Good day. Discussing the possibility of raising the Fed's
short-term interest-rate target, Federal Reserve Bank of New York
President John Williams said Friday that "Given the clear signs of
a very strong labor market, we are approaching a decision to get
that process under way." The vice chairman of the rate-setting
Federal Open Market Committee added that he sees the target rising
gradually to around 2% over time. On Monday, the People's Bank of
China went in the other direction, cutting two key interest rates
that would likely translate into lower benchmark lending rates, in
a bid to provide more support for a slowing economy.
Now on to today's news and analysis.
Top News
Williams Says Fed's Next Step Is Gradual Rate Rises
Federal Reserve Bank of New York President John Williams said
the U.S. central bank is getting closer to the point when it will
need to raise its short-term interest-rate target, but he declined
to say when he would like that to happen.
With the Fed having accelerated the speed at which it is pulling
back on its bond-buying stimulus, "the next step in reducing
monetary accommodation to the economy will be to gradually bring
the target range for the federal-funds rate from its current very
low level back to more normal levels," Mr. Williams said Friday in
a virtual appearance.
Fed Releases Transcripts of 2016 Policy Meetings
Transcripts released by the Federal Reserve on Friday revealed
the extent of officials' 2016 debate over how fast to move up
interest rates after lifting them from near zero at the end of the
previous year.
Sarah Bloom Raskin in Her Own Words
If Sarah Bloom Raskin becomes the Fed's point person on banking
oversight, it could be poised for a more expansive effort to
address financial risks caused by a warming environment. Here are
some samples of her policy views.
Biden Moves to Remake the Federal Reserve
U.S. Economy
Democrats Face Costs of Rising Inflation With Few Options
Left
Democrats are trying to use their control of Congress and the
White House to curb inflation, but economists say price increases
have reached a point beyond what any political party can easily do
to tame them quickly.
U.S. Retail Spending Drops as Omicron and Inflation Surge
Sales at U.S. retail stores, online and restaurants dropped by
1.9% in December, a sharp decline following record-level retail
sales that started with a 1.8% gain in October from the prior
month, the Commerce Department reported.
Texas, Arizona Have Recovered All the Jobs Lost When Covid-19
Hit
Texas and Arizona have joined two other states in recovering all
the jobs they lost at the start of the Covid-19 pandemic, leading a
trend that is expected to include another dozen states by the
middle of this year.
In Battle for Workers, the Humble 401(k) Gets Richer in 2022
Facebook's parent and consulting firm KPMG U.S. are among a
growing number of companies putting more money into employees'
401(k) retirement accounts, employing another lever to attract and
retain staff.
Offices Are Leased Up, Thanks to Gifts for Tenants, Months of
Free Rent
Key Developments Around the World
Full Recovery in Global Labor Market Could Take Years
It will take at least two years before global unemployment falls
back to pre-pandemic levels, according to fresh projections, with
joblessness in poor countries remaining high even as labor markets
in rich countries become increasingly tight.
China Seeks to Cushion Blow of Economic Pain as Momentum
Slows
China's leaders are hoping that they can put a floor under the
economy, which officials said Monday expanded by just 4% in the
fourth quarter of last year, the slowest pace since the beginning
of the Covid-19 recovery in the second quarter of 2020.
China Cuts Two Key Rates to Support Slowing Economy
China GDP Grew 8.1% in 2021, Economy Slowed in Fourth
Quarter
In China, the Economic Buzzword for 2022 Is Stability
China's Population Stalls, Births in 2021 the Lowest in Modern
History
Financial Regulation Roundup
Credit Suisse Chairman to Leave After Breaking Covid-19 Travel
Rules
Credit Suisse Group AG Chairman António Horta-Osório is leaving
the global bank following a board investigation into his travel and
personal conduct, according to people familiar with the bank.
Raskin May Face Rough Confirmation For Bank Supervision Post
Sarah Bloom Raskin, President Biden's pick to become the Fed's
top banking regulator, could face a contentious nomination process
due to her support for tougher banking rules and for using
financial regulation to address climate-change positions.
Pandemic Profits Begin to Ebb at America's Biggest Banks
Some of the forces that pushed bank profits to new records are
starting to weaken, with JPMorgan saying the shifting environment
and higher costs would mean it wouldn't hit its longer-term
profitability targets in 2022 and maybe 2023.
Forward Guidance
Tuesday (all times ET)
Time N/A: Bank of Japan releases policy statement and outlook
for economic activity and prices
Wednesday
8:30 a.m.: U.S. Commerce Department releases December housing
starts
9:15 a.m.: Bank of England's Bailey and Cunliffe testify on
financial stability report
Commentary
Why China's Central Bankers Are Still Worried
With infrastructure investment still struggling to accelerate
and consumers hunkering down, it is difficult to imagine a floor
for overall Chinese growth without more definitive signs of a
bottom in real estate, Nathaniel Taplin writes.
Bond Market Forecasts Bad Economic News
With the best job growth in over 40 years, inflation a national
obsession and the Fed preparing to raise interest rates, it is easy
to forget how different the world was before the pandemic, which
could be where the U.S. is headed again, Greg Ip writes.
It Will Take Time to Dig Out of This Consumer-Spending Hole
The disruptions the Omicron variant is causing appear likely to
weigh on spending for some weeks, and it seems all but certain the
economy will grow at a much slower pace this quarter than in the
fourth, Justin Lahart writes.
Bank Investors Must Wait for the Benefits of Rising Interest
Rates
Likely Fed rate increases should be a solid foundation for big
banks, driving lending income higher, and there ought to be a
tailwind from economic growth, but a number of challenges might
offset these positives in the year ahead, Telis Demos writes.
Glynn's Take: RBA and Markets Set to Square Off in Clash of
Wills
By James Glynn
Australian inflation data next week are likely to show that the
country continues to sit outside the bonfire of rising prices now
menacing economies like the U.S., U.K. and Europe.
If fourth-quarter consumer-price index data on Jan. 25 is
relatively benign, that would immediately challenge financial
markets' current bet that the Reserve Bank of Australia will raise
interest rates within months. That view contrasts with the far
longer timetable of late 2023 or 2024 that the RBA has given. Read
more.
Basis Points
U.S. industrial production dropped 0.1% in December from
November, its first decline since September, with manufacturing
output down by 0.3% as supply-chain issues continue to affect
output, the Federal Reserve said. (Dow Jones Newswires)
U.S. consumer sentiment worsened in early January amid a surge
in Covid-19 cases due to the Omicron variant, causing the
preliminary estimate of the University of Michigan index of
consumer sentiment to drop from 70.6 in December to 68.8.
Economists polled by The Wall Street Journal had forecast a 70.0
reading. (DJN)
U.S. import prices fell 0.2% in December, the first monthly
decline since August, led by a 6% decrease in petroleum prices,
while natural-gas prices dropped by 13.7%, according to the Labor
Department. (DJN)
U.S. businesses continued restocking at a robust pace in
November in an effort to meet strong sales, liftng manufacturing
and trade inventories by 1.3% on month in November, the same growth
rate as in October, according to data from the Commerce Department.
(DJN)
Canadian businesses anticipate raising wages over the next 12
months to attract and retain workers as labor shortages intensify,
according to the latest quarterly business-outlook survey from the
Bank of Canada published Monday, which likely increases pressure on
the central bank to raise rates. (DJN)
Canadian factory sales climbed 2.6% in November from the
previous month to a seasonally-adjusted 63.07 billion Canadian
dollars, or the equivalent to $50.23 billion, Statistics Canada
said Monday. (DJN)
China's central bank said it would act early and more forcefully
to help stabilize the economy in 2022, a politically important year
for Chinese leaders. (DJN)
The Bank of Japan raised its price forecast slightly amid
pandemic-related supply shortages, although it still expects its 2%
inflation target won't be reached for at least the next two years.
In its quarterly outlook, the bank's policy board projected
inflation would increase 1.1% in the year ending March 2023 and
1.1% in the following year, up from previous proje
(END) Dow Jones Newswires
January 18, 2022 08:54 ET (13:54 GMT)
Copyright (c) 2022 Dow Jones & Company, Inc.