Fed Rate Cut Timing in Focus; Renters Get Concessions, Home Buyers Shut Out; Deflation in China

Fed Rate Cut Timing in Focus; Renters Get Concessions, Home Buyers Shut Out; Deflation in China By James Christie

Good day. Inflation has fallen faster this year than many Federal Reserve officials expected. Now, after a series of interest-rate increases none of them envisioned two years ago, the big questions facing the central bank are about when it can begin cutting rates and by how much. The Fed's timing matters and must contend with dueling hazards for the U.S. economy, Nick Timiraos of The Wall Street Journal writes below. Meanwhile, after suffering through a three-year period when rents jumped by 30% or more in many U.S. cities, renters are now starting to enjoy concessions from landlords. This comes as high mortgage rates have busted the math for many would-be home buyers. And in China, consumer prices fell again last month, the latest sign of economic weakness

Now on to today's news and analysis.

Top News Inflation Fight Is Succeeding, Raising Questions About Rate Cuts

When Federal Reserve Chair Jerome Powell met on an October afternoon with small-business owners in Pennsylvania, Julie Keene lamented how her family farm and food market had been blindsided by high inflation over the past two years.

"Predictability is just gone," said Keene, co-owner of Flinchbaugh's Orchard & Farm Market in Hellam, Pa. "It is very hard to operate a business in a world where there is not predictability."

Powell curtly told Keene he saw one clear solution : "We get inflation down."

Here's Where Prices Are Actually Coming Down Economy's Soft Landing Comes Into View as Job Growth Slowly Descends U.S. Economy Renters Are Starting to Get Concessions From Landlords Again

Thanks largely to an unusual surge in new building supply, more landlords are offering enticements to fill up their properties, from a month of free rent to a reduction in fees and deposits.

The Math for Buying a Home No Longer Works Megafactories Are Coming. Now the Hustle Is On to Find Workers.

U.S. manufacturers have long struggled to find all the employees they need. The coming wave of megafactories , aided by billions of dollars in public incentives, could push the shortage into a crisis, executives and industry officials say.

The Long Goodbye: Why Laid-Off Employees Are Still on the Job Why Treasury Auctions Have Wall Street on Edge

The U.S. Treasury prefers its debt sales to be humdrum affairs. Lately, they are sparking fireworks in markets. Scrutiny of Treasury auctions-whereby the government funds operations by selling the world's safest bonds to big banks and dealers-has grown alongside their size.

When Bond Yields Dropped, the Everything Rally Kicked Off Key Developments Around the World China Can't Shake Deflation

Consumer prices in China fell for the second straight month, a deepening bout of deflation that shows Beijing's efforts to reignite faltering growth are falling short.

BOJ Should Raise Rates Before Next Summer, Suntory CEO Says

Takeshi Niinami, chief executive of Suntory Holdings and the head of a Japanese business lobby, called on the Bank of Japan to raise interest rates , saying it would help boost the economy's productivity and competitiveness.

Argentina Swears In Javier Milei as President

Javier Milei was sworn in as Argentina's president Sunday, telling the nation to brace for massive public spending cuts as he tries to dig the country out of its worst economic crisis in a generation.

Financial Regulation Roundup SEC Probes Investment Advisers' Use of AI

The Securities and Exchange Commission is asking investment advisers how they use and oversee artificial intelligence, as agency head Gary Gensler continues to express skepticism about the technology.

FTX Customers Fight for What's Left of Their Crypto

Cryptocurrency prices have been on a wild tear this year, but thousands of FTX customers, whose tokens have been trapped on the crypto exchange for more than a year, are missing out on the action.

FTC Probes Chevron's $53 Billion Deal for Hess

Chevron and Hess said Friday the antitrust enforcer is seeking additional information about the merger, a move signaling the commission is reviewing whether the deal could be anticompetitive under U.S. law.

Forward Guidance Monday (all times ET)

10 a.m.: The Conference Board Employment Trends Index for November

11 a.m.: New York Fed's Survey of Consumer Expectations

Tuesday

Time N/A: FOMC Meeting

2 a.m.: U.K. unemployment for November

8:30 a.m.: U.S. consumer-price index for November

Research ECB Unlikely to Rush Ahead With Early Rate Cuts

The European Central Bank is unlikely to start cutting interest rates until the second half of 2024, even as weakening activity and fast-declining inflation have prompted markets to anticipate early and substantial rate cuts, Katharine Neiss, chief European economist at PGIM Fixed Income, writes in a note. A breakdown of the drivers behind the bigger-than-expected drop in eurozone inflation in November isn't available yet, "but we doubt this is sufficient evidence for the ECB to pivot towards cutting rates so soon," she writes. However, should final inflation figures show a broad-based weakening, and with the labor market cooling rapidly, early and aggressive cuts could be in the frame, she writes. PGIM Fixed Income expects the ECB's deposit rate to end 2024 at 3.5%.

-Emese Bartha

Commentary The Fed Can't Put Off Preparing for Rate Cuts

A move toward lower rates is probably coming, and sometime in the early part of next year , the Federal Reserve-helmed by Chair Jerome Powell-will need to start preparing for it, Justin Lahart writes.

Basis Points A preliminary reading of the University of Michigan's consumer-confidence index showed it surging to 69.4 points from 61.3 at the end of November. Economists polled by The Wall Street Journal expected a rise to 62.4. Imports are surging at U.S. seaports to end the year. The National Retail Federation's Global Port Tracker forecasts shippers in November brought in 1.96 million containers, measured in 20-foot equivalent units, up almost 11% from last year. The NRF also expects importers will bring in 1.93 million boxes this month, up almost 12% from a year earlier. (Dow Jones Newswires) Canada's industrial capacity utilization rate rose to 79.7% in the July-to-September period, up 0.1 percentage point from the previous quarter, and came down 0.6 point from a year earlier, Statistics Canada said Friday. (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.

(END) Dow Jones Newswires

12-11-23 0715ET