Yellen Gives Her Take on the Economy; Bank of Mexico Stays Pat; Bank of Russia Hikes Again; China's Sputtering Economic Recovery

Yellen Gives Her Take on the Economy; Bank of Mexico Stays Pat; Bank of Russia Hikes Again; China's Sputtering Economic Recovery By James Christie

Good day. Today, we feature an interview with Treasury Secretary Janet Yellen, a former Federal Reserve chair, on her outlook for the U.S. economy. Also, former Fed vice chair Roger W. Ferguson Jr. weighs in on the central bank's performance this year. Meanwhile, the Bank of Mexico held interest rates steady on Thursday, in line with rate decisions earlier in the day by the European Central Bank, the Bank of England and the Swiss National Bank. Elsewhere, Russia's central bank raised its key interest rate for the fifth time in an effort to contain a surge in inflation as resources are diverted to sustain the invasion of Ukraine. And China's central bank on Friday injected a record amount of liquidity into the financial system via one-year policy loans as its economic recovery shows signs of losing further momentum.

Now on to today's news and analysis.

Top News Janet Yellen on Why She Predicts a Soft Landing for the U.S. Economy

It has been a matter of debate among economists for a while: Can the U.S. economy achieve a so-called soft landing, with inflation falling back to prepandemic levels without a deep economic slowdown?

U.S. Treasury Secretary Janet Yellen, a former chair of the Federal Reserve, is confident it can. She sat down with Wall Street Journal economics reporter Nick Timiraos at the WSJ CEO Council Summit in Washington to explain her views on that and more .

Analysis: What Grade Does the Fed Get for 2023?

If we were grading the Federal Reserve's 2023 performance, the best I could give would be an "incomplete" : too soon to celebrate victory but no reason to call it a defeat. The Fed regained some of the credibility many believe it had lost by being late in confronting the inflation challenge. However, inflation, while declining, remains stubbornly above the Fed's 2% target.

Roger W. Ferguson Jr. is a former vice chairman of the Federal Reserve, and a former president and chief executive officer of TIAA. He can be reached at [e-mail].

U.S. Economy U.S. Retail Sales Show Holiday Season Off to Strong Start

Retail sales, which include spending at stores, restaurants, dealerships and online, rose a seasonally adjusted 0.3% in November from the month before, the Commerce Department said Thursday. That was a rebound from October's downwardly revised 0.2% decline and a surprise to economists who had expected sales to fall again last month.

What Fed Rate Cuts Mean for Home Buyers in 2024

If you have been on the hunt for a new home but couldn't stomach mortgage rates pushing 8%, the Fed's move will make mortgage payments cheaper , as rates are nearly certain to come down if the central bank sticks to its forecast.

Markets Cheer Fed Outlook, but the Rally Complicates It Stocks Extend Post-Fed Rally

Charter Schools Get Squeezed in Retreat From Low-Rated Debt

At charter schools, as elsewhere, boom times have given way to belt-tightening, raising questions about who will survive. Higher salaries and dwindling federal Covid aid are stretching revenues and squeezing budgets .

House Passes Defense Bill Without Abortion, Transgender Provisions

House lawmakers voted 310-118 to approve the National Defense Authorization Act, which would increase America's total national security budget by roughly 3% to $886 billion from last year's $858 billion authorization bill.

Key Developments Around the World Bank of Mexico Leaves Reference Interest Rate Unchanged

The Bank of Mexico left its benchmark interest-rate target unchanged at 11.25% for a sixth straight meeting Thursday and reiterated it expects to keep the rate at the current level "for some time."

Mexico Launches Maya Train in Bid to Boost Southern Tourism Russia's Central Bank Raises Key Rate For Fifth Time

The Bank of Russia lifted its key interest to 16% from 15%, in line with investor expectations. When the central bank started its current series of increases in July, the key rate stood at 7.5%. The series of rate rises, aided by the reintroduction of some capital controls, has helped steady the ruble, which had previously been tumbling. However, the central bank said consumer prices continue to increase more rapidly than it had expected, while government spending will stay high for longer than previously indicated. The annual rate of inflation was 7.5% in November, almost double the central bank's target. In a statement, the central bank said rates would have to remain high for some time. "The return of inflation to target in 2024 and its further stabilisation close to 4% assume that tight monetary conditions will be maintained in the economy for a long period," it said. (Dow Jones Newswires)

China's Economy Shows Signs of Losing Further Momentum

The latest data suggests China's economy is struggling anew : investment and consumer spending both expanded slower than expected last month. The country's central bank on Friday pumped a net of about $112 billion into markets.

China's Central Bank Keeps Key Policy Rates Unchanged China's New Home Prices Fell in November Amid Continued Weakness Don't Buy China's November Recovery Financial Regulation Roundup Oklahoma Finds It Hard to Break Up With JPMorgan and BlackRock

Oklahoma is among several conservative states targeting financial firms that have embraced ESG. But no state has moved as fast to enforce a broad blacklist of financial firms , creating a case study Wall Street and other states are watching.

Blackstone, Canada Pension Plan in $1.2 Bln Joint Venture With FDIC

Two units of Blackstone Real Estate Debt Strategies, Blackstone Real Estate Income Trust, Canada Pension Plan Investment Board and funds affiliated with Rialto Capital entered a JV with the Federal Deposit Insurance Corp.

Biden Administration Calls AI a Risk to Financial System

The Biden administration identified artificial intelligence as a vulnerability in the financial system for the first time, recommending financial institutions closely monitor the development of AI. The Financial Stability Oversight Council, an interagency group led by Treasury Secretary Janet Yellen, made the recommendation as part of its annual report.

Forward Guidance Friday (all times ET)

8:15 a.m.: Canada housing starts for November

8:30 a.m.: New York Fed's Empire State Manufacturing Survey

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

12:40 p.m.: Bank of Canada's Macklem speaks at Canadian Club Toronto, remarks published at 12:25 p.m.

Monday

5:30 a.m.: Bank of England's Broadbent speaks at London Business School

8:30 a.m.: New York Fed Business Leaders Survey

Research Bank of Japan Likely to Signal Exit From Negative Rate Landscape

The Bank of Japan policy board wraps up its last meeting of the year on Dec. 19, and while Bank of America doesn't expect any change in key targets, its strategists believe the BOJ will lay the groundwork to exit its negative interest rate policy in early 2024. "If the signal comes in the statement, it could take the form of new language acknowledging further signs of progress towards the 2% price stability target, and a directive from the BOJ governor to the staff to consider preparing options for guiding front-end rates into slightly positive territory," BofA economists say in a report. But they caution that given uncertainty around the outlook for the economy and markets, they don't think the BOJ will lock itself into rigid or overly dovish guidance. "We expect BOJ normalization to remain gradual," the economists say.

-Patrick Sheridan

Commentary Europe's Hawkish Rebellion Will Be Hard to Sustain

Central banks in Europe want to push back against the strengthening consensus among investors that 2024 will be a year of interest-rate cuts, but they may be swept up by it anyway, Jon Sindreu writes.

Beware the Most Crowded Trade on Wall Street: Soft Landing in 2024

This December, investors believe, again with absolute conviction, that the economy is heading for a soft landing. Each of the past three years had a similarly strong consensus that proved wrong , James Mackintosh writes.

Americans Are Spending on the Holidays After All

Sales look as if they are doing well so far this month, too, with Bank of America economists reporting total card spending by their bank's customers up 1.2% versus a year ago in the week ended Dec. 9, Justin Lahart writes.

The (Surprisingly) Good News on Life Expectancy: It's Still Going Up

It turns out there are two ways to measure mortality and life expectancy, and the one you hear about the most paints a misleadingly pessimistic picture of the future, Josh Zumbrun writes.

Will the End of Fossil Fuels Spoil the Lucky Country's Streak?

A fossil-fuel-free future-like the one envisioned at the COP28 climate summit in Dubai on Wednesday-would pose a significant challenge to Australia's growth model , Jacky Wong 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.

Ernst & Young is laying off dozens of partners as the accounting firm faces slowing demand for certain services.

Companies are wrestling with how much information to report about cyberattacks under new disclosure rules , worried that saying too much might invite lawsuits and more hacks.

Opioid victims are finding that billions of dollars pledged by drugmakers to settle lawsuits have been snared in the morass of the nation's bankruptcy system.

Listen to Flexport CEO Ryan Petersen discuss what he sees as the role of technology versus human interaction in running a global logistics company.

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12-15-23 0716ET