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Commodity Price Surges Add to Inflation Fears
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Good day. Economists say China’s producer-price index, a gauge of factory-gate prices, could climb to its highest level since August 2008 on Wednesday amid rising commodity prices. Lumber, iron ore and copper prices have hit records. Corn, soybeans and wheat have jumped to their highest levels in eight years. Oil recently reached a two-year high. Central bankers must decide whether to keep looking past the increases, along with other signs of higher inflation, or move faster to cool demand through rate rises or other moves.
Now on to today’s news and analysis.
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Commodity Price Surges Add to Inflation Fears
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Corn prices have jumped to their highest levels in eight years. PHOTO: BING GUAN/REUTERS
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The run-up in commodity prices is casting a cloud over the global economic recovery, slamming vulnerable businesses and households and adding to fears that inflation could become more persistent. The world hasn’t seen such across-the-board commodity-price increases since the beginning of the global financial crisis, and before that, the 1970s.
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Derby's Take: Fed Is Fine With Reverse Repos Nearing Half a Trillion
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Over recent weeks, eligible financial firms, mainly money-market funds, banks and government sponsored entities, have been moving ever larger amounts of money into what the U.S. central bank calls its reverse repo facility. Read more.
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Key Developments Around the World
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Job Openings Are Still Rising, but Labor Demand Is Easing in Some Sectors
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Federal Student-Loan Loss Forecast Rises by $53 Billion
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A year ago, the federal budget projected taxpayers would ultimately lose $15 billion on all outstanding student debt, currently at $1.6 trillion. The Biden administration now projects long-term losses will reach $68 billion.
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Logjams Are Keeping Much of $47 Billion in Federal Aid From Renters
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Local governments have struggled with how to distribute the money, and some have complained they are being deluged by a flood of aid requests, while many renters are being disqualified for failing to correctly complete their applications
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López Obrador Coalition Falls Short of Supermajority in Mexico's Lower House
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President Andrés Manuel López Obrador’s party, along with two smaller allied parties, won a majority in the lower house in midterm elections but fell short of a two-thirds majority needed to carry out his nationalist economic agenda.
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Financial Regulation Roundup
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SEC Chair Urges New Restrictions on Executive Stock-Trading Plans
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The Securities and Exchange Commission is in the process of drafting a proposal that would restrict plans that corporate insiders use to avoid insider-trading claims when buying or selling their own company’s stock.
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Inside Credit Suisse’s $5.5 Billion Breakdown
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Credit Suisse’s creaky risk-management systems didn’t do their job as the bank’s guardrails and left it highly exposed to human errors in judgment, according to current and former people at the bank.
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London Metal Exchange Pedals Back on Closing Trading Ring
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The London Metal Exchange will reopen its open-outcry trading ring in September, halting plans to close a pit that dates back to the industrial revolution following resistance from an influential group of traders.
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G-7 Calls for Making Climate-Change Reporting Compulsory
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The Group of Seven leading nations have taken a step closer to the goal of establishing global standards for disclosing corporate environmental data, which investors increasingly want.
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8:30 a.m.: U.S. Commerce Department releases April international trade data
10 a.m.: U.S. Labor Department releases April Job Openings and Labor Turnover Survey
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8:30 a.m.: U.S. Labor Department releases May CPI
10 a.m.: Bank of Canada release interest rate announcement
1 p.m.: Bank of Canada’s Timothy Lane give speech
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The Fed’s Risky Fill-the-Punch-Bowl Strategy
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The risks the Federal Reserve is taking with its winsome forecast are significant, and the central bank should stop buying mortgage securities immediately and, soon after, it should slow its purchases of Treasury debt, Kevin Warsh writes. Mr. Warsh, a former member of the Fed Board, is a distinguished visiting fellow at Stanford University’s Hoover Institution.
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Corporate Taxes Will Rise One Way or Another
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The cat-and-mouse game of global corporate-tax optimization has been going on for decades amid successive failed efforts at reform, but this time looks likely to be different, Rochelle Toplensky writes. She notes that while history offers scope for doubt, with an army of accountants and lawyers ready to chart the least costly way through any new rules, it is hard to see corporate tax rates moving any way but upward as politicians need higher revenues to pay for their renewed interest in fiscal policy.
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Treasury Secretary Janet Yellen said President Joe Biden should keep pushing his $4 trillion in spending plans on infrastructure, jobs and families even if they trigger inflation and higher interest rates, Bloomberg reported. (Barrons.com)
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Former Bank of England Governor Mark Carney indicated Monday he is in the camp of economists worried about an outbreak of higher inflation, saying at a Brookings Institution webinar that “There are signs that inflation will be above target over the horizon from here.” (MarketWatch)
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The widespread uptake of digital currencies could increase the cost of credit for British consumers, a paper by the Bank of England has said, as banks would seek to offset the impact of stablecoins on their balance sheets. (Financial News)
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The Conference Board Employment Trends Index rose to 107.35 in May from a revised 104.31 in April. The indicator, which measures U.S. employment trends, is up 39.4% from a year earlier. (Dow Jones Newswires)
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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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