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Inside the Fed's Powell-Brainard Policy Alliance; Eurozone Inflation Narrative in Spotlight

11/29/2021 | 08:56am EST

Good day. If confirmed by the Senate as Federal Reserve Vice Chairwoman, Fed governor Lael Brainard would join the inner circle of advisers that shape the agenda for monetary-policy deliberations by the central bank's rate-setting committee. Fed Chairman Jerome Powell and Ms. Brainard have already underscored the importance of not raising rates until labor markets are tight. But with inflation running well above the Fed's 2% target, they are facing questions over how long they can maintain that stance. Elsewhere, consumer-price inflation in the eurozone is expected to hit a record high in November, raising more questions about the credibility of assertions by the European Central Bank that this period of high inflation is likely to prove transitory. The European Union's statistics agency is expected to estimate Tuesday that prices were between 4.3% and 4.5% higher in November than a year earlier.

Now on to today's news and analysis.

Top News

Brainard's Nomination Promotes a Powell Ally on Fed Innovations

President Biden's decision to nominate Lael Brainard to become Federal Reserve vice chairwoman elevates a veteran policy maker and economist who has been a strong ally of Chairman Jerome Powell on the central bank's boldest policy decisions during the pandemic.

Ms. Brainard was a key adviser to Mr. Powell as the Fed scaled up emergency-lending backstops last year, and she provided influential intellectual support for his effort last year to revamp the Fed's policy-setting framework. Under the new framework, the Fed set aside its practice of raising rates to pre-empt inflationary pressures and pledged to keep interest rates low to foster a faster and broader labor-market recovery.

U.S. Economy

Biden's Economic Plans Collide With Inflation Reality

President Biden is racing to show the public he is taking action to address rising prices and bottlenecks amid mounting anxiety among some of his advisers about political fallout heading into next year's midterm elections.

Biden's Nearly $2 Trillion Spending Bill Is a Boon for Unions

President Biden's nearly $2 trillion spending bill passed by the House is stocked with benefits for organized labor, including a measure aimed at helping unionized companies win billions of dollars in new green-energy projects.

Democrats Tackle Changes to $2 Trillion Spending Plan as Deadlines Loom

On the Front Lines of the Supply-Chain Crisis

Supply-chain problems have been a defining feature of the global economy in 2021. For millions of workers, the global gridlock has redefined their jobs. Here is a look at the people working at each link in the global supply chain that moves cargo from a distant factory to your home.

Supply-Chain Snarls Leave Southern California Swamped in Empty Shipping Containers

Key Developments Around the World

Eurozone Inflation Likely Hit Record High in November

Consumer-price inflation in the eurozone likely hit a record high in November, but many economists think that might mark a peak for now, and don't expect the European Central Bank to raise its key interest rate next year.

Turkey's Central Bank: Financial System Strong Despite Lira Crisis

Turkey's central bank said Friday the country's banking sector remained strong and had enough liquid assets to withstand the currency crisis, taking some pressure off President Recep Tayyip Erdogan to change course on economic policies.

On Monday, the Turkish lira fell after Mr. Erdogan ordered an investigation into potential currency manipulation, Dow Jones Newswires reported. Mr. Erdogan has tasked the State Supervisory Council to identify institutions that bought large amounts of foreign currency and to determine whether any manipulation had occurred, Turkey's state-run news agency reported Saturday.

Supply-Chain Woes Snarl Attempts to Tame House Prices

Home builders are passing on higher material costs to customers whenever possible, stoking inflation in countries wrestling with business closures related to Covid restrictions, higher energy bills and port congestion.

Financial Regulation Roundup

Evergrande Blueprint Worked for Chinese Developers, Until It Didn't

China's property boom has spawned numerous developers that, like industry giant China Evergrande Group, borrowed heavily to fund breakneck growth. Now they are inflicting unprecedented losses on international investors.

Jack Ma's Ant Moves Ahead With Credit-Scoring Firm

Ant Group Co. is setting up a credit-scoring company with state-owned shareholder partners, a key step in its broader transition to become a financial-holding company, under directions laid out by Chinese regulators earlier this year.

Chinese Tech Giants, Under Pressure From Regulation, Now Face Economic Drag

Macau Casino Stocks Slide After Arrest of Junket Boss Alvin Chau

Casino stocks fell and share trading of junket operator Suncity Group Holdings was suspended Monday morning after its chairman was held by police over allegations of illegal gambling and money laundering.

Australian Regulator Finalizes New Bank Capital Framework

Australia's regulator of financial institutions won't require the country's banks to raise extra capital as part of its finalized new system to strengthen financial system resilience. The Australian Prudential Regulation Authority on Monday released its well-flagged new bank capital framework. It said it had the goal of embedding "unquestionably strong" levels of capital and aligning Australian standards with internationally Basel III requirements, which are due to come into force around the world from 2023. Australian banks must implement APRA's capital framework by Jan. 1, 2023. (Dow Jones Newswires)

Forward Guidance

Monday (all times ET)

12:15 p.m.: European Central Bank's Lagarde speaks at Lincean Academy event

2 p.m.: Bank of Canada's Macklem gives opening remarks at symposium on indigenous economies

3 p.m.: New York Fed's Williams speaks at event to introduce the New York Innovation Center

3:05 p.m.: Fed's Powell gives prerecorded comments at event to introduce the New York Innovation Center

5:05 p.m.: Fed's Bowman, Bank of Canada's Schembri speak at symposium on indigenous economies

Tuesday

8:30 a.m.: U.S. Commerce Department releases October advance economic indicators report

10 a.m.: Fed's Powell testifies on coronavirus and Cares Act at Senate Banking Committee hearing

10:30 a.m.: New York Fed's Williams speaks at webinar organized by his bank on combating food insecurity

1 p.m.: Fed's Clarida gives speech on Federal Reserve independence at Cleveland Fed event, followed by discussion with Cleveland Fed's Mester

Commentary

U.S. Economy Could Enjoy Post-Holiday Glow

Many people coming off holiday jobs will be looking for work again and available to hire, getting supplies will be easier with holiday goods no longer clogging up transportation networks, and many businesses might look at it as a good time to secure necessary labor and rebuild inventories. As a result, Justin Lahart writes, some of the seasonal swoons in activity that typically occur when the calendar flips might be diminished -- translating into gains after they go through the seasonal adjustment.

Basis Points

The World Trade Organization decided to postpone a ministerial meeting that was scheduled to start Tuesday in Geneva, after dozens of nations restricted travel from southern Africa to prevent the transmission of a new coronavirus variant.

South Africa's warning of a new coronavirus strain walloped the energy sector on Friday, leading to the sharpest declines in oil prices since the global economy locked down early last year to slow the spread of the deadly virus.

The new Covid-19 variant that has unsettled financial markets would need to have a dramatic economic impact to deter the Reserve Bank of New Zealand from continuing to raise interest rates, its chief economist said. (Dow Jones Newswires)

U.S. online retail sales over the Thanksgiving holiday weekend didn't increase from the prior year for the first time in nearly a decade, showing shoppers embraced stores on Black Friday and supply-chain concerns pulled some purchases earlier, according to some industry estimates.

Mexico posted a $2.7 billion trade deficit in October, its fourth consecutive monthly deficit, as imports grew while exports were unchanged from a year earlier. Imports increased 25.1% to $44.66 billion and exports were flat at $41.96 billion, the National Statistics Institute said. (DJN)

Confidence among businesses and households in the eurozone fell in November amid rising inflation, supply-chain constraints and a surge of coronavirus cases. The European Commission said that its economic sentiment indicator, an aggregate measure of business and consumer confidence, fell to 117.5 in November from 118.6 in October. (DJN)

German companies are putting more effort into recruitment this month, according to Ifo, which said its employment barometer rose from 103.7 points in October to 103.8 points. (DJN)

German import prices rose 21.7% on year in October, marking the highest increase since January 1980, Destatis said, noting energy imports were 141.0% more expensive than a year earlier. (DJN)

(END) Dow Jones Newswires

11-29-21 0856ET

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