Data Key to Fed's Next Rate Move, Powell Says; Janice Eberly Seen as Front-Runner to Be Next Fed Vice Chair; Bank of Canada Stays Put By James Christie

Good day. Reports on hiring and inflation in February will strongly influence the Federal Reserve's next interest-rate decision, Chair Jerome Powell said on Wednesday during a second day of testimony on Capitol Hill. Mr. Powell softened his tone from his remarks Tuesday, which left markets thinking he suggested a half-point rate rise was likely at the Fed's March 21-22 meeting. "I stress that no decision has been made on this," Mr. Powell said on Wednesday before the House Financial Services Committee, in words he inserted ad lib into his opening remarks. Meanwhile, The White House has homed in on Janice Eberly, a finance professor at Northwestern University, as the front-runner to be nominated as Fed vice chair in recent days, according to people familiar with the matter. But President Biden hasn't yet made a final decision. Elsewhere on Wednesday, the Bank of Canada held its target for the overnight rate at 4.50%, following a quarter-point increase in January. The decision to leave rates steady was based on recent data showing inflation moderating to below 6% and economic growth stalling in the fourth quarter, the central bank said in a statement.

Now on to today's news and analysis.

Top News Jerome Powell Says Data Will Determine Size of Next Rate Increase

Federal Reserve Chair Jerome Powell said on Wednesday the central bank was keeping its options open about how much to raise interest rates this month after investors interpreted his comments Tuesday to suggest a larger half-point rate rise was likely.

His comments over two days of congressional hearings show how the central bank is contemplating a shift in tactics to keep up with an economy showing surprising strength after a year of rate increases.

Mr. Powell said government reports on hiring and inflation in February, due for release over the coming week, would shape the outcome of the Fed's March 21-22 meeting.

Janice Eberly Seen as Leading Candidate for Fed Vice Chair

Janice Eberly, who served as the assistant Treasury secretary for economic policy during the Obama administration, is the leading candidate for the No. 2 job at the Federal Reserve, people familiar with the matter said.

Bank of Canada Holds Interest Rates Steady, Cites Inflation Slowdown

The Bank of Canada kept its main interest rate unchanged on Wednesday, the first time it has done so in about a year, arguing that economic data point to sharply decelerating inflation this year toward its 2% target.

Pro Take: Now Isn't Time to Change the Fed's 2% Inflation Target, Economists Say By Bob Fernandez

Federal Reserve Chairman Jerome Powell on Capitol Hill this week confirmed the central bank remains committed to bringing inflation down to its 2% target, even as markets and some economists worry about the toll more interest-rate increases could take on the economy and jobs.

But even some economists who think a higher inflation target is a good idea say the Fed shouldn't move it now. Read more .

U.S. Economy Markets on Edge Ahead of Jobs and Inflation Reports

U.S. financial markets are limping into a crucial period, with analysts warning about the potential for key economic releases, including reports on nonfarm employment and CPI, to deliver a further blow to investors' early-year optimism.

U.S. Job Openings Fell, Layoffs Rose in January

U.S. job openings fell in January and layoffs rose in a sign demand for workers could be cooling, with a seasonally adjusted 10.8 million openings in the month, down from December's upwardly revised 11.2 million.

Imports, Exports Grew in January, Reflecting Solid Global Economy

Imports grew 3.0% to a seasonally adjusted $325.8 billion in January, reflecting increases in automobile and consumer goods shipments, and exports rose 3.4% to $257.5 billion, as sales of consumer goods rose.

Biden's Budget Would Cut Deficits by $3 Trillion Over 10 Years

President Biden will outline a plan to reduce federal budget deficits by nearly $3 trillion over the next decade and raise taxes on wealthy people and large corporations, kicking off monthslong spending negotiations in Congress.

The Perk-Cession Is Under Way at Some Companies

Companies are cutting back on prized employee perks meant to make workers want to join and stay, sometimes running alongside layoffs, as they vow to trim expenses and prioritize efficiency.

Key Developments Around the World Malaysia Central Bank Keeps Policy Rate at 2.75%

Malaysia's central bank continued to keep its benchmark interest rate unchanged, saying it will continue to assess the impact of cumulative interest-rate adjustments, "given the lag effects of monetary policy on the economy."

Japan Lower House Approves Kazuo Ueda as Next BOJ Governor

Japan's Lower House of Parliament on Thursday approved Kazuo Ueda to become the next Bank of Japan Governor. The term for current BOJ Gov. Haruhiko Kuroda is set to expire on April 8. Mr. Ueda is a former economics professor at the University of Tokyo who served on the BOJ's policy board from 1998 to 2005. The Lower House also approved candidates for two BOJ deputy governors. The Upper House is scheduled to vote on the nominees on Friday. (Dow Jones Newswires)

China's Inflation Slows to One-Year Low, Casting Doubt on Recovery

Inflationary pressures in the world's second-largest economy eased more than expected in February after a post-reopening spike, a sign of the limited boost from the lifting of strict "zero Covid" curbs for domestic demand.

China Property Sector Left in Limbo by Stalled Debt-Restructuring Talks

U.S., EU to Start Trade Negotiations on Minerals

The U.S. and European Union are moving forward with crafting a trade agreement focused on critical minerals, with President Biden and European Commission President Ursula von der Leyen expected to discuss the plan on Friday.

EU Pledges Over $1 Billion on Arms for Ukraine, Member States

European Union defense ministers, who met with NATO's secretary-general on Wednesday, said they would propose giving Ukraine more ammunition from EU members' stocks and using bloc funding to help replenish those supplies .

IMF, World Bank Pause Loans to Tunisia Amid Crackdown on Migrants

A crackdown on political opponents and Black African migrants in Tunisia is complicating the country's efforts to secure billions of dollars in critical loans and grants from the International Monetary Fund and World Bank.

Financial Regulation Roundup China's New Way to Control Its Biggest Companies: Golden Shares

In its uneasy dance with China's private sector, the Communist Party is moving away from a public battle with some of the country's biggest companies. Instead, it is inching toward a quieter form of control .

Crypto Bank Silvergate to Shut Down, Repay Deposits

The crypto meltdown has claimed its first big casualty in the mainstream financial system: Silvergate Capital Corp. The bank said it will wind down and return all deposits following a run that forced it to sell off assets at a steep loss.

Credit Suisse Delays Annual Report After Last-Minute SEC Request

Credit Suisse Group AG delayed its annual report to address a late-night request from the U.S. Securities and Exchange Commission for more information on how the bank restated cash flows after restructuring its divisions.

Forward Guidance Thursday (all times ET)

8:30 a.m.: U.S. weekly jobless claims

10 a.m.: Fed's Barr gives speech on crypto to Peterson Institute for International Economics

1:30 p.m.: Remarks of Bank of Canada's Rogers on economic progress report to Manitoba Chambers in Winnipeg

Friday

2 a.m.: U.K. gross domestic product estimate and industrial production report for January

4 a.m.: ECB's Panetta delivers presentation on digital euro to Executive Committee of European Banking Federation in Frankfurt

6 a.m.: ECB's McCaul on panel at New Frontiers in Digital Finance conference

8:30 a.m.: U.S. employment report for February

10 a.m.: ECB's Lagarde visits German Chancellor Scholz

Research Fed's Beige Book Says Economic Activity Up Slightly

U.S. economic activity rose slightly early this year, according to the Federal Reserve's compilation of economic anecdotes from around the country known as the Beige Book. Half of the Fed's 12 regional banks reported activity rose at a modest pace in their districts, while the other half reported little or no change. "Consumer spending generally held steady, though a few districts reported moderate to strong growth in retail sales during what is typically a slow period," the report said. It added that manufacturing stabilized after a period of contraction, and travel and tourism remained fairly strong in most districts. Several districts said high inflation and higher interest rates continued to reduce consumers' discretionary income and purchasing power, and expressed concern about rising credit card debt. "Amid heightened uncertainty, contacts did not expect economic conditions to improve much in the months ahead," the Fed said.

-Harriet Torry

Citi Suggests Bank of Canada Rate Rise Is in Play

Citi economist Veronica Clark believes the Bank of Canada could raise its main interest rate by another quarter point as soon as April. Her view stands in contrast to the consensus in the Canadian financial community, which believes the BOC is on an extended pause. In a note to clients, Ms. Clark writes that guidance in the central bank's policy decision Wednesday "did not explicitly point" to an expectation that rates are on hold. She adds the statement made certain adjustments, such as a mention of 4% to 5% wage growth and the need for short-term core CPI to "come down further," that open the door to further rate increases. "We suspect stronger domestic activity and a backdrop of higher global inflation and rates will lead to another hike in April," she writes.

-Paul Vieira

U.K. at Risk of Deeper Recession

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03-09-23 0716ET