What New FOMC Voters Are Saying About Monetary Policy; Lagarde Spurs Hope for ECB Rate Cut

What New FOMC Voters Are Saying About Monetary Policy; Lagarde Spurs Hope for ECB Rate Cuts By James Christie

Good day. Federal Reserve policy makers have been encouraged by how their interest-rate increases have been lowering inflation without derailing the U.S. economy. Still, the economy faces much uncertainty, given the wars in Gaza and Ukraine, attacks on shipping in the Red Sea and a slowing Chinese economy. These likely are among matters the Federal Open Market Committee will consider as it charts monetary policy. Below we offer a look at what officials who are taking up voting roles at the FOMC have had to say recently. Meanwhile, the European Central Bank as expected held its key interest rate at a record high on Thursday. But ECB President Christine Lagarde didn't push back strongly against market expectations of rate cuts starting in April.

Now on to today's news and analysis.

Top News New Year Brings New Voters to Fed's Rate-Setting Committee

Four new voters are joining the Federal Reserve's interest-rate-setting committee in a year when the central bank is expected to start cutting rates after hiking them aggressively since early 2022.

The presidents of the Atlanta, Cleveland, Richmond and San Francisco Fed banks will get a formal say this year in what the Federal Open Market Committee decides to do with monetary policy. Other regional Fed presidents also participate in policy discussions by offering observations and regional insights, but don't get to vote.

ECB Holds Rates as Investors Weigh Expectations of Cuts

The European Central Bank held its key interest rate at a record high but kept open the door to interest-rate cuts as soon as the spring , sending the euro tumbling and shares rising across eurozone markets.

U.S. Economy What to Watch in Friday's Spending Report

Prices ticked up slightly in December, economists estimate, but the longer-run trend shows inflation cooling while consumers spent strongly and incomes grew-all ingredients of a soft landing for the economy.

What Recession? Growth Ended Up Accelerating in 2023

The U.S. economy grew 3.1% over the past year , the Commerce Department said Thursday. A resilient labor market supported strong consumer spending and brushed aside a feared downturn.

Video: Explaining the Unexpectedly Strong Economy, Details in Q4 GDP

Biden Pauses Approvals for LNG Exports

The Biden administration effectively froze the approval process for new plants to export U.S. liquefied natural gas, bowing to demands from environmental groups and angering oil-and-gas companies.

Heating Your House Will Be Cheaper This Winter

A flood of U.S natural gas, along with forecasts for unusually warm weather in the coming weeks, has knocked natural-gas prices down by roughly 30% since the start of heating season at the end of October.

When Layoffs Happen, Remote Workers Are Hardest Hit

Workers logging on from home five days a week were 35% more likely to be laid off in 2023 than their peers who put in office time, according to an analysis of two million white-collar workers conducted by Live Data Technologies.

Key Developments Around the World China's Rapid-Fire Stimulus Reveals Concerns Over Economy

Chinese leaders have signaled deepening concerns about the economy by unleashing a burst of measures aimed at reviving growth, a shift from only a week ago, when authorities sought to project confidence in the economy.

U.K. to Pause Trade-Treaty Talks With Canada

The U.K. said it would pause negotiations with Canada on a liberalized-trade treaty, citing a lack of progress. Canada said talks stalled over agriculture, and British reluctance to increase market access for the Canadian agrifood sector.

Red Sea Conflict Prompts India's Navy to Flex Its Muscles

India is deploying a growing number of warships to counter rebel attacks on commercial ships plying around the Middle East, while steering clear of joining the official U.S.-led force in the Red Sea, as it looks to protect its ties with Iran.

Financial Regulation Roundup The IPO Market Is Struggling in Its First Big Test of the Year

One of the first major IPO debuts planned this year is off to a rocky start , as the IPO of healthcare-services company BrightSpring is on track to price below expectations, people familiar with the matter say.

States Take Aim at Binance.US After CZ Plea

Regulators in Florida and Alaska have told Binance.US that the crypto exchange can no longer serve its residents . Last fall, Binance's founder pleaded guilty to charges of violating U.S. anti-money-laundering requirements.

Chinese Demand for U.S.-Stock ETFs Takes a Pause

A host of Chinese exchange-traded funds tracking overseas stocks fell, reversing course from recent rallies as investment managers seek to stem soaring demand for equities in markets including the U.S. and Japan.

Forward Guidance Friday (all times ET)

8:30 a.m.: U.S. personal income and spending, and personal consumption expenditures price index (PCE price index) for December

10 a.m.: U.S. pending home sales for December

Monday

10:30 a.m.: Dallas Fed Manufacturing Survey

Research Bank of Canada Needs 'Hard Landing' for Second-Quarter Rate Cut

Following a review of the Bank of Canada's forecast and communications, Laurentian Bank Securities chief economist Sebastien Lavoie says the only scenario that could trigger interest-rate cuts in the second quarter is a so-called "hard landing," or recession. He predicts inflation in Canada will stay stubbornly high, and perhaps accelerate, due to a squeeze in global-shipping trade caused by the Red Sea conflict and drought conditions weighing on the Panama Canal. He expects the hold on the Bank of Canada's 5% policy rate to be "lengthy," because a few conditions need to be met before rate cuts happen-most notably, both total and core CPI in the 2.5% to 2.7% range.

-Paul Vieira

Commentary The Economy Just Keeps Going

The rearview window isn't the best guide to the road ahead, but the details of Thursday's gross domestic product report suggest that, at least for now, the U.S. economy will keep rolling forward , Justin Lahart writes.

Executive Insights

Here is our weekly roundup of stories from across WSJ Pro that we think you'll find useful. They are unlocked for WSJ subscribers.

More companies are reporting security breaches: Hewlett Packard Enterprise , Microsoft and EquiLend to name a few. Some private-equity firms are sticking with natural gas despite climate-related pushback. Broadcom's new billing models for VMware products are making CIOs take notice. A pricing metric for Conagra dipped into negative territory , a sign that consumers are scaling back. WeWork is wrestling with lease amendments despite trying to negotiate while in bankruptcy. Basis Points Orders for longer-lasting goods in the U.S. were unchanged in December , pointing to little movement in manufacturing as the year ended. New orders for products meant to last at three years, such as appliances, computers, cars and other manufactured goods, were stable on month, adjusted seasonally, according to Commerce Department figures set out Thursday. (Dow Jones Newswires) Weekly filings for unemployment benefits in the U.S. ticked up by 25,000 to 214,000 last week but remained low by historical standards. This latest reading put the four-week moving average at 202,250, lower than the weekly average in the two years before the pandemic and less than the 223,500 average in 2023. (DJN) Sales of new single-family homes in the U.S. rose more than expected in December, according to Commerce Department figures set out Thursday. Sales increased by 8.0% from a month earlier and by 4.4% from a year earlier, reaching a seasonally adjusted rate of 664,000. The level for November was revised up to 615,000. December sales had been expected to rise a little less rapidly to 649,000, according to economists polled by The Wall Street Journal. (DJN) Canadian factory trade retreated last month, led by lower sales of transportation equipment and chemical products. An early estimate of sales in the manufacturing sector indicates a decline of 0.6% in December, Statistics Canada said Thursday. Manufacturing sales rose 1.2% in November from the month before to a seasonally adjusted 71.69 billion Canadian dollars, the equivalent of about $53.01 billion, the data agency reported earlier this month. (DJN) Germany's consumer confidence looks set to slump in February as shoppers save rather than spend amid a wintry economic landscape. A forward-looking consumer-sentiment index set out Friday forecasts confidence to plunge sharply to minus 29.7 in February from minus 25.4 this month. (DJN) U.K. consumers continue to feel cheerier as 2024 starts, according to a survey set out Friday. Research group GfK's Consumer Confidence Barometer rose three points to minus 19, its highest level in two years . The print was a little better than the minus 20 expected by economists, according to a poll carried out by The Wall Street Journal. (DJN) 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.

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01-26-24 0715ET