Good day. Senior Federal Reserve officials are now subject to sweeping personal-investing restrictions that will hold them to trading broad-based investment vehicles such as mutual funds, according to new rules imposed by Chairman Jerome Powell following a stock-trading controversy that prompted two regional Fed bank presidents to resign. Some in Congress seized on the questionable trading, first reported last month by The Wall Street Journal, to criticize Mr. Powell, who they think is too friendly to Wall Street on bank regulation. The controversy has dented but not derailed Mr. Powell's chances for a second term. Elsewhere, Turkey's central bank cut its benchmark interest rate amid rising inflation. The move followed President Recep Tayyip Erdogan last week dismissing three top bank officials.

Now on to today's news and analysis.

Top News

Fed Imposes New Restrictions on Officials' Investment Activities

The Federal Reserve building in Washington. PHOTO: JOSHUA ROBERTS/REUTERS

Federal Reserve Chairman Jerome Powell imposed sweeping personal-investing restrictions on senior officials in a bid to address a stock-trading controversy that prompted the resignation of two reserve bank presidents and hurt his prospects of being reappointed to lead the central bank next year.

The Fed said the new rules will restrict senior officials' trading to broad-based investment vehicles such as mutual funds. They also will require any trades to be preapproved and pre-scheduled, removing the potential for any appearance that officials were benefiting from inside information to bolster their personal investments.

Investors Bet Inflation Pressures Will Linger

As of Wednesday, the gauge known as the 10-year break-even rate suggested that the consumer-price index will rise by an annual average of 2.57% over the next decade, according to Federal Reserve Economic Data, or FRED. That is up from a recent low of 2.28% in late September and the highest level since 2013. Rising break-even rates worry some investors because the move suggests current inflation pressures could last longer than previously expected.

Derby's Take: As Fed Balance Sheet Grows, Questions About Its Impact Remain

By Michael S. Derby

The Federal Reserve's newest governor this week pointed to an uncomfortable truth about the central bank's multitrillion-dollar balance sheet: Policy makers don't know for sure how it affects the economy.

"We have no economic theory of how large the central bank's balance sheet should be. I've never seen it," Christopher Waller said during a virtual appearance. Read more.

U.S. Economy

Jobless Claims Fall to Pandemic Low as Labor Market Remains Tight

Filings for initial unemployment benefits decreased to 290,000 last week from a revised 296,000 a week earlier, the Labor Department said. Claims are holding well below a recent peak of 424,000 in mid-July but remain above 2019's weekly average of 218,000.

New York Lost Most Wall Street Jobs in 2020 Since 2008 Recession

U.S. Home Sales Jumped 7% in September

Existing-home sales rose 7% in September from August to a seasonally adjusted annual rate of 6.29 million, the highest pace since January, the National Association of Realtors said Thursday. September sales fell 2.3% from a year earlier.

Democrats Weigh Tax Alternatives to Fund $2 Trillion Package

Democrats worked to quickly find new sources of revenue to pay for their roughly $2 trillion social-policy and climate package, seeking to target businesses and wealthy individuals in novel ways after proposed rate increases ran aground in talks.

Key Developments Around the World

Turkish Central Bank Cuts Benchmark Interest Rate to 16%

Turkey's central bank on Thursday cut its benchmark interest rate from 18% to 16% after President Recep Tayyip Erdogan last week fired three top officials. Turkey's inflation rate accelerated on an annual basis in September, as the consumer price index rose 19.58% on year in the month compared with 19.25% in August. (Dow Jones Newswires)

RBA Moves to Defend Yield Curve Target; More Action Likely Needed

The Reserve Bank of Australia has defended its yield curve target of 0.10% after several days of inaction, tamping down speculation that it was preparing to signal an earlier start to interest-rate increases.

RBA Wants BNPL Firms to Scrap No-Surcharge Rules

Supply Bottlenecks Curb Eurozone Growth to Six-Month Low

Eurozone business activity growth slowed sharply to a six-month low in October amid increasing supply bottlenecks and ongoing pandemic concerns, flash purchasing managers index data by IHS Markit showed. The eurozone flash composite PMI fell to 54.3 in October from 56.2 in September, posting a decline for the third consecutive month. (Dow Jones Newswires)

Financial Regulation Roundup

CFTC Issues Its Largest Whistleblower Award, of Nearly $200 Million

The Commodity Futures Trading Commission issued its largest whistleblower award of roughly $200 million to a tipster who helped regulators bring successful enforcement actions. Tips to the CFTC have resulted in more than $3 billion in monetary sanctions.

Consumer Protection Agency Probes Apple, Facebook and Amazon

The Consumer Financial Protection Bureau said it had launched an inquiry on consumer data practices at Inc., Apple Inc., Alphabet Inc.'s Google and Facebook Inc. and other firms. The move opens a new front in Washington's scrutiny of the companies.

Turkey Censured Over Money Laundering, Terrorist Financing

A global watchdog on Thursday added Turkey to its list of countries requiring special regulatory oversight for failing to stop money laundering and terrorist financing, a designation analysts say will rattle Ankara's already shaky economy.

Bitcoin Back Near Record Highs, and a Houston Pension Plan Dives In

Houston's pension fund for its firefighters said it bought $25 million worth of bitcoin and ether for its defined-benefit plan's portfolio, the latest move by an institutional investor into digital assets. The move comes as bitcoin powered back to a record above $66,000 earlier this week.

Crypto Exchange FTX Reaches $25 Billion Valuation

Cryptocurrency exchange FTX reached a valuation of $25 billion in a new funding round of just over $420 million that includes heavyweights from traditional finance, such as the Ontario Teachers' Pension Plan and funds managed by BlackRock Inc.

Forward Guidance

Friday (all times ET)

10 a.m.: San Francisco Fed's Daly speaks on climate change risk at American Enterprise Institute event

11 a.m.: Fed's Powell speaks on panel at virtual Bank for International Settlements-South African Reserve Bank conference


America's Housing Boom Will Keep Builders and Agents Busy

Until America has more homes available for sale, the housing market will look unusually strong in what used to be the slow part of the year without satisfying pent-up demand that has been years in the making, Justin Lahart writes.

Evergrande Is Struggling to Sell Homes -- and Its Assets

It's never a good sign when a company struggles to sell much of anything, even its best assets, and that is now roughly the position troubled Chinese property developer Evergrande finds itself in, Jacky Wong writes.

Basis Points

The Conference Board's Leading Economic index, a gauge of U.S. business cycles, rose 0.2% to 117.5 in September from August, below a 0.4% rise economists polled by The Wall Street Journal had forecast. The index suggests the U.S. economy remains on a more moderate growth trajectory compared with the first half of the year, Conference Board Senior Director of Economic Research Ataman Ozyildirim said. (Dow Jones Newswires)

Businesses in the Federal Reserve Bank of New York's region see no signs of improvement in supply disruptions, as a survey by the NY Fed's Liberty Street Economics found 80% of service firms and 95% of manufacturers reporting difficulty obtaining supplies. (DJN)

Manufacturing activity in the Philadelphia area continued to expand in October, albeit at a slower pace compared with the previous month amid severe shortages related to global supply-chain problems, according to a Federal Reserve Bank of Philadelphia survey. Its index for current general activity fell from 30.7 in September to 23.8, a reading broadly matching the 24.5 economists polled by The Wall Street Journal expected. (DJN)

China Evergrande Group made an overdue interest payment to international bondholders, the state-owned Securities Times reported Friday, an unexpected move that allows the property company to stave off a default.

Sentiment in the French manufacturing sector remained stable in October, the French national statistics office said, noting its sentiment measure was unchanged from September at 107. Economists polled by The Wall Street Journal expected a reading of 105. (DJN)

Canada's Liberal government will begin winding down the bulk of emergency-income benefits it issued at the onset of the pandemic now that the economic recovery has shifted into a higher gear, Finance Minister Chrystia Freeland said. (DJN)

Canadian new house prices notched another gain in September, continuing an upward trend that began in the spring of 2020 with a 0.4% rise from August, Statistics Canada. Prices advanced 11.3% from a year earlier. (DJN)


(END) Dow Jones Newswires

October 22, 2021 08:43 ET (12:43 GMT)

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