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Warren Wants Ban on Regional Fed Leaders Trading Stocks; Rising Shipping Costs Are Companies’ Latest Inflation Riddle
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Good day. Sen. Elizabeth Warren (D., Mass.) has shot off a letter to the leaders of the 12 regional Federal Reserve banks calling for a ban on bank senior officials owning and trading individual stocks. The move follows disclosures that the chiefs of the Boston and Dallas Fed banks actively traded stocks and other investments last year. Both said last week they would sell off their stockholdings and move the money into cash or diversified investment funds by the end of the month. Meanwhile, transportation costs—typically a fraction of a finished product’s price—are emerging as another supply-chain hurdle, overwhelming some companies already paying more for raw materials and labor.
Now on to today’s news and analysis.
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Warren Calls On Fed Banks to Bar Leaders From Stock Trading
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Sen. Elizabeth Warren asked for a response by Oct. 15 on how regional Fed banks would implement her requested changes. PHOTO: AL DRAGO/BLOOMBERG NEWS
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Sen. Elizabeth Warren (D., Mass.) is calling on regional Federal Reserve Banks to set rules that would prevent their leaders from trading individual stocks, following recent disclosures that the chiefs of the Boston and Dallas banks actively traded stocks and other investments last year.
“The controversy over asset trading by high-level Fed personnel highlights why it is necessary to ban ownership and trading of individual stocks by senior officials who are supposed to serve the public interest,” Ms. Warren wrote in letters addressed to the leaders of the 12 regional Fed banks.
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Rising Shipping Costs Are Companies’ Latest Inflation Riddle
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The Covid-19 pandemic has driven a long-lasting surge in transportation costs, putting pressure on many businesses already confronting higher wages and raw-material prices. Some CEOs are saying they expect elevated freight costs stretching into 2023.
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How the U.S. Nailed the Economic Response to Covid-19
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The Federal Reserve gets some credit for slashing interest rates to near zero and intervening in markets to prevent an economic crisis from becoming a financial crisis. Then fiscal policy rose to the challenge, Greg Ip writes.
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High Steel Prices Have Manufacturers Scrounging for Supplies
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Manufacturers are facing the highest steel and aluminum prices in years, pushing them to take what steel they can get and another hurdle for U.S. companies already struggling to make enough cars, cans and other products.
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U.S. Industrial Production Recovers to Pre-Pandemic Levels
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U.S. industrial production, which includes factory, mining and utility output, rose at a seasonally adjusted 0.4% in August from July, according to data from the Federal Reserve released Wednesday. Economists polled by The Wall Street Journal expected a 0.5% rise. Factory output lost some momentum in August compared with July, when it rose by a revised 0.8%. (Dow Jones Newswires)
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Key Developments Around the World
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China’s Economic Recovery Is Looking Gloomier
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Growth across a range of Chinese economic indicators pulled back sharply in August, as a new outbreak of the Delta variant and tighter government regulations on the property market hit consumer spending and the housing sector.
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China’s Property Curbs Send Economic Tremors
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Beijing’s pressure on the real-estate sector is being felt far beyond China Evergrande Group, raising questions about how much economic pain China’s leaders are willing to stomach as they rein in yet another industry.
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Financial Regulation Roundup
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Yellen, IRS Want to Require Banks to Report Annual Account Flows
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Treasury Secretary Janet Yellen and IRS Commissioner Charles Rettig pressed lawmakers to give the IRS more information about taxpayer bank accounts, as the Biden administration tries to salvage its tax-compliance proposal.
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FTC Moves Toward Stricter Antitrust Scrutiny of Vertical Mergers
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A divided Federal Trade Commission withdrew guidelines on how the U.S. reviews mergers of companies that don’t directly compete with one another, the latest signal the agency is looking to escalate antitrust scrutiny of deal making.
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Democratic Tax Proposal Takes Aim at ETFs
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Senate Finance Committee Chairman Ron Wyden aims to tax exchange-traded funds’ use of “in-kind” transactions that currently avoids triggering capital-gains taxes, eliminating a key selling point for ETFs: tax efficiency.
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Time N/A: Central Bank of Egypt releases policy statement
8 a.m.: European Central Bank’s Lagarde speaks on the euro and the European economy at livestreamed forum
8:30 a.m.: U.S. Commerce Department releases August retail sales
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4:30 a.m.: Bank of England releases August Kantar inflation attitudes survey
10 a.m.: University of Michigan releases preliminary September U.S. consumer sentiment
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J.P. Morgan Cuts Third-Quarter U.S. GDP Forecast
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J.P. Morgan has pared its estimate of U.S. economic growth in the current quarter from 7% to 5%, bank economist Michael Feroli wrote Wednesday in a note to clients. “The revision reflects a combination of weaker final demand growth and slower inventory accumulation,” he wrote, adding “these in turn are likely the result of, among other potential issues, the delta virus and supply-chain problems, the latter being particularly severe for the motor vehicle sector.” Mr. Feroli wrote that the economy will make up for some of the slower growth, lifting his fourth-quarter GDP projection from 3% to 3.5%.
—Michael S. Derby
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China Goes Cold Turkey on Property
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Beijing has decided it wants a German economy with high-tech manufacturing and exports, high savings and no American-sized housing bubbles, but China has long been a property-centric economy, Nathaniel Taplin writes.
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Prices of goods imported to the U.S. fell 0.3% on month in August after rising 0.4% in July, according to data from the Bureau of Labor Statistics. The decline is the first since October 2020, when prices dropped 0.1%. The reading missed economists' forecasts, which anticipated a 0.2% rise. (Dow Jones Newswires)
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Consumer prices in the U.K. rose 3.2% on the year in August, the Office for National Statistics said Wednesday, marking the highest annual rate of inflation since March 2012 and well in excess of the Bank of England’s 2% target. (DJN)
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The U.K. property market looks likely to slow after official data showed a fall in house-price growth in July and U.K. house-builder Redrow said the market had softened. U.K. average house prices increased 8% in the year to July 2021, versus 13.1% in June, according to the ONS. (DJN)
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Canadian existing-home sales declined 0.5% in August, a fifth-consecutive month-over-month drop after a March peak, and on an actual, nonadjusted basis dropped 14% from a year earlier, the Canadian Real Estate Association said. (DJN)
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New Zealand’s economy grew 2.8% in the second quarter from the first quarter after a 1.6% increase in January-March, underpinned by higher government spending, record-low interest rates and fast-rising house prices. The median forecast in a Wall Street Journal survey was for growth of 1.1%. (DJN)
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This newsletter is compiled by James Christie in San Francisco and Ed Ballard in London.
Send us your tips, suggestions and feedback. Write to:
Jon Hilsenrath, Michael Derby, Nell Henderson, Nick Timiraos, Jason Douglas, Paul Hannon, Harriet Torry, Kate Davidson, David Harrison, Kim Mackrael, Tom Fairless, Megumi Fujikawa, Michael Maloney, Paul Kiernan, James Glynn
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