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Bostic Wants to Speed Up Fed's Asset Buying Taper; Quarles Says Fed Will Need to Raise Rates

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)

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December 03, 2021 08:49 ET (13:49 GMT)

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