

The coronavirus pandemic and related shutdowns caused both unemployment applications and payments to rise to the highest levels on record back to the 1960s this spring. While both measures trended down from those peaks this summer, the figures remain above any recorded before this year.

“Unemployment is down from its peak, but I remain concerned,” said Bradley Hardy, an economist at American University in Washington, D.C. He added that part-time workers and those...

Federal Reserve Chairman Jerome Powell discussed the central bank’s goal of achieving inflation moderately above 2%, keeping interest rates near zero for some time to come, and an uncertain economic outlook despite an improving jobs market, during a press conference following the conclusion of the Fed’s policy meeting Wednesday. Here is a transcript, lightly edited for clarity and length.

JEROME POWELL: Good afternoon. At the Federal Reserve we are strongly committed to achieving the monetary policy goals that Congress has...

Can words take the place of actions? The Federal Reserve hopes so. On Wednesday it issued a policy statement promising to get inflation above 2%. In their accompanying projections, officials indicated that would mean keeping interest rates near zero at least until 2024 and until unemployment falls to 4%.

“This very strong forward guidance, very powerful forward guidance that we have announced today will provide strong support for the economy,” Chairman Jerome Powell told reporters. To drive the point home, he used the word...

Federal Reserve Chairman Jerome Powell said Wednesday the central bank’s new way of conveying guidance about the future of interest rate policy is powerful.

But right out of the gate, two of his colleagues were somewhat at odds with how the central bank consensus thinks about the matter.

On Wednesday, the rate-setting Federal Open Market...

Indonesia’s central bank kept its benchmark rate unchanged Thursday to safeguard the stability of the rupiah.

Bank Indonesia kept the seven-day reverse repo rate unchanged at 4.00%. Nine economists polled by The Wall Street Journal had unanimously expected the central bank to hold off from easing in September to ensure monetary stability.

Bank...

The Bank of Japan upgraded its assessment of Japan’s economy on Thursday, saying it has started to pick up after a difficult period caused by the coronavirus pandemic.

The BOJ had earlier said the economy was in an extremely severe situation. On Thursday, it said the economy “has started to pick up with economic activity resuming gradually,” although conditions remain severe owing to the effects of the virus.

The...

SÃO PAULO—Brazil’s central bank left its benchmark Selic lending rate unchanged at a record low Wednesday amid concern about the government’s fiscal situation and as the country’s economy recovers more quickly than expected from the coronavirus crisis.

The policy committee left the Selic at 2%, the first time in 10 meetings the bank didn’t cut the rate. The central bank maintained its guidance that there is little, if any, space for more cuts to the Selic and that it won’t reduce monetary stimulus unless inflation starts to...

Federal Reserve Chairman Jerome Powell discussed the central bank’s support for the economy during the coronavirus crisis, a New York Fed index showed improvement in business expectations and former Bank of England Gov. Mark Carney joined Pimco’s global advisory board. Here is a roundup of central banking news and analysis.

The level of support the Fed is offering financial markets right now has fueled concerns its actions are creating financial bubbles, or creating...