Good day. Raphael Bostic, the Federal Reserve Bank of Atlanta
president, wants the Fed to wrap up the so-called taper of its
asset-buying program sooner rather than later. "I think having this
finish some time towards the end of the first quarter would be in
our interest," he said. Meanwhile, in his final public appearance
before he leaves the Fed at the end of the month, Randal Quarles
said the central bank should prepare to raise interest rates
because inflation was likely to stay above its 2% target. "This
is...not really a bottleneck story anymore," the Fed governor said,
referring to supply-related price increases as the economy
reopens.
Now on to today's news and analysis.
Top News
Fed's Bostic Wants to Accelerate Pace of Bond Buying Taper
Federal Reserve Bank of Atlanta President Raphael Bostic said
Thursday he would like to get the Federal Reserve in position to
raise its short-term interest rate target next year if inflation
pressures don't retreat from currently high levels.
To get there, the Fed should accelerate the pace of its
drawdown, or tapering, of its monthly purchases of Treasury and
mortgage bonds, he said.
"The data, as it has come in over the last several months,
suggests that we might, it may be appropriate for us to pull
forward a lift off," Mr. Bostic said, referring to increasing the
Fed's now near-zero short-term target rate range.
Quarles Says Fed Will Need to Raise Rates to Cool Inflation
Federal Reserve governor Randal Quarles said it was possible
fiscal stimulus over the past two years had boosted demand to
levels that might exceed the pre-pandemic trend and that the Fed
needs to bring supply and demand into balance by raising interest
rates.
U.S. Economy
Low Initial Jobless Claims Reflect Tight Labor Market
Initial jobless claims totaled a seasonally adjusted 222,000 for
the week that ended Nov. 27, the Labor Department said. The data
followed the prior week's report showing the lowest number of new
claims in 52 years. Economists surveyed by The Wall Street Journal
estimate that employers added 573,000 jobs in November, roughly on
par with October. The unemployment rate is expected to tick down to
4.5% from 4.6%. The Labor Department is schedule to release the
figures today at 8:30 a.m. Eastern time.
Small-business owners are still struggling to find workers, the
National Federation of Independent Business said, noting its
November jobs report showed 29% of owners reported labor quality as
their top business problem, a 48-year record high. (Dow Jones
Newswires)
Senate Approves Spending Bill Averting Government Shutdown
Congress passed a short-term extension of government funding and
sent the legislation to President Biden's desk, averting a partial
shutdown after resolving a standoff over vaccine rules, Andrew
Duehren writes.
Key Developments Around the World
Wages Are Going Gangbusters in the U.S. -- Elsewhere, Not So
Much
U.S. workers are getting their largest pay bumps in three
decades, while wages in the U.K. are outpacing inflation. But many
employees in some large Asia-Pacific economies are struggling to
negotiate wage increases -- if they can get one -- to cover higher
consumer prices.
Pressure to Grow on RBA to Exit QE Entirely by February
Pressure is set to grow on the Reserve Bank of Australia to exit
its government bond-buying program entirely by February, as other
major central banks hasten the scaling back of their own bond
purchases, James Glynn writes.
OPEC, Russia Agree to Keep Boosting Oil Output, Jolting
Prices
The Organization of the Petroleum Exporting Countries and allied
producers led by Russia agreed to continue pumping more crude,
sticking to their long-term plan despite new worries over demand
raised by the Omicron coronavirus variant.
Financial Regulation Roundup
Australia Adopts Magnitsky Sanctions Rules
Australia passed new rules Thursday that will make it easier to
sanction accused human-rights abusers and to ensure the country
doesn't turn into a haven for criminals, becoming the latest U.S.
ally to pass a law styled after the U.S. Magnitsky Act.
HSBC, Credit Suisse, Others Fined for 'Sterling Lads' Currency
Cartel
European Union authorities fined four banks close to $400
million for manipulating the foreign-currency market by exchanging
sensitive information and trading plans, including through an
online chat room dubbed "Sterling Lads."
FTC Challenges Nvidia's $40 Billion Deal For Arm Holdings
The Federal Trade Commission sued to block Nvidia Corp.'s
proposed $40 billion takeover of chip-design specialist Arm
Holdings, alleging it would give the chip supplier unlawful control
over computing technology and designs that rivals need to develop
their own chips.
Citigroup Applies for China Securities License
Citigroup Inc. has applied for a securities license in China,
according to a person familiar with the matter, as the New
York-based banking giant eyes a bigger presence in the world's
second-largest economy.
Companies Cling to Libor as Key Deadline Nears
U.S. companies need to give up the London interbank offered rate
for new debt at the end of December. Many want to close just one
more deal before that, write Mark Maurer and Sebastian Pellejero.
Come Jan. 1, banks won't be able to issue new loans or other
financial contracts using Libor, which underpins trillions of
dollars in corporate loans, derivatives and home mortgages. They
will, however, be able to keep referencing Libor for debt issued
before the year-end deadline through June 2023.
Forward Guidance
Friday (all times ET)
8 a.m.: European Central Bank's Lane chairs lecture by Ricardo
Reis, London School of Economics, at ECB conference on fiscal
policy and Economic and Monetary Union governance
8:30 a.m.: U.S. Labor Department releases November jobs
report
9:15 a.m.: St. Louis Fed's Bullard speaks on economy and
monetary policy at Missouri Bankers Association conference
Monday
10:30 p.m.: Reserve Bank of Australia releases policy
statement
Research
CFOs Warn in Fed Report of Lasting Inflation Pressures
Chief financial officers of companies are warning of a long
lasting surge in cost pressures, according to a report released
Thursday by the Federal Reserve Bank of Richmond. The bank's
fourth-quarter CFO survey report said that "almost 90% of firms
reported larger-than-normal cost increases -- a sharp rise from the
second quarter of 2021." Federal Reserve Bank of Atlanta economist
Bret Meyer, whose bank undertook the survey with the Richmond Fed
and Duke University's Fuqua School of Business, said that "CFOs
indicate that these cost pressures are not abating and will likely
be with us for some time. Many firms, especially large firms, are
passing on at least some of these cost increases."
-- Michael S. Derby
Moody's Says Global Banking Outlook Is Stable
The outlook for the global banking industry for the next 12 to
18 months is stable, Moody's Investors Service said in a report, as
"solid reserves and healthy capital and liquidity give banks a
strong base as they emerge from the pandemic." While higher
inflation won't immediately undermine banks' profitability, and may
even benefit asset quality in the short run, "persistently higher
inflation accompanied by a sudden rise in interest rates would
weigh on asset valuations and push up customer borrowing costs,
raising the likelihood of loan delinquencies and elevated
provisions," the report added.
-- Stephen Nakrosis
Commentary
'No' on Fed Chairman Jerome Powell
While Jerome Powell was a better choice than Lael Brainard for
Federal Reserve chairman, that alone isn't a good reason to confirm
Mr. Powell for a second term and the Senate should not support his
reappointment, Tom Cotton writes.
Mr. Cotton, a Republican, is a U.S. senator from Arkansas.
What Jerome Powell Couldn't Say in His Speech, and Doesn't
Know
Life was hard enough for the Fed when it rested its credibility
on its ability to achieve a given inflation rate, and now Jerome
Powell is tying his credibility to his own capacity to distinguish
good, transitory inflation from bad, permanent inflation, Joseph C.
Sternberg writes.
Whether Omicron Wreaks Havoc or Not, the U.S. Dollar Is a
Buy
If the new variant torpedoes the recovery, the greenback is
certain to reassume the haven role it played in 2020, and if the
economy shrugs off Omicron and markets see the Fed in a position to
follow through with raising rates, then money will flow into the
U.S., Jon Sindreu writes.
Basis Points
U.S. households over the past two years have socked away close
to $1.6 trillion in excess savings, or resources they otherwise
wouldn't have been able to save before the Covid-19 crisis,
according to the Federal Reserve Bank of New York. The funds are
well beyond the three to six months of emergency savings generally
recommended by financial advisers.
Mexico's Senate ratified President Andres Manuel Lopez Obrador's
nominee to head the Bank of Mexico, deputy finance minister
Victoria Rodriguez, when governor Alejandro Diaz de Leon's term
ends Dec. 31. (Dow Jones Newswires)
Brazil's gross domestic product shrank by 0.1% in the three
months through September compared with the previous quarter, as a
drought hit agricultural production and outweighed growth in the
service sector, but expanded 3.9% from a year earlier, according to
the Brazilian Institute of Geography and Statistics. It added that
second-quarter GDP shrank by a revised 0.4% from the first quarter
and expanded by a revised 1.9% from a year earlier. (DJN)
Italy's unemployment rate increased from 9.2% in September to
9.4% in October, the highest rate since June, as more people joined
the labor market on the economic recovery from the Covid-19
pandemic, according to statistics office Istat. Economists polled
by FactSet expected the rate to drop to 9.1%. (DJN)
The Caixin China Services purchasing managers index dropped to
52.1 in November from 53.8 in October, Caixin Media Co. and
research firm IHS Markit said, moving in line with the official
index as the latest coronavirus outbreaks hurt demand and disrupted
operations at service companies. The reading remained above the
50-mark separating expansion from contraction. (DJN)
The Turkish lira fell after ratings agency Fitch downgraded the
country's outlook to "negative" from "stable" and following data
that showed inflation accelerated. Consumer prices jumped 21.31%
year-on-year in November after rising 19.89% in October. (DJN)
(END) Dow Jones Newswires
December 03, 2021 08:49 ET (13:49 GMT)
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