Axios Markets

Joe Biden could be the first president since Jimmy Carter who wants to make the Federal Reserve more hawkish, Axios' Felix Salmon writes.

Why it matters: Standard political calculus has been turned upside down this year, as the Democrats start preparing for what is certain to be a bruising 2022 midterm campaign. Instead of trying to maximize economic growth and full employment, their new priority is to ensure that inflation comes down as quickly as possible.

The big picture: Inflation was not caused by the Democrats — it was caused by the coronavirus pandemic, which precipitated both global supply-chain disruptions and a huge fiscal response, mostly from the Trump administration.

• The spike in inflation has happened on Biden's watch, however. As per the (arguably unfair) rules of the political game, that means it's his problem: Voters will blame him for inflation if it stays high.
• Biden's latest spending bills won't move the needle on inflation one way or the other. Neither will strongly-worded letters about gas prices. Instead, Biden's main point of leverage comes from his ability to nominate members — and the chair — of the Fed board.

What they're saying: "The Fed chair has practically unilateral power over monetary policy, and at this point monetary policy is really the only thing our government can do to affect inflation," says economist Noah Smith. (While there are 12 voting members on the Federal Open Market Committee, the preference of the Fed chair has in practice always been respected.)

• Between the lines: Besides the Fed chair, there is one seat vacant on the seven-member board of governors already, with two about to become vacant as Richard Clarida and Randal Quarles are both leaving the board around the end of the year. On top of that, if Powell isn't renominated as Fed chair, his seat will be vacant too.
• Biden will certainly want a more diverse Fed board, and one that cares more than the current quorum does about bank regulation and global warming. None of that will stop him from preferring hawks to doves.

Be smart: Current central bank orthodoxy is decidedly dovish. Most central bankers — including both of the front-runners for the Fed chair position — are more likely to welcome the return of inflation than they are to fear it. Then again, central bankers don't need to run for elected office.

The bottom line: As Solita Marcelli of UBS says: "It is very common for politicians to prefer central bankers who promote economic growth by keeping monetary policy loose. However, under current circumstances, that strategy could be counterproductive for President Biden."

SEC chair Gary Gensler called for toughening up regulations on high-frequency trading firms that are active in U.S. Treasuries, in a speech at yesterday’s Treasury Market Conference. (Bloomberg)

The Deere & Co. strike is over. Union workers approved a new contract to increase pay and retirement benefits, and resumed working early today after more than a month on the picket line. (WSJ)

In response to the global chip shortage, state and local governments across the U.S. are rushing to woo chip makers like Samsung to build new plants in their communities. (NYT)

The Bank of England might finally, really be the first major central bank to raise interest rates from the pandemic era's rock bottom levels.

• Flashback: The BoE was widely expected to pull the trigger at its November meeting. It didn’t.

Why it matters: The world will be watching. If rate liftoff in a major economy goes smoothly — or has hiccups — it could send useful signals to other central bankers.

What’s new: Two key data points out this week.

• Jobs grew after the U.K.’s furlough scheme — or stimulus program — ended on Sept. 30. Unemployment’s now down to 4.3% — even lower than economists expected.
• On top of that, inflation reached 4.2% in October — a 10-year high — jumping from 3.1% in September.

“It would be a bigger surprise if at the next meeting they don’t raise rates. They pretty well telegraphed it,” Chris Gaffney, president of World Markets at TIAA Bank, tells Axios.

• The BoE members that voted earlier this month to keep the key rate steady at 0.1% wanted to ensure that employment moved in the right direction after the end of the furlough program, he adds.

The bottom line: Naturally, Bank of England governor Andrew Bailey isn’t committing to any course in advance. But he did acknowledge the labor market is “considerably tighter,” and said Tuesday’s jobs data, along with the next employment release, are critical to the bank’s thinking, Reuters reports.

• The next jobs report will be out two days before the BoE meeting on Dec. 16.

Finding meaning in your Twitter feed’s trove of snark and deep thoughts about public companies is hard. S&P Global is here to help, Axios' Kia Kokalitcheva writes.

• S&P is partnering with Twitter to create a new index series that will track company sentiment — as told through tweets.

Why it matters: If you’ve ever wondered whether Twitter matters, now the king of indices is telling us it really does. 

Details: The S&P 500 Twitter Sentiment Index Series, based on the classic S&P 500 Index, will apply a sentiment scoring model to bullish and bearish tweets containing Twitter “$cashtags” (those are Twitter tags of stock ticker symbols). 

How it works: One index will measure the market-cap-weighted performance of 200 of the S&P 500 constituents with the highest sentiment scores.

• Another will measure the equal-weighted performance of 50 of the constituents with the highest scores. 

Go deeper: The indices will analyze tweets in real time. Filters will be applied, to screen out spam tweets (sorry, Twitter trolls).

The bottom line: This is Fintwits’ biggest endorsement to date.

CEOs, like the workforce at large, delayed their job quitting plans in the chaos of 2020. Now they’re making up for lost time, and are just as much a part of the Great Resignation as their employees, a report out today from executive search firm Heidrick & Struggles shows.

Why it matters: The latest class of CEOs will help lead the world through a host of thorny modern issues — like cybersecurity, sustainability and digital transformation.

Driving the news: In the first half of 2021, 76 CEOs were appointed at the 1,095 largest public companies from 14 countries. That’s a record for any six-month period since the report's authors began tracking.

What they found: The new top leaders are more likely than their predecessors to be women, and to be from countries other than where the company is headquartered.

• They’re also more likely to have experience beyond the traditional CFO and COO feeder roles, in a sign that boards are willing to expand the definition of what qualifies a candidate for the role.

The bottom line: “The top job, like so many others, has been altered by the rapid changes that have taken place over the last 18 months," said Jeff Sanders, co-managing partner of Heidrick & Struggles' CEO & board of directors practice.

• "[B]oards and organizations are taking a more expansive view in their CEO succession planning,” he said.