Good day. It appears the Federal Reserve is growing more focused
on the inflation element of its dual mandate than jobs, according
to sister publication Barron's, which takes a look at St. Louis Fed
research that puts a dent in the argument that there is hidden
slack in the jobs market. Barron's notes that Chairman Jerome
Powell on Friday said it was "very possible" that the Fed would
meet its full employment goal next year, which woud put
interest-rate increases on the table, a possibility the market is
already pricing in. Elsewhere, the chief market strategist at
Santander Asset Management Germany told Dow Jones Newswires to
expect the European Central Bank to reiterate at its monetary
policy meeting Thursday that current high inflation is
temporary.
Now on to today's news and analysis.
Top News
More Than 3 Million Retired Early. What That Means for Interest
Rates.
One of the big questions for policy makers and traders alike is
whether people who have left the workforce will, at some later
point, jump back in.
It's hugely important because, if these workers are taking a
temporary break while waiting for health conditions to improve,
then the job market has more slack than the official unemployment
rate would suggest. For the Federal Reserve, so-called hidden slack
would be a reason to keep policy easier than it otherwise would,
given the inflation battle it is simultaneously facing. But new
research from the St. Louis Fed puts a dent in the hidden slack
argument. (Barron's)
Santander AM: ECB to Reiterate Inflation Pressures Are
Temporary
The European Central Bank is likely to reiterate at Thursday's
monetary policy meeting that the current trend of high inflation is
temporary, says Klaus Schruefer, chief market strategist at
Santander Asset Management Germany. Although the ECB will reiterate
its current policy, there will be "fairly intensive discussions
about how to continue the asset purchase program next year," he
says. Once the Pandemic Emergency Purchase Programme ends in March,
Santander expects the ECB's regular Asset Purchase Program to be
the main tool for quantitative easing. Mr. Schruefer expects the
ECB will increase the APP's current monthly purchase volume of 20
billion euros and afford the scheme some of the additional
flexibility contained in the PEPP program. (Dow Jones
Newswires)
U.S. Economy
Democrats Negotiate Tax, Healthcare Provisions as Biden Seeks
Deal
Democrats are sprinting to wrap up negotiations over their
wide-ranging social-policy-and-climate bill, facing a weekend
deadline to resolve disagreements on tax policy and healthcare,
among other issues.
What's In and What's Out of $2 Trillion Budget Reconciliation
Plan
Democrats are working to complete a framework on a roughly $2
trillion education, healthcare and climate plan they hope to
approve this fall without Republican support. Here are details on
where the proposal stands.
Republicans Call for Tougher Controls to Keep U.S. Tech From
China
Republican China hawks in a letter to Commerce Secretary Gina
Raimondo urged action to address 10 issues of "immediate concern,"
including strengthening export controls on semiconductors and jet
engines.
Covid-19 Battle Turns a Corner as Borders Open to Foreign
Travelers
When its borders open to foreign travelers on Nov. 8, the U.S.
will have lifted one of the longest restrictions imposed 19 months
ago at the start of the pandemic, signaling a new phase of guarded
optimism in its battle with Covid-19.
Key Developments Around the World
Rich Nations Lag Behind in Meeting Climate-Funding Pledge
Wealthy governments won't fulfill a pledge to provide $100
billion a year to help developing countries fight climate change
until at least 2023, according to a new report just days before a
closely watched UN climate summit starts.
China Evergrande Says Work on Some Residential Projects
Resumes
China Evergrande Group said construction is progressing at some
of its residential projects in southern China, as the highly
indebted developer tries to stave off collapse and deliver the
homes it has promised to more than a million people.
Chinese Developer Modern Land Fails to Repay U.S. Dollar
Bond
Financial Regulation Roundup
Cryptocurrency Company Snared in SEC Dragnet Sues Regulator
Do Kwon, a South Korean citizen and resident, says the SEC
violated it rules and sought either to embarrass him or to stir up
media interest in its crackdown on the cryptocurrency market when
it handed him two subpoenas.
Mastercard and Bakkt to Bring Cryptocurrency Services to the
Masses
Mastercard and crypto firm Bakkt Holdings said they have
partnered to enable cryptocurrency card payments to make it easier
for banks, financial-technology firms and merchants to offer and
accept crypto payments.
Casino Operator Crown Resorts Engaged in Illegal Behavior:
Report
A report commissioned by the government in Australia's Victoria
state concluded that Crown Resorts engaged in illegal and dishonest
behavior and in theory isn't suitable to hold a casino license. But
it stopped short of recommending that Crown be immediately stripped
of its license.
Forward Guidance
Tuesday (all times ET)
8:45 a.m.: European Central Bank's Enria speaks on panel at
European Banking Authority conference
10 a.m.: U.S. Commerce Department releases September new-home
sales
Wednesday
Time N/A: Central Bank of Brazil releases policy statement
8:30 a.m.: U.S. Commerce Department releases September advance
economic indicators report; U.S. Commerce Department releases
September durable-goods data
10 a.m.: Bank of Canada releases interest-rate announcement and
monetary policy report
11 a.m.: Bank of Canada's Macklem holds press conference
Research
Paper Says Easy Monetary Policy Reduces Wealth Inequality
New research is pushing back on the idea that easy monetary
policy exacerbates wealth inequality. As some analysts see it, low
interest rates push up asset prices and thus benefit the wealthy
more than they help lower unemployment for the disadvantaged. But a
paper by Edward N. Wolff of New York University says that when it
comes to wealth inequality and the low inflation that allows easy
monetary policy, "these two monetary effects have reduced wealth
inequality rather than increasing it." The paper says "asset price
changes and debt devaluation accounted for 72.6 percent of the
advance of mean wealth over 1983-2019," which in turn has helped
lower the racial wealth gap rather than enlarging it.
-- Michael S. Derby
Commentary
Inflation Pinches Restaurants; Customers Seem Willing to Split
Check
Pricing power is limited for restaurants, but there is reason to
believe strong customer demand will absorb higher costs, and if
they can pay for more employees in a tight labor market, that alone
could pay off, Charley Grant writes.
Xi's 'Common Prosperity' in Theory and Practice
President Xi Jinping's bid for a third term at China's helm
would presumably be strengthened by showing he has solutions to
festering problems such as inequality and unaffordable housing,
Nathaniel Taplin writes.
Basis Points
U.S. banks are overrun with cash. So they are loading up on
debt. The six largest U.S. lenders have issued some $314 billion of
bonds so far this year, already the most for any year since 2008,
according to Dealogic.
U.S. propane prices haven't been so high heading into winter in
a decade, which is bad news for millions of rural Americans who
rely on the fuel to stay warm.
The U.S. economy grew in September at a slower pace than in the
previous few months, according to the Federal Reserve Bank of
Chicago, whose Chicago Fed National Activity Index fell to minus
0.13 last month from 0.05 in August, below the 0.35 consensus
forecast of economists polled by FactSet. (Dow Jones Newswires)
Growth in Texas factory output slowed in October compared from
the previous month amid severe supply-chain bottlenecks, according
to the Federal Reserve Bank of Dallas, whose production index of
the Texas Manufacturing Outlook Survey fell from 24.2 in September
to 18.3 this month. The reading still signals solid output growth,
the Dallas Fed said. (DJN)
Business sentiment in Belgium remained unchanged in October,
beating expectations for a decline, as the National Bank of Belgium
business confidence gauge stayed at 4.0, unchanged from the
previous month. Economists polled by The Wall Street Journal had
expected a decline to 2.0. (DJN)
Chile's right-wing presidential candidate Jose Antonio Kast is
leading in a new poll, overtaking leftist candidate Gabriel Boric a
few weeks before the first round of voting. Pollster Cadem said
Kast has 23% support versus 20% for Boric as the far-left and
far-right edge out more moderate candidates. The poll still shows
that more Chileans believe Boric would win in a runoff against
Kast. (DJN)
(END) Dow Jones Newswires
October 26, 2021 08:42 ET (12:42 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.