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Concerns About High U.S. Inflation May Be Overblown; Hawkish Talk by Two Federal Reserve Governors

10/27/2021 | 06:46am EST

Good day. Inflation next year could be much less than the 5.4% rate at which the consumer-price index has risen over the past 12 months, says Mark Hulbert, a contributor to sister publication Barron's. It's a rosy projection that comes from inflation models with the best historical track records, according to a new study, he writes. Meanwhile, The Wall Street Journal's Michael S. Derby writes that two Federal Reserve governors have indicated the Fed could move forward its timing for an interest-rate increase if inflation doesn't start moderating relatively soon. That aggressive talk on rates contrasts with the views of most other central bank officials, including Chairman Jerome Powell.

Now on to today's news and analysis.

Top News

Why Inflation Will Probably Be Lower Than Many Fear

Focusing on the models with the best track records would seem to be an obvious approach to the debate over whether inflation's recent surge is transitory. But surprisingly few commentators have done so. Many appear to have instead based their projections on little more than intuitions and hunches, picking and choosing among the myriad pieces of available economic data and anecdotal evidence to find what supports their prior beliefs. Read more at Barron's.

Derby's Take: As FOMC Meeting Nears, Two Fed Governors Issue Hawkish Warnings

By Michael S. Derby

Federal Reserve governors are leading the way when it comes to hawkish talk at the central bank about what may be needed to bring high levels of inflation back under control. Read more.

U.S. Economy

U.S. Consumer Confidence Rose as Delta Covid-19 Wave Eased

The Conference Board's consumer confidence index increased to 113.8 in October from a revised 109.8 in September as Americans' concerns over Covid-19 eased, according to the group's senior director of economic indicators.

Home-Price Growth Holds at Record in August

The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the U.S., rose 19.8% in the year ended in August, unchanged from the prior month.

Corporate Minimum Tax Resurfaces as Democrats Hunt for Money

Senate Democrats detailed a 15% minimum tax on large companies' income, refreshing an earlier revenue proposal as they try to generate enough money to pay for President Biden's social-spending and climate-change agenda.

Billionaire Tax Faces Likely Constitutional Challenge

Democrats' plan to tax billionaires' unsold assets each year as they gain in value faces a potentially significant obstacle: a legal challenge, given the clear incentive for a taxpayer to spend millions in legal fees to save billions on taxes.

How the Billionaires Income Tax Would Work

Key Developments Around the World

U.N. Finds Nations' Climate Plans Fall Short of Paris Accord

The world's emissions reductions plans would allow far more global warming than targeted in the Paris climate accord, and some of the biggest emitters, including the U.S., aren't on track to hit their pollution targets, according to a UN report.

China's Energy Crisis Complicates Its Plans for Climate Announcements Ahead of COP26

Australia Commits to Net-Zero Emissions by 2050, Shedding Climate Outlier Status

Financial Regulation Roundup

U.S. Takes Bitcoin Mining Crown After China Crackdown

After a government crackdown in China, many miners are betting on reliable access to energy and a more predictable regulatory environment in the U.S. More than a third of the global computing power dedicated to mining bitcoin is now drawn from machines in the U.S., up from less than a fifth last spring, according to data from the University of Cambridge.

Former Ghosn Aide's Trial Finishes With a Declaration of Innocence

The defense for former Nissan Motor executive Greg Kelly made its final argument for their client's innocence, arguing that prosecutors failed to prove key parts of the case involving former chief Carlos Ghosn's compensation.

Swedish FSA Drops Swedbank Market Abuse Probe

Swedbank AB said that the Swedish Financial Supervisory Authority has dropped its investigation into breaches of European Union market abuse regulations at the bank.

Forward Guidance

Wednesday (all times ET)

Time N/A: Central Bank of Brazil releases policy statement

8:30 a.m.: U.S. Commerce Department releases September advance economic indicators report; U.S. Commerce Department releases September durable-goods data

10 a.m.: Bank of Canada releases interest-rate announcement and monetary policy report

11 a.m.: Bank of Canada's Macklem holds press conference


Time N/A: Bank of Japan releases policy statement and quarterly outlook report; Central Bank of Egypt releases policy statement

7:45 a.m.: European Central Bank releases policy statement

8:30 a.m.: European Central Bank's Lagarde holds press conference; U.S. Commerce Department releases first estimate of third-quarter GDP


The Lowdown on the Third-Quarter Slowdown

The biggest question coming out of Thursday's U.S. GDP report will be what comes next, because the supply-chain problems affecting car makers and other industries continue to hold businesses back, Justin Lahart writes.

Basis Points

Factory activity in the central Atlantic region of the U.S. expanded in October, signaling business conditions improved, according to the Federal Reserve Bank of Richmond. Its Fifth District Survey of Manufacturing Activity's composite index rose to 12 from minus three in September. Economists polled by The Wall Street Journal expected the indicator to come in at 5. (Dow Jones Newswires)

Brazil's 12-month inflation rate rose in the 12 months through mid-October after transportation and power prices continued to increase, lifting consumer prices 1.20% from Sept. 16, the fastest pace for any month in more than five years, and by 10.34% from a year earlier, Brazil's Institute of Geography and Statistics said. (DJN)

U.S. public-pension funding surged this year thanks to buoyant financial markets, taking the aggregate funded ratio of the 100 largest U.S. public pension plans to 85% as of June 30, according to actuarial company Milliman, marking what it said is a "stunning improvement" from 70% in 2020. (MarketWatch)

Chinese industrial companies' profits rebounded in September, ending a six-month slide in growth. Industrial profits climbed 16.3% in September from a year earlier, compared with a 10.1% rise in August. In the first nine months of the year, profits grew 44.7% from a year earlier, slowing from a 49.5% increase in January-August period, as power shortages, rising commodity costs and Covid-19 outbreaks weighed. (DJN)

Consumer sentiment in Germany is expected to strengthen in November, due to increasing propensity to consume and declining propensity to save, according to data from market-research group GfK. Its forward-looking consumer sentiment index forecasts confidence among households rising to 0.9 point in November from a revised figure of 0.4 point in October. (DJN)

(END) Dow Jones Newswires

10-27-21 0846ET

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