Powell Says Smaller Rate Increases Make Sense; BOE and SNB Match Fed Move; Join WSJ Live Q&A on the Economic Outlook By James Christie

Good day. As expected, the Federal Reserve on Wednesday raised interest rates by 0.5 percentage point and Fed Chairman Jerome Powell suggested the central bank would strongly consider dialing down the size of rate rises to a more traditional quarter-percentage-point increment at its next meeting on Jan. 31-Feb. 1. "It makes a lot of sense, it seems to me-particularly if you consider how far we've come," Mr. Powell said. Central bank officials in their postmeeting policy statement continued to describe "ongoing increases" in interest rates as appropriate. Additionally, economic projections released Wednesday show officials expect their interest-rate increases will slow the economy over the coming year and lift the unemployment rate to 4.6% next year, from 3.7% in November. Historically, an increase of that much in that span has coincided with a recession. Join us today for a Wall Street Journal Q&A on the economic outlook, featuring KPMG's chief economist Diane Swonk and Duke University economist and former senior advisor at the Fed Ellen Meade. You can find details on and a link to the event below.

Now on to today's news and analysis.

Top News Fed Lifts Rate by 0.5 Percentage Point, Signals More Increases Likely

The Federal Reserve approved an interest-rate increase of 0.5 percentage point and signaled plans to lift rates through the spring , though likely in smaller increments, to combat high inflation.

The decision Wednesday marked a step down after four consecutive larger increases of 0.75 point and raised the benchmark federal-funds rate to a range between 4.25% and 4.5%, a 15-year high.

Parsing the Fed: How the December Statement Changed Transcript: Fed Chief Powell's Postmeeting Press Conference Fed Officials Raise Estimates for Where Rates Will End 2023 [https://www.wsj.com/livecoverage/federal-reserve-meeting-interest-rate-hike-december-2022/card/fed-officials-raise-estimates-for-where-rates-will-end-2023-wq8urgaibtNI9Eg6AClA#::text=Federal%20Reserve%20officials%20see%20interest, a%20median%20projection%20of%205.1%25.]

BOE and SNB Match Fed's Move; ECB Expected to Follow Suit

The Bank of England and the Swiss National Bank on Thursday matched the Federal Reserve by raising interest rates 50 basis points . The European Central Bank will deliver its decision later today and is also expected to follow suit.

WSJ Live Q&A The 2023 Outlook With Economists Diane Swonk and Ellen Meade

Following the Federal Reserve's latest policy meeting, KPMG's chief economist Diane Swonk and Duke University economist and former senior advisor at the Fed Ellen Meade join the Journal's chief economics correspondent Nick Timiraos to discuss the state of the economy moving into the new year and how central bank actions could impact the real estate industry and job market in 2023. This live Q&A event begins at 1 p.m. EDT on Thursday, Dec. 15. You can join it by clicking here .

U.S. Economy What Fed Interest Rate Increase Means for Your 2023 Financial Plans

After a year of rising interest rates, higher prices and volatile markets, financial advisers say now is the time for Americans to plot a new course for 2023. Here are three strategies financial advisers suggest for next year.

Supermarkets Push Store Brands to Lure Cost-Conscious Shoppers

Sales of private-label products, which are typically cheaper than brand-name equivalents, have surged in recent months as shoppers look for ways to economize amid soaring inflation and a disposable-income squeeze .

November Retail Sales Report to Show Holiday Spending Trends

Pandemic Loans Coming Due but Some Aren't Ready to Repay

For 1.2 million Covid disaster loans to small businesses, the first payments are due this month; another one million loans enter repayment in January. Borrowers began repaying 427,000 loans in October or November.

Key Developments Around the World Xi Jinping Doubles Down on His Putin Bet

In recent weeks, China's leader Xi Jinping has instructed his government to forge stronger economic ties with Russia, building on a trade relationship that has strengthened this year and become a lifeline to Moscow .

China's Central Bank Keeps Key Policy Rates Unchanged China's Leaders Plot Pivot Back Toward Boosting Economy China's Economy Struggled in Zero Covid's Final Month

Russian Oligarch Vladimir Potanin Faces U.S. Sanctions

The U.S. is moving to impose sanctions on one of Russia's wealthiest men, Vladimir Potanin, and on some of his financial companies as Washington looks to further clamp down on Russia amid the war in Ukraine.

Tunisians Emigrate in Record Numbers as Hopes Fade

Record numbers of Tunisians are leaving the country after a decade of economic turmoil and the government's turn toward authoritarianism, dimming hopes for a younger generation in the nation that sparked the Arab Spring.

Financial Regulation Roundup SEC Proposes Rules That Would Squeeze Stock-Market Middlemen

The SEC voted Wednesday to advance the biggest changes to U.S. stock-market rules since the mid-2000s, aiming to give small investors better prices on their trades and reduce some advantages enjoyed by high-speed trading firms.

Prosecution of Sam Bankman-Fried Could Rise or Fall on Intent

Prosecutors in the case against FTX founder Sam Bankman-Fried will need to prove that he knowingly and willfully broke the law , former federal prosecutors and defense attorneys say.

Caroline Ellison Was Alameda CEO; Officials Say Bankman-Fried Ran It Bankman-Fried's Alleged Campaign Finance Violations Explained DOJ, SEC Charge Eight Social-Media Influencers for Alleged Fraud

Federal prosecutors and the SEC charged eight social-media influencers over an alleged stock-manipulation scheme in which they used their platforms to alter stock prices and illicitly make more than $100 million .

Forward Guidance Thursday (all times ET)

7 a.m.: Bank of England rate decision

8:15 a.m.: ECB rate decision; Canada housing starts for November

8:30 a.m.: U.S. retail sales for November; U.S. weekly jobless claims

9:15 a.m.: U.S. industrial production and capacity utilization for November

Friday

4 a.m: Eurozone flash PMI for December

5 a.m.: EU harmonized consumer price index for November

9:45 a.m.: S&P manufacturing PMI and services PMI for December; S&P Global Composite PMI for December

Research Canada's Economy Still Edging Toward Downturn in 2023

Canada's economy continues to inch closer to a recession next year, though signs of easing inflation pressures improve the odds a downturn will be mild by historical standards, according to Royal Bank of Canada. Housing-market activity looks to be nearing a bottom after a sharp correction over the spring and summer, while the residual effect of higher interest rates will continue to ripple through and soften consumer spending in the quarters ahead, the bank says. It estimates higher household debt payments and inflation will cut an additional C$3,000 from purchasing power per household in 2023. At the same time, RBC expects unemployment to rise as job openings pull back, though employment levels are seen little changed next year from 2022.

-Robb Stewart

Pandemic Home Buyers Unlikely to Fall Underwater as Prices Drop

Only 3.4% of U.S. homeowners who bought in the past two years would be underwater on their mortgages even if home values were to fall another 4% by the end of 2023, according to a new report from Redfin. Economists at the digital real-estate brokerage predict another 4% drop from here through the end of 2023, but even if that happens, the typical home bought over the past two years will have still gained $27,000 in value, the report says, adding that prices would need to fall about 12% for the share of underwater homeowners to reach double digits.

-Will Feuer

Commentary Fed's Walk May Be More Dovish Than Its Talk

Just because Fed policy makers think they know what they will be doing in the year ahead doesn't make it so, Justin Lahart writes, noting that last December the Fed's projections called for all of 0.75 of a point in rate increases this year.

Jerome Powell's Grim Inflation Outlook Is at Odds With Markets

After raising interest rates by the expected half-percentage point, the Fed laid out an economic and interest-rate forecast premised on a painful, drawn-out battle with inflation completely at odds with the markets, Greg Ip writes.

Basis Points Prices of imported goods to the U.S. decreased in November for a fifth consecutive month driven by lower petroleum prices, falling 0.6% after declining 0.4% in October, according to Labor Department data. (Dow Jones Newswires) Canadian factory sales were stronger than anticipated in October, driven higher in part by a rebound in prices for refined petroleum products. Manufacturing shipments rose 2.8% from September to a seasonally adjusted 72.56 billion Canadian dollars ($53.57 billion), Statistics Canada said. (DJN) China's home sales continued to decline in the January-November period, even as Beijing rolled out more support measures for the embattled property sector amid a nationwide Covid wave. Home sales by value fell 28.4% from a year earlier in the first 11 months, widening slightly from the 28.2% decline in the January-October period. (DJN)

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12-15-22 0724ET