What Will the Fed Say?

The Fed’s Jay Powell is deciding how to tamp down rising inflation.Credit…Andrew Harnik/Associated Press

A big day for Jay

The Federal Reserve will wrap up its final policy meeting of the year this afternoon. With inflation rising quickly, Fed officials have been suggesting that they may need to shift away from bolstering the economic recovery toward stabilizing prices. That adds more suspense than usual to Fed Chairman Jay Powell’s 2 p.m. policy announcement. The Times’s resident Fed watcher, Jeanna Smialek, has a cheat sheet on what to expect:

A quicker end to bond buying. The Fed had been purchasing $120 billion a month in bonds to keep interest rates low. Last month, it said it would taper those purchases by $15 billion each month. Economists now expect the Fed to pick up the pace, reducing bond purchases by $30 billion a month. That would mean that the purchases end altogether by the Fed’s March meeting.

Interest rate hints. Policymakers could offer hints about when they might start raising interest rates — a more powerful tool to stem inflation — in their so-called dot plot, which shows officials’ anonymous forecasts for where they expect to set interest rates. Many economists expect the forecasts to show two to three rate increases in 2022.

Powell’s pivot on prices. The Fed chair, after months of saying that inflation was transitory, suggested late last month that the central bank was becoming more wary of price pressures. Yesterday, new data showed that the prices producers pay for supplies rose a record 9.6 percent in November versus a year ago. Powell’s interpretation of inflation trends will be scrutinized for clues about future actions.

More answers on missing workers. One big question for the Fed is how it can help fully repair the labor market. Labor force participation recently showed signs of picking up, but there are still four million fewer people employed than before the pandemic. The Fed has said that it wants to see inflation run above 2 percent on a sustained basis and maximum employment before raising interest rates. With the inflation target more than met, how the Fed describes progress on its employment target is key.

HERE’S WHAT’S HAPPENING

Congress approves a $2.5 trillion increase to the debt ceiling. Only one Republican in either house, Representative Adam Kinzinger of Illinois, voted in favor of the move, a deal that allowed the measure to pass with a simple majority in the Senate.

The U.S. reportedly prepares to expand Chinese investment blacklists. The Biden administration will put the drone maker DJI and seven other Chinese companies on a “do not invest” list for U.S. citizens, The Financial Times reports, and is considering new sanctions on China’s largest chip maker, according to Bloomberg.

New York prosecutors zero in on former President Donald Trump’s financial statements. As they weigh charging Trump with fraud, The Times reports that Manhattan prosecutors are focusing on documents he used to obtain loans and boast about his wealth, asking whether he inflated the value of assets.

Elon Musk’s companies face harassment allegations. Six women who worked for Tesla are suing the carmaker for alleged sexual harassment and discrimination, adding to two similar suits filed in the past month. Meanwhile, SpaceX employees are speaking out about what they describe as a culture of harassment at the rocket company.

More Starbucks stores are holding elections to unionize. After workers in Buffalo formed the only union at a company-owned store in the U.S. last week, employees at two Boston-area stores filed to hold a union election. The move could lead to a wider push at the coffee chain’s thousands of stores nationwide.

How companies are adjusting to Omicron

Yesterday marked a year since the first coronavirus vaccine was administered in the U.S. It was also the day the U.S. topped 800,000 deaths from Covid. Now that the Omicron variant is spreading fast, companies are revising their pandemic policies.

Google set deadlines for complying with its vaccine mandate. The company circulated a memo that said workers who haven’t shown proof of vaccination or applied for an exemption by Jan. 18 would be placed on paid leave for 30 days, followed by unpaid leave for up to six months, and then they would lose their jobs.

JPMorgan Chase will bar unvaccinated employees from entering its New York headquarters, along with several other offices in the city. In a memo reviewed by DealBook, the bank said that those locations would relax their masking rules, because “it seems unfair to require our vaccinated employees to wear masks all day at their desks,” which would be mandated under a state rule for companies that do not require proof of vaccination.

Apple is reinstating mask mandates and crowd control at retail stores. “Amid rising cases in many communities, we now require that all customers join our team members in wearing masks while visiting our stores,” Apple told The Verge. The company is also limiting visitor numbers at some store locations.

The N.F.L. is mandating booster shots for staff members who work most closely with players. More than 94 percent of players are vaccinated, but more cases have been recorded this season than last. The players’ union argued for a return to daily testing for all, regardless of vaccination status.

Amtrak temporarily dropped its vaccine mandate for employees, and will allow workers to opt for weekly testing instead, citing a court decision that halted the enforcement of a national mandate for federal contractors. The policy means that Amtrak no longer plans to cut services next month, it said.

“ … if you opened your eyes for 2 seconds, you would realize I will pay more taxes than any American in history this year.”

— Elon Musk, tweeting in response to Senator Elizabeth Warren, who said tax rules should be changed so that the world’s richest person “will actually pay taxes and stop freeloading off of everyone else.” By exercising Tesla stock options due to expire, Musk may owe a tax bill that could reach $10 billion this year; a ProPublica investigation found that Musk has paid much less in federal income tax in previous years: for example, $65,000 in 2017 and none in 2018.

Stimulus dissonance

All of the Republican governors who opposed the $1.9 trillion Covid relief bill, which passed in March with only Democratic votes, have accepted the money it allocated to their states. Now, they’re in the awkward position of criticizing the spending while championing programs that rely on the funds. Here are some of their strategies:

Reluctant acceptance: Gov. Kristi Noem of South Dakota derided the stimulus as a “giant handout” while outlining how she would use nearly $1 billion slated for her state to invest in local water projects and build new day care centers. She said that if she rejected the funds, they would be used by other states. (If a state rejected the money, which none have, it would instead be returned to the Treasury Department.)

Calling it payback for other regulations: Gov. Ron DeSantis of Florida said the $3.4 billion the state has received so far would go toward infrastructure, transportation and work force retention. He justified it by arguing that the federal government fueled economic disruption with pandemic shutdowns and vaccine and mask mandates that he opposed.

Funding … opposition to mask mandates: Gov. Doug Ducey of Arizona has used some of the money for education programs designed to exclude schools with mask mandates. (The Treasury Department warned Ducey in October that the state could lose some of its funds if it did not change the policy.)

On the other side: Democratic governors are “searching for an off-ramp to the pandemic that allows them to sell a brighter future to voters next November,” Politico reports.

Exclusive: Crowdsourcing shareholder activism

Today, a service is launching that will allow individuals to use their brokerage accounts to shake up public companies, just like hedge funds and other big activist investors do. Iconik, a new app, offers commission-free trading, like Robinhood and others, while also encouraging users to team up and force companies to make changes by collectively voting their shares.

Institutional investors have long held the most sway on matters like executive pay, director nominations and environmental practices because of the size of their holdings. Using Iconik, small shareholders could create their own campaigns and get users to pledge their votes, which would be cast collectively at a company’s shareholder meeting, potentially giving a group the same clout as a large institution. It’s crowdsourcing, but for shareholder activism.

Alex Thaler, Iconik’s C.E.O., got the idea during the meme stock rally. “Most investors don’t put much value in their voting rights, or even know they exist,” he told DealBook. The meme stock rally, he said, showed that with social media tools, collective action in the stock market is much easier today.

The app is launching with two active campaigns. One is sponsored by the group Sleeping Giants, which is calling shareholders to force Facebook to shut down hate speech on its platform, and the second is aimed at JPMorgan Chase, which environmental activists want to stop lending to fossil-fuel companies.

There is a potential downside: Iconik encourages investors to buy individual stocks, while financial advisers generally recommend diversified index funds. But Frank Partnoy, a Berkeley Law professor who studies shareholder governance and is an investor in Iconik, said that individual investors have given up their voice in corporate America in the name of diversification. “What GameStop and AMC showed us is that when individual investors decide to act together they can have a significant influence on the market,” he told DealBook.

THE SPEED READ

Deals

The U.A.E. may scrap a multibillion-dollar military equipment deal with the U.S., citing onerous rules to guard against Chinese espionage. (WSJ)
In crypto news: Robinhood acquired the crypto trading platform Cove Markets; NYDIG, an institutional crypto trading firm, raised $1 billion in a funding round; and shares of TeraWulf, the Gwyneth Paltrow-backed Bitcoin mining company, dropped sharply on their market debut. (CoinDesk, NYT, Bloomberg)
Cineplex was awarded nearly $1 billion in damages after Cineworld pulled out of its acquisition of the movie theater chain in the early days of the pandemic. (Forbes)
3M is merging its food-safety business with Neogen to create a company worth $9.3 billion. (WSJ)

Policy

A polite F.D.I.C. meeting was followed by scathing statements from feuding board members. (NYT)
The Biden administration has named Sandra Thompson, the acting F.H.F.A. director, as permanent chief of the agency that oversees Fannie Mae and Freddie Mac. (Bloomberg)
Andrew Cuomo was ordered by a New York state ethics board to return the profits from his pandemic memoir written while he was governor. (NYT)

Best of the rest

Goldman Sachs and JPMorgan Chase are reportedly set to raise bonuses for investment bankers to reflect a bumper year — and to address burnout. (Bloomberg)
“Jobless for a Year? That Might Be Less of a Problem Now.” (NYT)
Supply chains are so snarled that Halloween costumes are still arriving at ports. (FreightWaves)
“It’s Awkward Being a Woman in the Metaverse” (Bloomberg Opinion)
Visions of a volatile world: The photos of the year. (NYT)