Fed Policy Makers Disagree on Next Rate Move; Fed's Beige Book Notes Business Pessimism By James Christie
Good day. Three regional Federal Reserve bank presidents said on Wednesday that the Fed should raise interest rates at its Jan. 31-Feb. 1 meeting, but they disagreed by how much. Lorie Logan of the Dallas Fed and Patrick Harker of the Philadelphia Fed said the central bank should consider slowing the pace of its increases after raising rates by a half point at its meeting last month. James Bullard of the St. Louis Fed, meanwhile, urged another half-point increase. Also on Wednesday, the Fed's so-called Beige Book noted that high inflation continued to squeeze Americans, while many business contacts of the central bank reported growing difficulty in passing higher costs to consumers. Commerce Department data released Wednesday echoed those views. The department reported that retail spending fell in December at the sharpest pace of 2022, marking a dismal end to the holiday shopping season.
Now on to today's news and analysis.
Top News Two Fed Officials Back Quarter-Point Rate Rise Next Month
NEWARK, Del.-Two Federal Reserve officials said they would favor raising interest rates at the central bank's next meeting by a quarter percentage point, further slowing the pace of increases .
The Fed raised rates by a half point at its meeting last month, stepping down the pace after four consecutive increases of 0.75 point aimed at combating high inflation. Dallas Fed President Lorie Logan said Wednesday that she supported that decision "and the same considerations suggest slowing the pace further at the upcoming meeting" on Jan. 31-Feb. 1., and Philadelphia Fed President Patrick Harker said the Fed could afford to move more slowly with quarter-point moves.
By contrast, St. Louis Fed President James Bullard during a Wall Street Journal Live event said it would be appropriate to raise rates by a half-percentage point at the Fed's next meeting and continue pushing them up. Mr. Bullard said he sees a central bank policy rate of between 5.25% and 5.5% at the end of the year.
Transcript: WSJ Q&A With St. Louis Fed President James Bullard
Businesses Expect Weak Growth in Months Ahead, Says Beige Book
U.S. economic activity was relatively flat at the start of the year and businesses are pessimistic about growth in the months ahead, the Federal Reserve said in its compilation of economic anecdotes known as the Beige Book.
U.S. Economy Producer Price Increases Decelerated in December
Supplier-level inflation cooled significantly at the end of 2022, adding to signs that price pressures are easing in the U.S., as the producer-price index rose 6.2% in December from a year earlier, the slowest annual pace since March 2021 .
U.S. Retail Sales Fell 1.1% in December
Americans cut back on retail spending this holiday season, pinched by rising interest rates, still-high inflation and concerns about a slowing economy, leaving retail sales down a seasonally adjusted 1.1% in December from November.
Treasury to Begin Extraordinary Measures to Pay Government Bills
The Treasury Department is set to begin taking special measures to keep paying the government's bills on Thursday as the divided Congress braces for a potentially lengthy and difficult debate over raising the debt ceiling.
Yellen Plans China Trip as Washington, Beijing Work to Revive Ties
Treasury Secretary Janet Yellen will travel to China soon, the Treasury Department said, as the world's two largest economies try to resume diplomatic engagements that largely stalled amid tensions over Taiwan and the pandemic.
Key Developments Around the World In Davos, Leaders Fret Over Fragmenting Global Economy
Geopolitical rivalry, technology decoupling and protectionism have increasingly altered the business and political landscape, adding risks and, for some, opportunity, say executives and officials at the World Economic Forum.
Live Updates From the World Economic Forum
China's Property Bust Compounds Economic Pain
China's housing market flipped from being a growth driver to an economic drag in 2022. The prognosis for this year isn't much better , compounding Beijing's efforts to get its economy back on firmer footing.
Foreign Investors Pulled $91 Billion From China's Bond Market in 2022
Ruble Gyrates as Sanctions Squeeze Moscow's Energy Exports
The Russian ruble is showing signs of weakness after a confounding rally that made it one of 2022's best-performing currencies. Its direction from here will be a sign of how Russia's economy is holding up under a raft of Western sanctions.
Russia's Influence Wanes in Ex-Soviet States as It Pursues Ukraine War
Iraq Economy Reels as U.S. Moves Against Money Flows to Iran
Iraqis are blaming an unexpected culprit for a weakening currency that has caused the price of food and imported goods to rise: A little-noticed policy change by the U.S. Treasury and the Federal Reserve Bank of New York.
French Workers Protest Macron's Plan to Raise Retirement Age
Thousands took to the streets and workers across France went on strike to protest the government's plan to raise the retirement age, kicking off what is expected to be a protracted battle between unions and the president.
Financial Regulation Roundup Bitzlato Charged With Laundering More Than $700 Million
U.S. authorities have designated Hong Kong-based cryptocurrency exchange Bitzlato Ltd. as a primary money-laundering concern and charged its founder for allegedly facilitating money laundering for criminals.
Crypto Lender Genesis Is Preparing to File for Bankruptcy Within Days
Crypto lender Genesis Global Trading Inc., owned by Digital Currency Group, is in the final stage of preparing paperwork before it files for chapter 11 protection, according to people familiar with the matter.
Global Minimum Tax Could Raise More Revenue Than Thought
Governments could get a bigger windfall than previously estimated if they implement a planned overhaul of international tax rules, the Organization for Economic Cooperation and Development said Wednesday.
Forward Guidance Thursday (all times ET)
7:30 a.m.: ECB publishes account of Dec. 14-15 monetary policy meeting of Governing Council
8:30 a.m.: U.S. housing starts for December; U.S. weekly jobless claims
9 a.m.: Boston Fed's Collins speaks at Boston Fed's New England Public Policy Center and UMass Amherst's Donahue Institute conference
12 p.m.: ECB's Schnabel in moderated webinar on monetary policy in times of pandemic and war hosted by Finanzwende e.V.
1:15 p.m.: Fed's Brainard speaks on economic outlook at University of Chicago Booth School of Business
6:35 p.m.: New York Fed's Williams speaks to Fixed Income Analysts Society
Friday
5 a.m.: ECB's Lagarde in panel discussion on 'Global Economic Outlook: Is this the End of an Era?' at World Economic Forum in Davos
10 a.m.: U.S. existing home sales for December
1 p.m.: Fed's Waller speaks on economic outlook to Council on Foreign Relations in New York
Research U.S. Industrial Sector Might Be in Recession
December's industrial production data suggests the U.S. "manufacturing sector appears to be in recession and, even if China's emergence from its Covid restrictions provide some boost later this year, the deterioration in the survey evidence suggests the near-term outlook is grim," Paul Ashworth, chief U.S. economist for Capital Economics, writes in a report. Industrial production fell 0.7% last month, more than the 0.1% forecast in a Wall Street Journal survey and November's revised 0.6% decline. Capacity utilization was 78.8%, down from 79.4% in November. "Worse still, the weakness in manufacturing was widespread, with monthly declines in a broad range of sectors," Mr. Ashworth writes.
-Paulo Trevisani
Commentary Retailers Get a Seasonal Beating
'Twasn't much of a holiday shopping season for retailers in the U.S., and the question now is how much of its softness in sales was driven by consumer belt-tightening or other factors affecting shopping, Justin Lahart writes.
Basis Points U.S. industrial production declined again in December, weighed by lower factory output, in a sign manufacturers are pulling back in response to softening demand for goods. Production decreased 0.7%, marking a second consecutive monthly drop after a downwardly revised 0.6% drop in November, according to Federal Reserve data. (Dow Jones Newswires) U.S. home builder confidence improved in January for the first time in more than a year, although sentiment remained subdued amid the current housing market downturn, as the National Association of Home Builders' housing-market index rose from 31 in December to 35. Levels below 50 indicate more builders view conditions as poor rather than good. (DJN) U.S. businesses continued to increase restocking in November despite weakening demand, data from the Commerce Department showed. Their inventories rose 0.4% after increasing by a revised 0.2% in October, in line with the gain expected from economists polled by The Wall Street Journal. (DJN) Malaysia's central bank unexpectedly decided to keep its benchmark interest rate unchanged on Thursday, saying the move will let it assess the impact of its previous policy adjustments. Bank Negara Malaysia held its overnight policy rate at 2.75%, marking the first time it has stood pat since March 2022. Indonesia's central bank on Thursday raised its seven-day reverse repo rate in an effort to keep inflation in check and to safeguard the stability of the rupiah. Bank Indonesia increased its benchmark interest rate by 25 basis points to 5.75% as expected. Japan's exports rose for the 22nd consecutive month in December 2022, driven by overseas demand for autos and mineral fuels, Ministry of Finance data showed. Exports rose 11.5% on year in December, which was weaker than November's 20% increase but stronger than the 9.5% increase forecast by economists surveyed by FactSet. (DJN) Turkey's central bank on Thursday held its policy rate at 9% as inflation fell at the year end amid easing commodity prices. The
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01-19-23 0715ET
