Good day. Fed officials are about to start their two-day meeting, where they are expected to wrestle with how to put meat on the bones of their new average inflation framework. The central bank yesterday named Trevor Reeve as director of its monetary affairs division. Mr. Reeve was involved in key decisions while serving as the division’s deputy director since 2017. And Chicago Fed leader Charles Evans, who helped shape the Fed's financial crisis-era interest-rate guidance, reckons that any new effort on this front will be trickier to pull off.

 Now on to today’s news and analysis.

The Federal Reserve named Trevor Reeve, a senior adviser to Chairman Jerome Powell, to the powerful role of director of its monetary affairs division on Monday. In elevating Mr. Reeve to the post, the Fed is facilitating a smooth transition at a challenging juncture for policy planning, as the director of the monetary affairs division is a key participant in meetings of the central bank’s rate-setting Federal Open Market Committee

The problem the Fed now faces is “a little more complicated” compared with when it adopted threshold-based forward guidance at the end of 2012, Chicago Fed President Charles Evans Evans recently told reporters. Read more. 

The Swedish central bank on Tuesday extended its commitment to offer monetary policy counterparties loans in U.S. dollars against collateral, up to March 31 2021. The Riksbank decided in March to offer monetary policy counterparties loans of up to $60 billion against collateral until 18 September 2020 to counteract the ongoing market unease resulting from the coronavirus pandemic. (Dow Jones Newswires) 

Euronext said it submitted a non-binding offer to acquire Borsa Italiana from London Stock Exchange Group. The Pan-European exchange said the bid was submitted in partnership with Italian lenders Cassa Depositi e Prestiti Equity and Intesa Sanpaolo SpA. (Dow Jones Newswires)

9:15 a.m.: Federal Reserve releases August U.S. industrial production

Time N/A: Central Bank of Brazil releases policy statement
8:30 a.m.: U.S. Commerce Department releases August retail sales
2 p.m.: U.S. Federal Reserve releases policy statement and economic projections
2:30 p.m.: Fed’s Powell holds virtual press conference

A report Monday from Congress' bipartisan Joint Economic Committee said the Federal Reserve should move to a system in which it allows economic activity to go above its trend growth rate to make up for times when it has fallen short. "Describing a ‘level target’ policy—in which monetary policy is not tightened until the economy returns to that trend, with specific markers for what would constitute a return to normalcy—would help build confidence that a strong recovery is coming," the report said. Given the likelihood short-term rates will be near zero for a long time to come, the report said that such a system would help bolster confidence that a strong economic recovery emerges after the coronavirus pandemic and is not snuffed out by premature policy tightening. Alan Cole, the committee's senior economist, said in the report that "output gaps like that of the last decade come with tremendous losses" and that "we can use what we have learned from the experiences of 2007-2019 to help mitigate the present Covid-19 recession, and prevent or mitigate future recessions as well."

                                                                                                    —Michael S. Derby

Radical departures from Shinzo Abe’s economic program are unlikely, but incoming prime minister Yoshihide Suga could still leave a lasting impact if he declines to repeat his predecessor’s greatest mistakes, Mike Bird writes for Heard on the Street. "The most valuable thing Mr. Suga could do, regardless of the length of his tenure, would be to put the idea of more sales-tax increases out to pasture," Mr. Bird says. 

• China’s average new home prices continued rising at a faster pace in August from the previous month, as the real-estate sector rebounds from the coronavirus crisis and cheap credit flows into the market, lifting the average price in 70 cities by 0.56% from July, according to the National Bureau of Statistics. (Dow Jones Newswires)
• The number of workers in Mexico registered with its Social Security Institute, a gauge of formal private-sector employment, rose in August for the first time in six months, with more than 92,000 jobs added after more than 1.1 million were lost in the preceding five months, mostly due to shutdowns over coronavirus.  (DJN)
• Mexico issued the first sovereign bonds linked to the sustainable development goals of the UN, placing €750 million ($889 million) in bonds due 2027 at a yield of 1.603%. (DJN)
• Consumer confidence in New Zealand fell to its lowest level since 2008 in September after renewed pandemic restrictions curtailed economic activity, with the Westpac McDermott Miller consumer confidence index dropping 2.1 points to 95.1, indicating pessimism about future economic prospects outweighs optimism. (DJN)
• Nearly 100,000 U.S. restaurants have closed as a result of the coronavirus pandemic, representing one in six locations, according to a new survey by the National Restaurant Association, which expects restaurants will lose $240 billion this year. (DJN)

This newsletter is compiled by James Christie in San Francisco and Ed Ballard in London. 

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