By Michael Maloney

Good day. Surging inflation is leading some workers to demand bigger raises. But wage increases prompted by higher prices could protect workers while potentially fueling more inflation, economists say. And as the Federal Reserve takes steps to keep inflation in check, its so-called monetary policy hawks could provide the best clues 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, Cost-of-Living Raises Gain Popularity

The COLA is making a comeback. Higher prices, a worker shortage and a revitalized labor movement are bringing about the return of pay increases tied to inflation, known as cost-of-living adjustments, or COLAs. On Tuesday, striking workers at food maker Kellogg ratified a contract that included a COLA, the second major labor agreement in recent weeks to feature such pay adjustments. Analysts say COLAs could spread in future negotiations between employers and unions.

Food Companies Are Having Trouble Keeping Up With Inflation

General Mills Says Prices to Climb Next Year

Derby's Take: In Balance-Sheet Debate, Pay Attention to the Hawks

By Michael S. Derby

In the Federal Reserve's struggle to contain surging inflation in a rapidly expanding economy, shrugging off the most hawkish of central bank officials can be a mistake.

The Fed's hawks -- those most inclined toward boosting borrowing costs -- in recent months made comments that telegraphed where the institution ended up going recently. The biggest proponents of taking away emergency support for the economy have been James Bullard of the St. Louis Fed and Fed governor Christopher Waller, who until last year was research director at Mr. Bullard's bank. Read More.

U.S. Economy

As Omicron Takes Over in the U.S., More Curbs World-Wide

New travel restrictions and other steps to curb the spread of the Omicron variant were put in place world-wide as further evidence emerged of just how rapidly the new strain spreads.

Biden Administration to Distribute 500 Million At-Home Test Kits

Covid-19 Pandemic Drives U.S. Population Growth to Record Low

America'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 country's demographic contours.

American Workers Are Burned Out, and Bosses Struggle to Respond

In the first 10 months of this year, America's workers handed in nearly 39 million resignations, the highest number since tracking began in 2000.

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

Life Expectancy in U.S. Declined 1.8 Years in 2020, CDC Says

In Louisville, Hub of E-Commerce, Businesses Duel for Workers

Key Developments Around the World

Turkey Rolls Out Economic Rescue Plan, Reversing Lira Spiral

Turkey's currency mounted a dramatic, partial reversal from a monthslong collapse Tuesday after President Recep Tayyip Erdogan announced a rescue plan to encourage Turks to put their money back into the lira.

In a televised speech late Monday, Mr. Erdogan said the government will guarantee returns on lira deposits at a rate similar to those on foreign currency, making up for any further depreciation in the lira. The Finance Ministry released details of the policy on Tuesday.

Bank of Thailand Keeps Rate at Record Low Amid Uncertain Outlook

Thailand's central bank maintained its benchmark interest rate at a record low as the economy struggles to recover and the Omicron variant casts uncertainty over the outlook, writes The Wall Street Journal's Kosaku Narioka.

China's Tech-Investment Paradox

China's economy is struggling right now, but one thing not lacking is foreign investment, writes the WSJ's Nathaniel Taplin. Keeping that up may help China offset the drag from a slower growing property sector in the future.

Financial Regulation Roundup

NatWest Unit Pleads Guilty to Manipulating Treasury Markets

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

SEC Taps Academic to Oversee Mutual Funds

The Securities and Exchange Commission tapped law professor William Birdthistle to serve as its top 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 $125 million to the U.S. Securities Exchange Commission to settle an investigation into allegedly misleading statements made by its founder and former executive chairman.

Biden Bill Targets Foreign Real-Estate Investors' Tax Moves

In a bid to raise funding for their roughly $2 trillion social-spending bill, Democrats are targeting foreign real-estate investors. The U.S. government charges investors from certain countries a tax of up to 30% on profits made from U.S. commercial real estate. But many overseas buyers have been able to avoid paying this tax, which isn't assessed on U.S. companies, through a complex maneuver involving loans from offshore entities. Now, a provision in the Build Back Better bill would likely end the practice.

Forward Guidance

Wednesday (all times ET)

8:30 a.m.: Czech National Bank releases policy statement; U.S. Commerce Department releases third estimate of third-quarter GDP

10 a.m.: National Association of Realtors releases November U.S. existing-home sales

Thursday

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

8:30 a.m.: U.S. Commerce Department releases November personal income and outlays; U.S. Commerce Department releases November durable-goods data

10 a.m.: U.S. Commerce Department releases November new-home sales; University of Michigan releases final December consumer sentiment survey

Research

New York Fed: First Wave of Pandemic Bond Buys Helped Fix Markets

New York Fed research says central-bank bond buying done in March 2020, at the start of the pandemic, did a good job of restoring market functioning in the face of heavy stress. "While it is difficult to pin down the effects of the Fed's purchases amidst the pandemic and numerous policy actions, the evidence suggests they were effective," says Michael Fleming, Haoyang Liu, Rich Podjasek and Jake Schurmeier for the bank. The paper did add that the purchases weren't a panacea, and the fact that the Fed rode to the market's rescue may increase moral hazard risks and make market participants believe the central bank will bail them out next time there's trouble. -- Michael S. Derby

Commentary

China's Yuan May Have Peaked

The Chinese yuan has been a surprise winner in 2021, making steady gains against the dollar even as China's economy has been faltering. But that is unlikely to last, writes WSJ's Paul Overberg.

Basis Points

The U.S. current-account deficit widened 8.3% to $214.8 billion in the third quarter, the Commerce Department said. It is the largest deficit since 2006. The trade gap has widened for seven straight quarters. The widening of the 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)

Federal Reserve Bank of New York research says central-bank bond buying done in March 2020, at the start of the pandemic, did a good job of restoring market functioning in the face of heavy stress. "While it is difficult to pin down the effects of the Fed's purchases amidst the pandemic and numerous policy actions, the evidence suggests they were effective," says Michael Fleming, Haoyang Liu, Rich Podjasek, and Jake Schurmeier for the bank. (DJN)

Eurozone inflation is on the rise. Headline inflation jumped to 4.9% year-on-year in November, reaching its highest level ever. Meanwhile energy inflation continues its relentless advance, rising to 27.5% from 23.7% in October. These upside surprises have caused many analysts to upgrade their inflation forecasts for 2022. (DJN)

Oxford Economics' eurozone recovery tracker continued its downward trajectory in early December as the resurgent pandemic, re-imposed restrictions, and social distancing took their toll on activity. The tracker fell to 80.2 points from 83.4 in the two weeks ended Dec. 5. This is the lowest reading since May, OE's Tomas Dvorak says. (DJN)

German supply problems have once again worsened significantly for the country's retail sector, the Ifo Institute says. In December, 81.6% of retailers complained that they won't receive all the goods they ordered, up from 77.8% in November. (DJN)

U.K. economic growth 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, says Gabriella Dickens, senior U.K. economist at Pantheon Macroeconomics. Official data showed the current-account deficit widened to GBP24.4 billion in the third quarter, compared with a revised deficit of GBP13.5B in 2Q, wider than the previous estimate of GBP8.6 billion. (DJN)

(END) Dow Jones Newswires

12-22-21 0936ET