The period of free money is coming to an end

What’s going on: US Federal Reserve she said on Wednesday that it will begin cutting asset purchases, a key part of its incentive efforts, by $ 15 billion each month. The program is expected to be completed by mid – 2022.
I’m not alone. Also the Central Bank of Australia take measures to tighten monetary policy this week, while the Bank of Canada announced last week that it will stop expanding its balance sheet. The European Central Bank is also slowing down the pace of its purchases this quarter.

Given policy shifts, one might think investors are panicking. After all, the amount of cash in the system was a major force for market euphoria after the pandemic crash.

“The main driver in the market today is this phenomenal pool of liquidity,” Vis Raghavan, JPMorgan’s CEO for Europe, the Middle East and Africa, told me this week. “The market is just flooded with money. Every asset class is extremely busy.”

However, there was no “narrowed rage” as there was in 2013, when the Fed signaled that it would eventually slow down asset purchases, triggering a strong bond sell-off and turmoil in the global market. The Dow, S&P 500 and Nasdaq Composite hit all-time highs on Wednesday, and the bond market remains stable.

Why? First, the message was very clear. Raghavan believes it is also obvious that central banks would be willing to go all-in again if the recovery after the pandemic went south. After 2020, their willingness to flex their muscles is no secret.

“No one wants any economic turmoil to ruin this recovery,” he said. “Whatever happens, there will be intervention to ensure there is no economic pain.”

Fed President Jerome Powell, who last year saw the central bank’s balance sheet rise to $ 7.4 trillion, the highest level ever, hinted at this on Wednesday.

“We are prepared to adjust the pace of purchases if changes in the economic outlook justify it,” he said.

However, as inflation has been growing the fastest in the last three decades, the question now is whether central banks will have to cut incentives even more aggressively or risk missing the moment to sustain price increases. This will require careful communication to keep investors on the same page.

Powell said the Fed will not raise interest rates until the labor market progresses. But does the central bank risk falling behind?

Take a look at this space: there was a chance that the Bank of England would become the first major central bank to raise interest rates since the crisis hit on Thursday – but kept interest rates at a record low of 0.1%. The Bank of America team believes the central bank will double interest rates by February.

OPEC is under serious pressure to pump more crude oil

While the world is debating the end of fossil fuels at COP26 in Glasgow, OPEC and its allies are debating whether to pump more oil to ease rising prices that boost global inflation and harm vulnerable households.

Latest: Energy ministers from major manufacturers, including Saudi Arabia and Russia, meeting virtually on Thursday, are under pressure from big clients like the U.S. to increase production by more than the planned 400,000 barrels a day, reports my business colleague CNN Charles Riley.

Speaking at a climate summit in Glasgow earlier this week, President Joe Biden said rising petrol prices were “the result” of “Russia’s or OPEC countries’ refusal to pump more oil”.

“When will we see what happens in this regard,” Biden added.

A step back: the price of world-class Brent crude oil has doubled to more than $ 83 a barrel over the past year as the global economy has recovered from a pandemic slump. Bank of America predicts prices will rise increase even higher and reached $ 120 per barrel by June 2022.

High oil prices would slow down the recovery at a crucial moment, and higher gasoline prices could have political consequences for Democrats heading to the 2022 midterm elections. $ 40 a gallon, and in Nevada, Washington and Oregon they are flirting with $ 4.

Remember: OPEC member countries produce about 40% of the world’s crude oil. In recent years, OPEC has coordinated production decisions with other major producers, including Russia, as part of a larger group called OPEC +.

“The external flexibility of OPEC + from oil-producing countries is increasing, especially from the United States,” said Rystad Energy analyst Louise Dickson.

The CEO of the Web Summit says regulators should turn to China

To leave the pandemic behind, more than 40,000 people in Lisbon are at the online summit, Europe’s largest technology festival.

A lot of them talk about Facebook. Whistler Frances Haugen started the event On Monday, he claimed the company would have been “stronger” if founder Mark Zuckerberg had resigned as chief executive. On Wednesday, Chris Cox, Facebook’s chief product officer, said he was a social media giant welcomed the “difficult talks”.

“It’s good for us and good for society,” he said, while praising the company’s focus on virtual and augmented reality technologies. “We’re not perfect.”

Web Summit CEO Paddy Cosgrave told me that the arrival of whistleblowers on the scene is helping regulators gain momentum.

“They are moving faster than they have ever moved before to write legislation that would start addressing some of these problems,” he said in an interview.

One potential model? Cosgrave believes regulators should turn to China, which he said implements “very sensible policies” related to social media and child protection.

Earlier this year, Beijing banned online players under the age of 18 from playing on weekdays. Douyin, the Chinese version of TikTok, is introduction of “teenage mode” limiting the time that children under the age of 14 can spend in the app – a move seen as an attempt to overtake any regulations.

Next

Cars.com (AUTO),, Brands Dine (DIN),, Kellogg (K),, Modern (MRNA), Nikola, Papa John’s (PZZA) in ViacomCBS (VIACA) report on the results before the opening of US markets. Airbnb, Datadog (DDOG),, Expedia Group (EXPE),, Living people (LYV),, Pinterest (PINS),, Red fin (RDFN),, Square (SQ) in Uber (UBER) follow after completion.

Also today: first U.S. unemployment claims for mail last week at 8.30 ET.

Coming tomorrow: A strong U.S. job report for October could spur chatter about the Fed’s rate hike sooner than expected.

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