Searching for Signs of Ebbing U.S. Inflation; Fed's Williams Warns Rates May Stay High for Some Time By James Christie
Good day. Today, the Labor Department will release its report on the December consumer-price index, and economists surveyed by The Wall Street Journal expect a slight acceleration from November's headline annual inflation reading. Core prices, however, are expected to show a slowing in annual inflation to 3.8%, down from 4% in November. A rapid cooling of core price increases over the past year has raised hopes of a soft landing for the economy. Yesterday, New York Fed President John Williams said he expects inflation will slow to 2.25% by year's end but added interest rates will likely need to remain high for some time. And in regulatory news, the Securities and Exchange Commission approved bitcoin exchange-traded funds for everyday investors.
Now on to today's news and analysis.
Top News What to Watch in the CPI Report: Will Inflation's Downturn Stabilize?
Consumer inflation ticked up in December but underlying price pressures continued to ease, analysts estimate , fueling hopes that the economy can dodge a recession.
Economists surveyed by The Wall Street Journal estimate consumer prices overall rose 0.2% in December from the prior month and increased 3.2% from a year earlier. That compares with November's 0.1% monthly gain and marks a small acceleration from that month's 3.1% annual increase.
New York Fed's Williams Expects Rates to Remain High
Federal Reserve Bank of New York President John Williams said U.S. interest rates likely will need to stay high for some time until Fed officials are confident the rate of inflation is returning to 2%, MarketWatch reported. Williams also said he expects inflation to reach the central bank's 2% goal by 2025. The policymaker said the labor market would need to soften a bit more, potentially bumping up the unemployment rate to 4% from the current level of 3.7%.
U.S. Economy GOP Hard Liners Confront Mike Johnson Over Spending, Border
House Republicans turned up the pressure on Speaker Mike Johnson (R., La.) to take a tougher line with Democrats on spending cuts and tightening the border, criticizing him while bringing action on the floor to a halt Wednesday.
Why This Is a Good Year to Be a Renter, in Three Charts
Families could finally catch a break on one of the biggest bills they may pay each month: the rent. The sting of rent inflation hit tenants hard the past two years, due in part to record demand and not enough supply. The surge in monthly rent for a primary residence peaked in March 2023 at 8.8% higher than the year before, according to the Labor Department. Now the outlook for renters is improving on several fronts.
Key Developments Around the World Bank of Korea Holds Policy Rate Steady as Expected
South Korea's central bank kept its policy rate unchanged for an eighth consecutive time, as widely forecast, even as expectations for a rate cut this year grow.
Eurozone Could Be in Recession, ECB's de Guindos Says
The eurozone could be in the midst of a recession, according to European Central Bank Vice President Luis de Guindos. Economic activity slowed in the third quarter of 2023, coming in at a contraction of 0.1%, and indicators point to a contraction in December too, confirming the possibility of a technical recession in the second half of 2023, de Guindos said in a speech in Madrid. "Incoming data indicate that the future remains uncertain, and the prospects tilted to the downside," he added. (Dow Jones Newswires)
ECB Monetary-Policy Transmission Strength Surprises, de Cos Says
The strength of the ECB's transmission of its monetary policy has been surprising, according to governing council member Pablo Hernandez de Cos. If this were to continue, it would lead to lower growth, he said in Madrid. But with the current high level of uncertainty, policymakers must remain vigilant to avoid both insufficient and excessive tightening, according to de Cos, who is also governor of Spain's central bank. (DJN)
China's Messaging to the U.S.: Don't Rock the Boat
A new buzzword is emerging in Beijing's messaging to Washington: the "San Francisco vision"-a veiled warning to the U.S. not to rock the boat after a reset in ties at a November summit in California.
Ecuador Is at War with Drug Gangs, President Says
Ecuador is at war with drug gangs, President Daniel Noboa said Wednesday, as troops patrolled the country's largest city a day after gunmen took over a TV studio and launched attacks against the new government.
Financial Regulation Roundup SEC Approves Bitcoin ETFs for Everyday Investors
A ruling Wednesday clears the way for the first U.S. exchange-traded funds that hold bitcoin to be sold to the public, allowing mainstream investors to buy and sell bitcoin as easily as stocks and mutual funds.
Here's How the New Bitcoin ETFs Will Work Citigroup Taking Charges on Argentina, Russia, Restructuring
Citigroup recorded a litany of one-time charges and expenses in the fourth quarter related to its exposures to Argentina's debt market, Russia's political instability and the bank's own restructuring plan.
Forward Guidance Thursday (all times ET)
8:30 a.m.: U.S. consumer-price index for December; U.S. weekly jobless claims
12:40 p.m.: Richmond Fed's Barkin presents economic outlook to Virginia Bankers Association and Virginia Chamber of Commerce
Friday
2 a.m.: U.K. industrial production for November and gross domestic product, estimate for November
8:30 a.m.: U.S. producer-price index for December
Research Consumer Sentiment Supports Global Soft Landing
Consumer and business sentiment is improving around the world, and that bodes well for a global soft landing, Oxford Economics senior economist Tamara Basic Vasiljev writes in a report. In December, Oxford's global composite sentiment gauge was up 10% from its low point a year earlier. "Consumers expressed growing optimism regarding their spending plans and earning expectations," she writes, adding that real wages entered positive territory in most major economies. Retail sales resumed growth and businesses turned cautiously optimistic. "Notably, both the U.S. and China recorded net positive sentiment scores," she adds. "The increased optimism among consumers and the relatively positive (albeit cautious) outlook of businesses signal a favorable environment for a global soft landing."
-Paulo Trevisani
Basis Points Mortgage applications in the U.S. jumped as home buyers played catch-up after the holiday season despite rates edging higher, lifting the Mortgage Bankers Association's index of application volume 9.9% to 190.6 for the week ending Jan. 5 from a week earlier. A year earlier, the index stood at 186.7. (MarketWatch) U.S. crude oil inventories rose unexpectedly last week, while stocks of gasoline and distillate fuels saw above-forecast builds and refineries reduced their capacity use, according to data released Wednesday by the U.S. Energy Information Administration. U.S. wholesale inventories declined as expected in November, as manufacturers continued to juggle with a fragile economy and an uncertain outlook. Inventories were 0.2% lower at the end of November than the same point a month earlier, according to adjusted Commerce Department figures, matching expectations in a poll of economists by The Wall Street Journal. (Dow Jones Newswires) Australia's trade surplus came in much larger than expected in November as imports slumped, led by nonindustrial transport equipment and fuels, with the latter suffering a big fall in prices on month. Feedback Loop
This newsletter is compiled by James Christie in San Francisco.
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This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
01-11-24 0715ET
