The U.S. labor market hasn’t achieved enough progress to justify a pullback in the Federal Reserve’s stimulus program but is on track to reach a key threshold around the end of the year, a top central bank official said in a speech prepared for delivery Friday night.

The Fed cut its benchmark interest rate to near zero in March 2020 and has been purchasing at least $120 billion a month in Treasurys and mortgage bonds to provide extra stimulus to the economy. Officials since the end of last year said those purchases would continue until they see “substantial further progress” toward their goals of low unemployment and stable inflation.

Fed governor Lael Brainard signaled the central bank hasn’t met that standard yet but could do so by December or a little bit before that. In her remarks, she said the Fed would be in a better position to assess the job market’s progress in October, when spending, school and work patterns “should settle into a post-pandemic...

WASHINGTON—Investors barely reacted last week when Federal Reserve officials signaled they could announce plans to start reducing their bond buying later this year. That was a relief for policy makers eager to avoid a repeat of the market turmoil that erupted in 2013 when the Fed made a similar announcement.

The Fed’s next test will come when it outlines a concrete plan for when and how it will scale back, or taper, the asset purchases.

The central bank has been buying $120 billion a month of Treasury and mortgage securities since June 2020, a pace officials say will continue until the economic recovery advances further. By bidding up the price of long-term bonds, the purchases tend to hold down borrowing costs for businesses and consumers, since bond prices and yields move in opposite directions.

Some investors worry that yields will jump significantly higher when the Fed stops buying bonds. The Fed’s indication in 2013 that it would eventually wind...

Expansion in China’s factory sector in July hit the lowest level in nearly a year and a half, with a gauge of activity slipping in the latest sign of slackness of the world’s second-largest economy.

China’s official manufacturing purchasing-managers’ index, a gauge of manufacturing activity, dropped to 50.4 in July from 50.9 in June, according to data released by the National Bureau of Statistics on Saturday.

The July reading also fell below a median forecast of 50.8 from a Wall Street Journal poll of economists, but still remained above the 50 mark that separates expansion from contraction.

Beneath the headline number, the subindex measuring production declined to 51.0 in July, from 51.9 the previous month as the recent record rainfall in central China and Yangtze River Delta triggered flooding and tangled supply chains. Power shortages in some cities held back output.

The subindex of new export orders fell deeper into contractionary territory...

Indonesia’s central bank on Thursday maintained its benchmark rate, as the local economy shows early signs of recovery.

Bank Indonesia kept its seven-day reverse repo rate unchanged at a record low of 3.50%. Nine economists polled by The Wall Street Journal had unanimously expected the bank to stand pat.

The central bank maintained its overnight...

A day after the Federal Reserve boosted the return on a key part of its interest rate control tool kit, a record $756 billion flowed into the central bank’s reverse repo facility on Thursday.

The reverse repo facility takes in cash primarily from money-market funds, as well as government-sponsored companies and banks. Until Wednesday, this facility offered a return of zero percent to eligible users, which the Fed moved up to 0.05%, while at the same time lifting another rate, called the interest on excess reserves rate, to 0.15% from 0.10%.

Over the past few months, cash has been flooding into the reverse repo facility. After years of negligible activity marked by periodic spikes, more money began to flow in starting this spring, and has hovered at around half a trillion dollars daily over recent days.

The Fed said Wednesday that the rate changes were technical and designed to smooth money-market conditions and ensure the federal-funds rate, its chief...

Australia’s job market has tightened alongside a rapid economic recovery over recent quarters, but there is still no solid evidence that wages growth or inflation is heating up, Reserve Bank of Australia Gov. Philip Lowe said Thursday.

“For inflation to be sustainably in the 2-3% range, wage increases will need to be materially higher than they have been recently,” Mr. Lowe told a farmers conference in Toowoomba, Queensland. “This still seems some way off,”

Mr....

Federal Reserve Chairman Jerome Powell discussed the central bank’s changing interest-rate outlook, its decision to maintain an accommodative policy stance for now, and what could lie ahead for inflation and the job market during a press conference Wednesday after the Fed’s monetary policy meeting. Here is a transcript, lightly edited for clarity and length.

JEROME H. POWELL: Good afternoon. At the Federal Reserve we are strongly committed to achieving the monetary policy goals that Congress has given us—maximum employment and price stability. Today, the Federal Open Market Committee kept interest rates near zero and maintained our asset purchases. These measures, along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete.

Widespread vaccinations, along with unprecedented fiscal policy actions, are also providing strong...

Taiwan’s central bank on Thursday left its benchmark rate unchanged, citing loose monetary policies globally and economic risks amid a resurgence of the coronavirus pandemic at home.

The move came as the island voiced concerns over a slowdown in economic growth in the second half of the year, after Taiwan tightened its pandemic prevention restrictions since May, when local infections rose sharply. The central bank said it forecasts a 5.08% GDP growth for the full year, lower than an estimate of 5.64% growth from the Directorate-General...

Federal Reserve Chairman Jerome Powell tried once more on Wednesday to wave Fed observers off from making too much of a central bank chart that lays out where policy makers expect short-term rates to move over the next few years.

Mr. Powell, during a press conference after the latest rate-setting Federal Open Market Committee meeting, sought to push back at the so-called “dot plot” chart that showed a greater appetite for rate increases among his colleagues. According to the chart, none of the 18 Fed officials on the FOMC...

A booming U.S. economy that is driving inflation higher around the world and pushing up the U.S. dollar is pressing some central banks to increase interest rates, despite still-high levels of Covid-19 infections and incomplete economic recoveries in their own countries.

The world’s central banks are hanging on how the U.S. Federal Reserve will respond to a rise in inflation, wary of being caught in the crosscurrents of an extraordinary U.S. economic expansion. Global stock markets fell on Thursday after Fed officials signaled they expect to raise interest rates by late 2023, sooner than they anticipated in March, as the U.S. economy heats up.

A global march toward higher interest rates, with the Fed at the center, risks stifling the economic recovery in some places, especially at a time when emerging-market debt has risen.

The size of the U.S. economy, accounting for almost a quarter of world gross domestic product, and the importance of its financial...

A surge of retirements during the pandemic is scrambling the Federal Reserve’s plans for taking the U.S. economy off life support.

“This is an extraordinarily unusual time, and we really don’t have a template of any experiences of a situation like this,” said Fed Chairman Jerome Powell in a press conference Wednesday following the central bank’s June meeting. “We have to be humble about our ability to understand the data.”

Throughout the pandemic, officials have emphasized that they were likely to hold interest rates near zero until the labor market returns to full employment, when everyone who wants a job can find one without pushing inflation up uncontrollably.

Full employment has always been notoriously hard to measure, but now it has gotten harder still. Officials look at a range of indicators, including the number of jobs created and the share of the adult population either working or looking for a job.

The rapid rise in retirements...

Norway’s central bank kept its key interest rate at zero at Thursday’s monetary policy meeting, as expected, but said a rate increase is likely in September.

Norges Bank had previously suggested a rate rise would come in the latter half of 2021, but said Thursday the pace of vaccinations has accelerated, society has begun to gradually reopen and economic activity is rebounding faster than projected.

“In...

The Federal Reserve is sticking to its story. The factors that drove annual core inflation up to a near-30-year high of 3.8% in May are largely “transitory,” it said Wednesday.

Chairman Jerome Powell reiterated the point several times in his press conference: “Our expectation is these high inflation readings…will start to abate.” The used-car price surge will reverse as that for lumber already did, he said. Fed officials expect inflation to slow from 3.4% at the end of this year to 2.1% by the end of next year and 2.2% by the end of 2023. The last two figures are each up just a tenth of a percentage point from their March forecast.

But beneath the surface, some anxiety is creeping in. In March, just five of 18 Federal Open Market Committee participants thought risks to inflation were weighted to the upside. In June, that had risen to 13. In other words, a solid majority of Fed officials think inflation is more likely to turn out higher rather than lower than...

The Federal Reserve on Wednesday raised the level of a key rate it pays banks to park cash at the central bank from 0.10% to 0.15%, and lifted the interest on excess reserves rate, or IOER, with an increase in the reverse repo rate from 0% to 0.05%.

The Fed left the target rate range of the federal-funds rate, its primary tool for influencing the momentum of the economy to achieve its job and inflation goals at between 0% and 0.25%, where it has been since March 2020.

The...

WASHINGTON—The U.S. economy needs ambitious fiscal policy to help unwind destructive forces, such as racial inequality and climate change, that have kept prosperity out of reach for millions of Americans, Treasury Secretary Janet Yellen told lawmakers Wednesday.

Ms. Yellen, who testified before the Senate Finance Committee, defended the Biden administration’s $6 trillion budget proposal for fiscal year 2022 in prepared testimony, calling for policies such as paid family leave, modernizing infrastructure, reducing emissions and making housing and education more affordable. The private sector doesn’t make enough of these investments to reverse long-term, structural economic challenges, such as falling labor-force participation and wage inequality, Ms. Yellen said.

“We need to make these investments at some point, and now is fiscally the most strategic time to make them,” she said.

Ms. Yellen also said the administration was carefully monitoring...

WASHINGTON—Federal Reserve officials signaled they expect to raise interest rates by late 2023, sooner than they anticipated in March, as the economy recovers rapidly from the effects of the pandemic and inflation heats up.

Their median projection showed they anticipate lifting their benchmark rate to 0.6% from near zero by the end of 2023. In March they had expected to hold it steady through that year.

Prompting the policy shift is a much stronger economic rebound and hotter inflation than the Fed anticipated just a few months ago.

The Federal Reserve is required by law to seek both full employment and stable prices. It heads into a pivotal meeting this week with both sides of that mandate in trouble; inflation has shot up, while unemployment remains uncomfortably high. For the first time in years, it faces two-sided risks: Tighten monetary policy too soon and tank the economy, or tighten too late and watch inflation ratchet higher.

This isn’t how things were supposed to turn out. Last summer the central bank unveiled a new monetary framework. Because inflation had been running below its 2% target, the Fed wanted inflation to run a bit above 2% so that over time it would average 2%. To achieve this it would let the economy overheat. Near-zero interest rates and bond buying would bolster demand and return unemployment to pre-pandemic levels below 4%. That would nudge inflation a bit above 2% for a while, a process it assumed would take several years.

Nine months later, unemployment is...

One of the Federal Reserve’s most consequential challenges over the next few months will be communicating how it will pull back on its torrid pace of bond buying stimulus without unsettling financial markets.

As Fed officials approach this challenge, at least two appear to have taken off the table a strategy used with some success just under a decade ago. Then, the central bank set out employment and inflation thresholds that once crossed would open the door to increasing short-term rates, without mechanically promising action.

WASHINGTON—Some countries might try to stay outside the emerging agreement to impose a global minimum tax on corporations so those nations can use low tax rates to attract businesses. The Biden administration aims to deflect those attempts with a powerful Shield.

The Shield—the Stopping Harmful Inversions and Ending Low-Tax Developments rule—is the administration’s tax threat to the rest of the world, the flip side of Treasury Secretary Janet Yellen’s cooperative diplomacy.

The plan, which would require the approval of Congress, aims to leverage the size of the U.S. consumer market to give other countries a choice: impose a minimum tax or watch the U.S. tax your companies and take your revenue. It is an aggressive weapon and one that mirrors how the U.S. changed its tax laws in 2010 to prod foreign banks into identifying Americans’ offshore accounts to the Internal Revenue Service.

The Shield faces some significant potential hurdles in Congress, along...

WASHINGTON—Federal Reserve officials are set to provide updated details on their plans for eventually scaling back easy-money policies as they conclude a two-day policy meeting amid signs of accelerating economic growth and inflation.

The Fed on Wednesday is likely to say after the meeting that it will maintain short-term interest rates near zero and keep buying at least $120 billion a month of Treasury and mortgage bonds. The central bank will also release individual policy makers’ updated quarterly economic projections.

The new forecasts could show officials expecting to raise interest rates sooner than they anticipated in March, when most saw the benchmark federal-funds rate remaining steady through 2023. They are also likely to begin discussing when and how to start scaling back bond purchases.

Fed officials want the economy to get closer to their goals of “maximum employment” and sustained, 2% inflation before reducing the bond purchases. They...

The Federal Reserve will soon begin selling off the corporate bonds and exchange-traded funds it amassed last year through an emergency-lending vehicle set up to contain the Covid-19 pandemic’s economic fallout.

The vehicle, known as the Secondary Market Corporate Credit Facility, or SMCCF, held $5.21 billion of bonds from companies including Whirlpool Corp. , Walmart Inc. and Visa Inc. as of April 30. In addition, it held $8.56 billion of exchange-traded funds that hold corporate debt, such as the Vanguard Short-Term Corporate Bond ETF.

A Fed official said the sales should be completed by the end of this year. Net proceeds will be remitted to the Treasury Department.

The Fed’s corporate-debt holdings are distinct from its $7.3 trillion balance sheet of Treasury securities and agency mortgage-backed securities. The central bank is continuing to purchase those types of assets to the tune of at least $120 billion a month as part of its monetary-policy...

The Federal Reserve’s latest Beige Book survey of the U.S. economy, released Wednesday, said the economy expanded at a moderate pace from late April to early May. The report also flagged multiple examples of supply chain disruptions related to the coronavirus pandemic and the economy’s reopening amid improving vaccination rates. The report noted “selling prices increased moderately, while input costs rose more briskly,” adding that “looking forward, contacts anticipate facing cost increases and charging higher prices in coming months.” Regarding the labor market, the Fed report said that “it remained difficult for many...

MEXICO CITY—The Bank of Mexico raised its forecast for this year’s economic growth after a bigger-than-expected first-quarter expansion and expectations that activity will pick up pace as the year progresses.

The central bank projects that gross domestic product in 2021 will expand 6% from last year, above its previous forecast of 4.8%.

The...

The U.S. economy continued to pick up speed in the spring, as consumers, many of them newly vaccinated and flush with federal stimulus cash, returned to restaurants, hotels and retail stores, the Federal Reserve said Wednesday.

The Fed report, a collection of business anecdotes from around the county known as the Beige Book, said the economy grew at a moderate pace between early April and late May, “a somewhat faster rate than the prior reporting period.”

But businesses said they were hamstrung by supply-chain disruptions. Manufacturers and home builders reported that materials and labor were in short supply. Companies also struggled with delivery delays, the report said.

Prices rose more rapidly than earlier in the year, as business passed on rising input prices to consumers.

“Contacts anticipate facing cost increases and charging higher prices in coming months,” the report said.

Federal Reserve Bank of Philadelphia leader Patrick Harker on Tuesday said he is getting ready to think about paring central bank stimulus as the economy continues to recover from the effects of the coronavirus pandemic.

“We’re planning to keep the federal-funds rate low for long, but it may be time to at least think about thinking about tapering our $120 billion in monthly Treasury bond and mortgage-backed securities purchases,” Mr. Harker said in prepared remarks.

Slowing...