COLA is making a comeback; Observation of hawks at the Fed

By Michael Maloney 

Have a good day. Soaring inflation is leading some workers to demand larger increases. But higher price-induced wage increases could protect workers while potentially fueling more inflation, economists say. And as the Federal Reserve takes action to control inflation, its so-called monetary policy hawks could provide the best clues as to what the central bank will do with its giant balance sheet.

Now on to today’s news and analysis.

Top news

As inflation rises, the cost of living rises more and more popular

COLA is making a comeback. Higher prices, a labor shortage, and a revitalized labor movement are leading to the return of inflation-linked wage increases, known as cost-of-living adjustments, or COLAs. On Tuesday, strikers at food maker Kellogg ratified a contract that included a COLA, the second major labor agreement in recent weeks to feature such wage adjustments. Analysts say COLAs could expand into future negotiations between employers and unions.

Food companies struggle to keep up with inflation

General Mills says prices will go up next year

The Derby point of view: in the balance sheet debate, watch out for hawks

By Michael S. Derby

In the Federal Reserve’s struggle to contain soaring inflation in a rapidly expanding economy, ignoring the more hawkish central bank official may be a mistake.

The Fed’s hawks – the ones most inclined to increase borrowing costs – in recent months have made comments that telegraphed where the institution had ended up going recently. The biggest proponents of cutting emergency support for the economy were James Bullard of the St. Louis Fed and Fed Governor Christopher Waller, who until last year was research director at the Mr. Bullard’s bank. Read more.

American economy

As Omicron takes over in the United States, more curbs in the world

New travel restrictions and other measures to curb the spread of the Omicron variant have been put in place around the world as new evidence emerges on how quickly the new strain is spreading.

Biden Administration to distribute 500 million home test kits

Covid-19 pandemic pushes US population growth to record highs

The U.S. population grew 0.1% this year, the lowest rate on record, according to Census Bureau figures released Tuesday that show how the pandemic is changing the demographic contours of the country.

American workers are exhausted and bosses struggle to react

In the first 10 months of this year, American workers submitted nearly 39 million quits, the highest number since monitoring began in 2000.

Some people want better jobs. Others, a better work-life balance. Still others want a complete break from the corporate grind. Almost two years after the start of the pandemic that left millions of people doing their work from home, many Americans are rethinking their relationship with work.

Life expectancy in the United States decreased by 1.8 years in 2020, according to CDC

In Louisville, e-commerce hub, business duel for workers

Key developments around the world

Turkey deploys economic bailout, reverses lira spiral

Turkey’s currency saw a partial and dramatic reversal after collapsing several months on Tuesday after President Recep Tayyip Erdogan announced a bailout to encourage Turks to put their money back into the pound.

In a televised speech on Monday evening, Erdogan said the government would guarantee the yields on lira deposits at a rate similar to foreign currencies, thus offsetting any further depreciation of the pound. The finance ministry released details of the policy on Tuesday.

Bank of Thailand keeps rate at record high amid uncertain outlook

Thailand’s central bank has kept its benchmark interest rate at an all-time high as the economy struggles to recover and the Omicron variant casts uncertainty on the outlook, writes Kosaku Narioka of the Wall Street Journal.

The paradox of technological investment in China

The Chinese economy is struggling right now, but one thing is not lacking is foreign investment, writes Nathaniel Taplin of the WSJ. Maintaining this could help China offset a slowdown in a slower growing real estate sector in the future.

Overview of financial regulation

NatWest unit pleads guilty to manipulating treasury markets

NatWest Markets pleaded guilty to wire fraud and securities fraud, admitting that its traders in London, Singapore and Connecticut engaged in a number of schemes between 2008 and 2018 to manipulate the US Treasury markets.

SEC uses Academic to oversee mutual funds

The Securities and Exchange Commission has called on law professor William Birdthistle to become its primary regulator of asset managers as it prepares to issue stricter rules for money markets and private funds.

Nikola to pay $ 125 million in SEC settlement

Nikola has agreed to pay the US Securities Exchange Commission $ 125 million to settle an investigation into allegedly misleading statements made by its founder and former executive chairman.

Biden Bill targets tax measures for foreign real estate investors

In a bid to raise money for their roughly $ 2 trillion social spending bill, Democrats are targeting foreign real estate investors. The US government imposes a tax of up to 30% on investors in certain countries on profits from US commercial real estate. But many foreign buyers were able to avoid paying the tax, which is not imposed on US companies, thanks to a complex maneuver involving loans from offshore entities. Now, a provision in the Build Back Better bill would likely end this practice.

Prospective indications

Wednesday (every hour ET)

8:30 am: Czech National Bank issues policy statement; US Department of Commerce releases third estimate of third quarter GDP

10 a.m .: National Association of Realtors publishes sales of existing homes in the United States in November

Thusday

Time N / A: Bank of Japan’s Kuroda delivers speech at Nippon Keidanren’s meeting in Tokyo

8:30 a.m .: US Department of Commerce releases personal income and expenses for November; US Department of Commerce releases November durable goods data

10:00 am: US Department of Commerce releases November new home sales; University of Michigan releases latest consumer confidence survey in December

To research

New York Fed: First wave of pandemic bond buying helped fix markets

New York Fed research indicates that central bank bond purchases made in March 2020, at the start of the pandemic, did a good job of restoring market functioning in the face of high tensions. “While it is difficult to determine the effects of the Fed’s purchases amid the pandemic and numerous political actions, the evidence suggests they have been effective,” say Michael Fleming, Haoyang Liu, Rich Podjasek and Jake Schurmeier for the bank. The newspaper added that the purchases were not a panacea and the fact that the Fed came to the market’s rescue could increase the risks of moral hazard and make market participants believe that the central bank will bail them out next. once there will be problems. – Michael S. Derby

Remark

Chinese yuan may have peaked

The Chinese yuan was a surprise winner in 2021, making consistent gains against the dollar even as the Chinese economy falters. But it’s unlikely to last, writes WSJ’s Paul Overberg.

Base points

The US current account deficit widened 8.3% to $ 214.8 billion in the third quarter, the Commerce Department said. This is the largest deficit since 2006. The trade gap has widened for seven consecutive quarters. The widening deficit reflected a reduced surplus on services, which have been hit hard by the coronavirus. The goods deficit widened in the third quarter. (Dow Jones Newswires)

Research from the Federal Reserve Bank of New York indicates that central bank bond purchases made in March 2020, at the start of the pandemic, did a good job of restoring market functioning in the face of high tensions. “While it is difficult to pin down the effects of the Fed’s purchases amid the pandemic and the many political actions, the evidence suggests they have been effective,” says Michael Fleming, Haoyang Liu, Rich Podjasek and Jake Schurmeier for the bank. (DJN)

Inflation in the euro zone is on the rise. Headline inflation jumped to 4.9% year-on-year in November, reaching its highest level on record. Meanwhile, energy inflation continues to grow steadily, reaching 27.5% against 23.7% in October. These good surprises have led many analysts to revise their inflation forecasts upwards for 2022. (DJN)

Oxford Economics’ eurozone recovery tracker continued its downward trajectory in early December as the resurgent pandemic, reimposed restrictions and social distancing wreaked havoc on business. The tracker fell to 80.2 points from 83.4 in the two weeks ended December 5. This was the lowest reading since May, according to Tomas Dvorak from OE. (DJN)

Supply problems in Germany have once again dramatically worsened for the country’s retail sector, according to the Ifo Institute. In December, 81.6% of retailers complained that they did not receive all products ordered, up from 77.8% in November. (DJN)

UK economic growth has slowed and the country’s current account deficit widened in the third quarter, showing that the economy was struggling to recover even before the emergence of the Omicron variant of Covid-19, said Gabriella Dickens, senior UK economist at Pantheon Macroeconomics. Official data showed the current account deficit widened to £ 24.4bn in the third quarter, from a revised deficit of £ 13.5bn in the second quarter, higher than the previous estimate of £ 8.6 billion. (DJN)

 

(END) Dow Jones Newswires

December 22, 2021 09:36 ET (14:36 ​​GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.


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