Have a good day. This year’s surge in inflation has had a sometimes overlooked side effect: It means that the Federal Reserve’s interest rate policy is providing even more fuel to a growing economy, writes The Wall Street Journal’s Nick Timiraos. He notes that with inflation of 5% in October compared to the previous year, according to the Fed’s preferred gauge, real short-term rates are at their lowest level in four decades and deeply negative. Inflation is even higher, according to the Ministry of Labor. He reported on Friday that the consumer price index rose 6.8% in November from a year earlier, the fastest pace since 1982. The core index, which excludes the volatile costs of food and energy, rose 4.9% from the previous year. Such increases may help explain why American workers may feel exhausted even as jobs abound as the economy strengthens, the Journal’s Jennifer Levitz reports.

Now on to today’s news and analysis.

Top news

Inflation pushes US real interest rates further into negative territory

In economic models, it is the inflation-corrected – or “real” – interest rate that matters most, because inflation reduces the value of future repayments. The real rate “is arguably the most fundamental indicator of the direction of monetary policy,” wrote economists Christina Romer and David Romer in a 2004 article. With inflation of 5% in October relative to l he year before, according to the Federal Reserve’s preferred gauge, real short-term rates were at their lowest level in four decades and deeply negative.

What do you think of inflation? The answer will help determine its longevity

Supply chain disruptions, labor shortages and rising oil prices have pushed inflation to its highest level in 39 years. But attention is now shifting to another variable: Do people think inflation is here for a while?

Derby’s point of view: Economists see Fed considering two rate hikes in 2022 at FOMC meeting

By Michael S. Derby

Economists are taking into account a more hawkish interest rate path for the Federal Reserve and expect its officials to reveal the change in the forecast due for release on Wednesday.

Based on comments from a number of Fed officials, economists also expect that after the conclusion of the two-day Federal Open Market Committee meeting, the central bank will pick up the pace. of its so-called reduction, or liquidation, of its stimulus to purchase bond assets, with a view to completing it around March. Read more.

American economy

US inflation hit a 39-year high in November

The Labor Department said on Friday that the Consumer Price Index – which measures what consumers pay for goods and services – rose 6.8% in November from the same month a year ago. It was the fastest pace since 1982 and the sixth consecutive month in which inflation has exceeded 5%. The so-called base price index, which excludes the often volatile food and energy categories, rose 4.9% in November from a year earlier. This is a larger increase than the 4.6% increase in October and the highest rate since 1991.

Inflation hits workers already exhausted by Covid-19

Lately, jobs are plentiful, consumer demand is on the rise, and road signs are touting signing bonuses as the economy improves. Yet many workers and small business owners say they are frustrated with inflation and the still disruptive effects of the pandemic.

Democrats face inflation, concerns over costs of $ 2 trillion spending plan

President Biden and the Main Democrats have rushed to counter new Republican criticism that the party’s education, health and climate change bill is more expensive than it looks and will exacerbate inflation , concerns shared by Senator Joe Manchin, a decisive vote for the plan.

Why US job gains are so hard to count during Covid-19

During the Covid-19 pandemic, economists have had particular difficulty predicting the number of jobs added in the U.S. monthly employment report, and the government has regularly made large revisions to its initial estimates.

Friction between US and China undermines efforts to resolve global trade disputes

A recent sign of the friction spilling over to the World Trade Organization’s dispute settlement function, the United States has since 2019 blocked new appointments to its seven-judge appeals body that examines trade disputes, saying that ‘They acted because the tribunal has an overbreadth track record.

Key developments around the world

China returns to focus on economic stability

China has again focused on keeping growth stable, as debt reduction policies and speculation triggered a sharp slowdown, especially in the real estate market. “Ensuring stability is the top priority for the economy next year,” the heads of government said in a statement.

Brazil grapples with ex-nemesis inflation amid pandemic

As the global economy is expected to rebound by more than 4% next year, including in countries in South America, more economists expect Brazil to remain stuck in recession by 2022 as it battles one of the world’s highest annual inflation rates of 10.7%.

Dizzying vaccination rates and zero taxes make Dubai a booming city

Even though the Omicron variant has rocked markets and imposed border restrictions across the world, Dubai has become a booming pandemic city, and it has doubled down on an open economy that welcomes a growing international workforce. more mobile.

Iran bets economy will hold up despite tough stance on nuclear program

US sanctions against Iran have damaged its economy, sparking unemployment and plummeting its currency. Still, Iranian officials say the country’s economy is resilient and would survive even if talks to revive the 2015 nuclear deal collapse.

Overview of financial regulation

SEC Attracts Top Law Enforcement Official Who Says Tougher Sanctions Are Coming

The Securities and Exchange Commission often chooses its best cop from the best defense lawyers on Wall Street. His most recent – Gurbir Grewal – had not worked on a securities case for nearly six years until he took the job in July.

Britain steps up scrutiny of foreign takeovers as US deals increase

Britain takes a closer look at foreign takeovers of its companies, complicating a popular path to overseas expansion for US companies as they spend record money on UK acquisitions , who for decades boasted of being the champion of open markets.

Overdraft fees make banks richer, and White House wants less

The Bureau of Consumer Financial Protection and the Office of the Comptroller of the Currency are lobbying financial institutions to reduce what officials describe as overdependence on overdraft fees, through a combination of public warnings and potential new regulations.

SEC investigates private equity firm backed by wealthy families

The Securities and Exchange Commission is investigating a private equity firm backed by several ultra-wealthy American families after receiving complaints that its owner was using funds to cover personal expenses, according to documents.

Yellen tightrope walk to deliver on Biden climate promises

Faced with pressure from Congressional Democrats and the need to keep President Biden’s campaign promises, Treasury Secretary Janet Yellen is calling on financial regulators to take action to reduce climate change risks.

Prospective indications

Monday (every hour ET)

12 p.m .: Bank of England releases financial stability report

Tuesday

Time N / A: Hungarian National Bank issues policy statement

8:30 am: US Department of Labor releases November PPI

To research

JP Morgan advances expected timing of Fed rate take-off

JP Morgan has revised its outlook on when it expects the Federal Reserve to hike interest rates, envisioning an increase in June from its earlier forecast of a take-off next September, wrote the bank economist Michael Feroli in a note to clients on Friday. The bank expects quarterly rate hikes after that, Feroli added. The bank also expects the Fed to follow up on recent comments from some officials and step up the pace of scaling back its bond buying program, ending asset purchases in mid-March. Mr Feroli said any cut announcements will be conveyed in the Fed’s statement after its policy meeting this week, noting that “we expect it to reiterate the option of adjusting the pace in response to the evolution of developments “.

– Michael S. Derby

Remark

The Federal Reserve is the main culprit in inflation

Inflation is a choice for which the Fed is primarily responsible, and it becomes part of the price formation process when the central bank acts late or with insufficient conviction, writes Kevin Warsh, adding that to date the Fed acted as a catalyst.

Mr. Warsh, a former member of the Federal Reserve Board, is a Distinguished Visiting Fellow in Economics at the Hoover Institution, Stanford University.

(END) Dow Jones Newswires

December 13, 2021 09:14 ET (14:14 GMT)

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