Good day. The Federal Reserve is heading into a difficult
environment as the inflationary surge threatens to become more
unpredictable due to the emergence of the new Omicron coronavirus
variant, prompting the central bank to discuss accelerating cuts to
its asset-purchase program at its mid-December meeting, Chairman
Jerome Powell said Tuesday. In other Fed developments, President
Biden is considering Richard Cordray, the first director of the
Consumer Financial Protection Bureau, to serve as the central
bank's top banking regulator, according to people familiar with the
matter. His nomination for the post could hearten progressive
Democrats who have called for the Fed to take a tougher approach to
regulating big banks and addressing financial risks posed by
climate change.
Now on to today's news and analysis.
Top News
Powell Warns Elevated Inflation Justifies Faster Cuts for Bond
Buying
Federal Reserve Chairman Jerome Powell discussed in a Senate
hearing the factors driving continued inflation and the risk the
Omicron variant poses for the economy.
Photo: Al Drago/Bloomberg News
Federal Reserve Chairman Jerome Powell signaled the central bank
would consider quickening the wind down of its easy-money policies
as it grapples with elevated inflation, which would open the door
to raising interest rates in the first half of next year.
He said Tuesday the Fed would discuss accelerating the reduction
of its asset purchases at its meeting in mid-December. "The risk of
higher inflation has increased," Mr. Powell said at a hearing
Tuesday morning before the Senate Banking Committee.
Global Inflation Set to Be Higher for Longer, Says OECD
The pickup in inflation rates around the world will be
longer-lasting and sharper than previously anticipated, with a
growing risk that households and businesses grow accustomed to
faster price rises, the Organization for Economic Cooperation and
Development said.
Derby's Take: Powell Reiterates Importance of Diversity in
Boston, Dallas Fed Searches
By Michael S. Derby
Federal Reserve Chairman Jerome Powell reiterated Tuesday that
two regional leadership openings at the central bank could be a
chance to broaden the diversity of those who help set monetary
policy. The Fed is looking for new leaders for the two banks as a
consensus forms that drawing officials from diverse backgrounds, be
it racial, gender or occupational, helps the central bank make
monetary policy better. Read more.
U.S. Economy
Covid-19 Variant Omicron Threatens U.S., Global Economies
Compared with the initial wave of Covid-19 and the Delta variant
this summer, Omicron's threat to economies will likely be less
severe, economists say, in part because each new virus strain has
had a diminished economic impact.
Gas Prices Pressure Drivers' Finances
U.S. gasoline prices have climbed about 50% in a year with
drivers paying an average of $3.40 a gallon for regular, up from
$2.27. This year's rise is on pace to be the largest percentage
increase in at least a decade.
U.S. Home-Price Growth Slowed in September
The S&P CoreLogic Case-Shiller National Home Price Index,
which measures average home prices in major U.S. metro areas, rose
19.5% in the year that ended in September, down from a 19.8% annual
rate the prior month.
Credit-Card Applications Hit Pandemic High
Americans are applying for credit cards at a rate not seen since
before the pandemic. Close to 27% of U.S. consumers said in October
that they had applied for a credit card in the past 12 months,
according to the Federal Reserve Bank of New York, the highest
level since 2019.
Key Developments Around the World
As Omicron, Supply Problems Loom, Eurozone Inflation Hits
Record
The European Union's statistics agency Tuesday said consumer
prices in the currency area were 4.9% higher than in November 2020,
by far the fastest annual rise since records began in 1997 and more
than double the ECB's 2% target.
India's Economy Hampered by Weak Consumer Spending
India's GDP grew 8.4% in the three months ended September,
compared with a year earlier, reflecting the aftermath of a
devastating spring Covid-19 surge, which set global records for
daily cases and deaths in a single country.
Turkish Lira Plumbs Record Low on Erdogan's Calls for Rate
Cuts
Turkey's currency crisis deepened after President Recep Tayyip
Erdogan defended his policy of demanding lower interest rates
despite rising inflation, sparking another selloff of the lira,
which hit 13.74 to the dollar around midnight local time before
rebounding slightly.
Financial Regulation Roundup
White House Considering Cordray as Top Fed Banking Regulator
President Biden is considering Richard Cordray, the first
director of the Consumer Financial Protection Bureau, to succeed
Randal Quarles as the Federal Reserve's vice chairman of banking
supervision, people familiar with the matter say.
Fannie Mae, Freddie Mac to Back Home Loans of Nearly $1
Million
Starting next year, home buyers in high-cost areas of the
country will be able to borrow nearly $1 million for a mortgage
loan backed by the government, a reflection of the rapid
appreciation in home prices nationally.
Forward Guidance
Wednesday (all times ET)
9 a.m.: Bank of England's Bailey gives speech at Institute and
Faculty of Actuaries
10 a.m.: Fed's Powell testifies on Covid-19 and the Cares Act
before House Financial Services Committee
2 p.m.: Federal Reserve releases beige book report on U.S.
economic conditions
Thursday
9 a.m.: European Central Bank's Panetta chairs panel at ECB
conference on fiscal policy and Economic and Monetary Union
governance
11 a.m.: Fed's Quarles gives speech on his departing thoughts at
American Enterprise Institute event
11:30 a.m.: Richmond Fed's Barkin, San Francisco Fed's Daly
speak on the labor market at Peterson Institute for International
Economics event; Atlanta Fed's Bostic speaks in live interview at
Reuters Next event
Commentary
China's Frozen Factories Warm Up, a Little
China may see a weak recovery at best in early 2022 if exports
hold up and further significant policy support for the economy is
forthcoming, but if not, expect a further slowdown next quarter,
Nathaniel Taplin writes.
Basis Points
U.S. businesses along the Canadian border say they are
anticipating a boost in cross-border shopping and tourism after
nearly 20 months of suffering from Washington's decision to ban
tourists from entering the U.S. via northern land-border
crossings.
U.S. consumer confidence fell in November to the lowest level in
nine months because of worries about high inflation, as the index
of consumer confidence dropped to 109.5 from 111.6 in October, the
privately run Conference Board said. (MarketWatch)
Business activity growth in the Chicago area cooled in November
as new orders slowed, according to data released Tuesday by MNI
Indicators, whose Chicago Business Barometer slipped to 61.8 for
the month, its lowest reading since February, from 68.4 in October.
(Dow Jones Newswires)
Canada's gross domestic product increased at a 5.4% annualized
rate in the third quarter, Statistics Canada said. Market
expectations were for a 3.3% annualized advance in the
July-to-September period, according to economists at TD Securities.
(DJN)
Australia's economy shrank in the July-September quarter as
efforts to combat the Delta variant of the Covid-19 virus forced
more than half the country into strict and lengthy lockdowns. The
economy contracted by 1.9% in the third quarter from the previous
quarter and grew 3.9% over the year, the Australian Bureau of
Statistics said Wednesday. Economists had expected a 2.5%
contraction in the third quarter. (DJN)
Australia's manufacturing sector shrugged off three months of
Covid-related lockdowns in November, lifting the Australian
Industry Group Performance of Manufacturing Index by 4.4 points to
54.8. (DJN)
Brazil's unemployment rate fell to 12.6% in the third quarter
from a revised 13.1% in the three months through August and from
14.9% in the year-earlier period, as households hired back many
domestic workers laid off during the height of the coronavirus
pandemic, the Brazilian Institute of Geography and Statistics said
Tuesday. (DJN)
South Africa's unemployment rate jumped to a record high of
34.9% in the third quarter of 2021, as the country struggles to
recover from the economic impact of the coronavirus pandemic,
Statistics South Africa said. (DJN)
Bank of Japan policy board member Seiji Adachi said he sees a
greater chance that the nation's inflation rate will increase after
years of flat prices. Mr. Adachi pointed to changes in the
price-setting behavior of Japanese companies and improvements in
their growth expectations. (DJN)
(END) Dow Jones Newswires
December 01, 2021 10:00 ET (15:00 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.