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Fed Signals Start to Taper of Bond-Buying Stimulus; Powell Discusses Stock Trading by Fed Officials; Brazil Central Bank Raises Key Rate

09/23/2021 | 09:29am EDT

Good day. The Federal Reserve's rate-setting committee said Wednesday in a statement it could start to reduce, or taper, its $120 billion in monthly bond buying as soon as its next scheduled meeting, Nov. 2-3. "The purpose of that language is to put notice out that that could come as soon as the next meeting," Fed Chairman Jerome Powell said. He also discussed recently disclosed stock trading by the heads of the Dallas and Boston Fed banks, adding ethics rules about trading by Fed officials will be reviewed. Elsewhere, Brazil's central bank raised its benchmark lending rate by 1 percentage point to 6.25% and said a similar increase may be coming at its next meeting in October to ensure inflation falls to the bank's target.

Now on to today's news and analysis.

Top News

Fed Tees Up Taper and Signals Rate Rises Possible Next Year

The Federal Reserve signaled it was ready to start reversing its pandemic stimulus programs in November and could raise interest rates next year amid risks of a lengthier-than-anticipated jump in inflation.

The Fed's rate-setting committee, at the end of a two-day gathering, said in its postmeeting statement Wednesday that it could start to reduce, or taper, its $120 billion in monthly asset purchases as soon as its next scheduled meeting, Nov. 2-3.

Analysis: Fed Officials See 'Transitory' Inflation Lasting Quite a While

Transcript: Fed Chief Powell's Postmeeting Press Conference

Powell: Fed Taking Questions About Officials' Trading Very Seriously

Fed Chairman Jerome Powell declined to voice clear support for the leaders of the Dallas and Boston Fed banks when asked about their disclosed stock trading and pledged to change the rules that allowed that by policy makers.

Key Developments Around the World

Brazil's Central Bank Raises Selic to 6.25%, Sees Increase to 7.25%

Brazil's central bank raised its benchmark lending rate by 1 percentage point as consumer prices continue to rise rapidly and said it expects to increase it by the same amount at its next meeting in October.

Taiwan Central Bank Leaves Policy Unchanged

Taiwan's central bank kept its benchmark discount rate at 1.125% and raised its 2021 forecast for gross domestic product growth to 5.75% from 5.08%. (Dow Jones Newswires)

Taiwan Applies to Join Pacific Trade Pact Days After China

Europe Is Pumping Less Gas, Leaving a Gap Russia Is Filling

Europe's need for gas is drawing cargoes of American liquefied natural gas across the Atlantic, feeding into higher prices for gas in the U.S. itself. It has also handed more sway to Russia, Europe's biggest supplier.

U.S. Economy

Infrastructure Plan Faces Uncertainty as Democrats Remain Divided

Persistent divisions among Democrats over the size of their climate and social-welfare plan are threatening to derail much of President Biden's agenda, as progressives signal they could block a roughly $1 trillion infrastructure package.

Hot U.S. Housing Market Cooled Some in August

Existing-home sales slipped 2% in August from the prior month to a seasonally adjusted annual rate of 5.88 million, the National Association of Realtors said Wednesday. August sales fell 1.5% from a year earlier.

Financial Regulation Roundup

SEC Asks Dozens of Companies for More Climate Disclosures

The Securities and Exchange Commission has sent letters to dozens of public companies asking them to provide more information to investors about how climate change might affect their financial earnings or business operations.

FASB Wants More Disclosure on Supply-Chain Finance Programs

The Financial Accounting Standards Board proposed requiring companies to disclose key terms and the size of their supply-chain financing, a move aimed at helping investors better understand the borrowing mechanism.

Elizabeth Warren, Other Democrats Concerned About SPAC Incentives

Four Democratic senators sent open letters to several creators of special-purpose acquisition companies questioning how executives are compensated and requesting details about potential conflicts of interest.

London Stock Exchange to Close Interest-Rate Derivatives Venture

London Stock Exchange Group PLC will shut its venture in interest-rate derivatives, CurveGlobal Ltd., after it failed to gain traction with traders over the past five years, a spokesperson for the exchange operator confirmed.

Ant to Fully Share Consumer Credit Data With China's Government

Credit data generated by Ant Group Co.'s consumer lending service will be fully integrated into a government credit-reporting system, a big step in a continuing effort to bring the fintech giant into line with Chinese regulators' priorities.

Forward Guidance

Thursday (all times ET)

Time N/A: South African Reserve Bank releases policy statement; Bangko Sentral ng Pilipinas releases policy statement; Central Bank of the Republic of Turkey releases policy statement

Friday

8:45 a.m.: Cleveland Fed's Mester speaks virtually on economic outlook at Ohio Bankers League CEO Symposium

9:25 a.m.: European Central Bank's Lane speaks on panel at virtual Joint Regional Financing Arrangements seminar series organized by the European Stability Mechanism

10 a.m.: U.S. Commerce Department releases August new-home sales; Kansas City Fed's George speaks virtually on economy and monetary policy to American Enterprise Institute; Fed's Powell, Clarida and Bowman speak at virtual Fed Listens event on the pandemic recovery

Research

Fed Doubles How Much Firms Can Park Via Reverse Repo Facility

In a technical move Wednesday, the Federal Reserve said it would lift the per-firm counterparty limit on its reverse repo facility from $80 billion to $160 billion. The move comes amid massive inflows into the facility: On Wednesday, $1.283 trillion in cash from money funds and other qualified institutions flowed onto the Fed's books, in a continuing surge of cash looking for options to invest short-term. Last spring, daily activity for the facility was negligible. The rise in the reverse repo's cap wasn't a surprise and it is unclear if it is related to positioning due to the debt-ceiling debate in Washington, which could aggressively affect Treasury market borrowing activity.

-- Michael S. Derby

Commentary

Federal Reserve's Intentions on Rates Remain Muddled

Fed policy makers have been at pains to convince investors that winding down its asset purchases won't necessarily lead to rate increases, but they made something of a muddle of that message on Wednesday, Justin Lahart writes.

Evergrande's Struggles Reflect China's Efforts to Rein in Debt Boom

Lehman Brothers failed when a multiyear mortgage bubble deflated, and now Evergrande is struggling because China is trying to pivot away from a model of economic growth inordinately dependent on debt, Greg Ip writes.

Basis Points

Consumer confidence in the eurozone picked up in September as the spread of the Delta variant of Covid-19 was brought under control and restrictions were eased, lifting the European Commission's measure of consumer confidence in the single-currency area to minus 4.0 from minus 5.3 in August. Economists polled by The Wall Street Journal had forecast a reading of minus 6.0. (Dow Jones Newswires)

The Ifo Institute cut its growth forecast for Germany in 2021 by 0.8 percentage point to 2.5%, as the economy didn't rebound as strongly as expected in the third quarter, and raised its growth forecast for 2022 by 0.8 percentage point to 5.1%. In 2023, Ifo expects growth of 1.5%. (DJN)

France's total financing requirements will decline in 2022 from this year, mainly due to a lower budget deficit, the French Treasury Agency said, noting that financing requirements will total 292.7 billion euros ($343.26 billion) next year versus EUR313.5 billion expected this year. (DJN)

South Africa's annual consumer price inflation inched up to 4.9% in August from 4.6% in July, Statistics South Africa said, marking the fourth consecutive month in which annual inflation is higher than the midpoint of the central bank's target range of between 3% and 6%. (DJN)

The value of transborder freight in North America rose 22% in July from a year earlier and was up 8.6% from July 2019, according to the U.S. Bureau of Transportation Statistics. A total of $111.3 billion in transborder freight was moved in July, BTS said. (DJN)

(END) Dow Jones Newswires

09-23-21 0928ET

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