Good day. Federal Reserve governor Christopher Waller said a more aggressive policy response than just tapering the Fed's $120 billion a month in asset purchases "may well be warranted in 2022" if inflation continues running high through the rest of the year. Mr. Waller also said he supports beginning to reduce asset purchases following its November meeting. Elsewhere, Bundesbank chief Jens Weidmann, who has been critical of the European Central Bank's easy-money policies, is stepping down. And The Wall Street Journal looks at how the effects of flooding in China over the summer provided a stark illustration of a risk nations may face by adopting a digital currency of the kind the People's Bank of China has in mind.

Now on to today's news and analysis.

Top News

Waller: Fed Could Bring Rate Rises Forward if Inflation Doesn't Cool

Federal Reserve governor Christopher Waller said the central bank could move forward the timeline for raising short-term interest rates to restore price stability if high levels of inflation don't start cooling soon, adding that he supports the Fed slowing its asset buying stimulus effort starting next month.

Mr. Waller said Tuesday that when it comes to moving up what is now a near zero federal-funds rate target range, "the pace of continued improvement in the labor market will be gradual, and I expect inflation will moderate, which means liftoff is still some time off." But he also said there is some amount of flux in the path forward for interest rate policy amid unexpectedly high inflation readings.

Derby's Take: Waller Flags Inflation Expectations as Key to Fed Rate Outlook

By Michael S. Derby

The Federal Reserve's newest governor said the monetary policy outlook depends crucially on what financial markets expect for the future path of inflation.

In a speech Tuesday, Christopher Waller offered a clear warning about what inflation might do to the monetary policy outlook. Mr. Waller, who became a central bank governor late last year after serving as research director at the St. Louis Fed, said if currently high levels of inflation do not show clear signs of moderation by year's end, he would move forward into next year his expectation of central bank rate rises. Read more.

U.S. Economy

New York Housing Demand Surges After Pandemic Slowdown

New York City's housing market is undergoing a powerful rebound, fueled by New Yorkers trading up, out-of-staters moving in, and others looking beyond the coronavirus pandemic's aftershocks as they place long-term bets on the city.

Biden Identifies Cuts to Social Policy and Climate Bill

Democrats accelerated efforts to strike a deal on their social-policy and climate legislation, as President Biden identified programs that party lawmakers could eliminate or slim down during a flurry of meetings at the White House Tuesday.

Key Developments Around the World

Bundesbank President Jens Weidmann to Step Down

The Bundesbank said that President Jens Weidmann is leaving for personal reasons, without elaborating. In his parting statement, Mr. Weidmann urged his ECB colleagues "not to lose sight of prospective inflationary dangers."

Flooding Exposed Risks in Beijing's Plan to Launch Digital Currency

Four days before flooding in Zhengzhou, China's central bank published an official strategy for its rollout of a digital currency and cited success with trials so far. Then, power outages in Zhengzhou paralyzed the digital-payment infrastructure that is the backbone of its plan.

PBOC Keeps Loan Prime Rate Unchanged

China's central bank kept its benchmark loan prime rate unchanged on Wednesday. The one-year LPR remained at 3.85% and five-year LPR at 4.65%, the bank said. The last time the central bank cut the LPR was April last year when the economy was hit by the pandemic shock.

Xi Jinping Faces Resistance to Property-Tax Plan

Chinese President Xi Jinping has made no secret of his desire to deflate China's property bubble. But according to people with knowledge of government deliberations, he is facing resistance over a measure aimed at curbing housing speculation: a nationwide property tax.

China's Magical Disappearing, Reappearing Property Tax

Is Brexit Hurting the U.K. Economy? Trade Data Flashes a Warning

Leaving the European Union has put the U.K. outside the EU's vast internal market of 445 million consumers and a customs territory that is bigger still, hobbling trade just as its economy needs all its engines firing to power out of its worst downturn in a century.

U.K. Annual Inflation Eased in September

German Producer Prices Rise at Fastest Annual Pace in Over 46 Years

Financial Regulation Roundup

BofA's California Partnership Roiled by Unemployment Fraud

Bank of America thought helping states such as California hand out unemployment benefits would be good business. Then millions of Americans lost their jobs at once.

Credit Suisse to Pay $475 Million in Mozambique Case

Credit Suisse Group agreed to pay $475 million and forgive $200 million Mozambique owes to investors in coordinated settlements with U.S. and European authorities over loans the bank made in the country. A subsidiary of the Swiss bank pleaded guilty to wire fraud conspiracy charges in New York federal court Tuesday.

Credit Suisse Spied on Executives, Broke Swiss Rules, Regulator Says

Democrats Try to Salvage IRS Bank-Account Reporting Plan

Sens. Ron Wyden (D., Ore.) and Elizabeth Warren (D., Mass.) outlined a scaled-back version of a tax-compliance plan on Tuesday and attempted to defend their proposal against opposition from the financial-services industry and Republicans.

U.S. Lawmakers Turn Spotlight on Private Equity

A group of lawmakers led by Sen. Elizabeth Warren (D., Mass.) plans this week to reintroduce a modified version of the Stop Wall Street Looting Act, a two-year-old proposal to rein in the private-equity industry, according to people familiar with the matter.

Investor-Backed Group to Analyze Companies' Climate-Change Plans

The Transition Pathway Initiative, a research group backed by some of the world's biggest investment firms, plans to help investors make sense of businesses' climate-change plans by assessing data from 10,000 companies and making the results public.

First Bitcoin Futures ETF Rises in Trading Debut

The first bitcoin-focused exchange-traded fund rose in its trading debut Tuesday after getting a warm reception from investors. The ProShares Bitcoin Strategy ETF climbed most of the day, gaining nearly 5% to settle at $41.94. About $981 million of shares changed hands over the session, making it the second most highly traded ETF debut ever, according to Elisabeth Kashner, director of ETF research at FactSet.

Forward Guidance

Wednesday (all times ET)

12 p.m.: Atlanta Fed's Bostic and Minneapolis Fed's Kashkari speak on racism and the economy

1 p.m.: Fed's Quarles speaks on economy at Milken Institute Global Conference

2 p.m.: Federal Reserve releases beige book report on U.S. economic conditions

Thursday

Time N/A: Central Bank of the Republic of Turkey releases policy statement

9 a.m.: Fed's Waller speaks on economy at Official Monetary and Financial Institutions Forum discussion

10 a.m.: National Association of Realtors releases September U.S. existing-home sales

9 p.m.: New York Fed's Williams speaks at China Finance 40 Forum

Commentary

Standoff in Australia's Bond Market Could Redefine Rates Outlook

Bond traders have been watching the horizon for the Reserve Bank of Australia to sail into view, its guns blazing in an attempt to restore order to short-dated bond yields. So far there hasn't been any display of firepower by the central bank, and anxiety is high, James Glynn writes.

Household Brands Count the Rising Cost of Transport

No matter the mode of transport, moving goods has become more expensive amid strong demand for consumer goods since countries began to reopen their economies. But quirks of consumer companies' supply chains mean they won't all be equally hit, Carol Ryan writes.

Basis Points

New home prices in China fell on a monthly basis for the first time in more than six years in September, new official data showed, as Beijing's measures to curb housing speculation and cool the property sector begin to bite.

China raised $4 billion from a sale of U.S. dollar bonds, borrowing cheaply again from international investors that flocked to its offering despite the country's slowing economic growth.

U.S. home builders started construction on homes at a seasonally-adjusted annual rate of 1.56 million in September, a 1.6% decrease from the previous month and a 7.4% rise from a year earlier, the U.S. Census Bureau said. (Dow Jones Newswires)

Singapore will establish standby fuel facilities for domestic power-generating companies to draw upon, in a bid to address a tight natural-gas market as prices of the fuel rise, the country's Energy Market Authority said. (DJN)

Spain's economy will grow less than previously estimated this year and next as supply-chain bottlenecks, high energy and fuel prices and the delay in the execution of EU Recovery funds are expected to weigh on activity, according to BBVA Research. Spanish GDP is expected to expand 5.2% in 2021 and 5.5% in 2022, down from 6.5% and 7.0% previously forecast, the bank said. (DJN)

Brazil's 12-month inflation rate in December will come in at 9.1% as a result of gasoline retailers passing higher wholesale costs on to consumers more rapidly than expected, according to Roberto Secemski, an economist at Barclays. Brazil's 12-month inflation rate rose to a more than five-year high of 10.25% in September, pushed up by gasoline and electricity prices, and the central bank has been raising its benchmark interest rate to try to slow the pace of price increases. (DJN)

(END) Dow Jones Newswires

October 20, 2021 08:39 ET (12:39 GMT)