ECB Cuts Rates by Quarter Point; U.S. PPI Beats Expectations; Trump Eyes Cutting Banking Agencies By Vicky Ge Huang

The European Central Bank lowered interest rates by a quarter point, aiming to stabilize an economy rocked by debt worries in France and highly exposed to the trade tariffs threatened by President-elect Donald Trump.

Business confidence indicators in Europe have weakened in recent weeks while headline inflation rose for a second straight month to 2.3% in November, creating an uncomfortable stagflationary backdrop.

Investors now expect the ECB to cut interest rates significantly more than the Federal Reserve or Bank of England over the coming months, reaching a terminal rate of around 1.75% by next summer, around 2 percentage points lower than the Fed.

Meanwhile, U.S. producer prices in November jumped more than expected over the previous month, a sign of strengthening inflationary pressures. The Labor Department said the rise was driven by a jump in goods prices.

A Wyoming cryptocurrency-focused bank is fighting for access to the Fed's payments systems amid expectations of a crypto-friendly regime under Donald Trump.

And the Trump transition team has started to explore pathways to dramatically shrink, consolidate or even eliminate the top bank watchdogs in Washington.

Top News ECB Cuts Rates by Quarter Point in Attempt to Boost Flagging Growth

The European Central Bank reduced its key interest rate to 3% from 3.25%, widening a gap in benchmark borrowing costs with the Federal Reserve. It was the third cut in as many meetings. Some investors had called for a half-point rate cut.

Bundesbank Cuts German Growth Forecasts

Germany's central bank drastically cut its economic-growth forecasts for next year and warned of heightened uncertainty with the possibility of rising trade protectionism. The Bundesbank said in its twice yearly report that it now expects just 0.2% economic growth in Germany in 2025, well below the 1.1% it predicted in prior forecasts made in June.

Germany Faces Tepid Growth Without Policy Changes, Ifo Says Germany's Goods Surplus Shrinks as Trade Uncertainty Mounts U.S. Producer Prices Rise 0.4% in November, Well Above Expectations

Producer prices rose by a larger-than-expected 0.4% in November from a month earlier, the latest sign of strengthening inflationary pressures. Economists surveyed by The Wall Street Journal had forecast that the producer-price index, a measure of the prices businesses receive for their goods and services, would increase by a seasonally adjusted 0.2%.

Pro Take: Crypto Bank Hopes Tide Is Turning in Washington as It Takes On the Fed

The case of a Wyoming crypto bank that was denied access to the Federal Reserve's payments systems is heading to an appeals court in the new year-and the startup hopes a lighter regulatory approach to cryptocurrencies under the Trump administration will help in its fight to join the $4 trillion-a-day network. Read more .

U.S. Economy Your Home-Insurance Bill Has Only One Way to Go: Up

Higher home-insurance rates are here to stay, while homeowners in many areas face an increasing risk of nonrenewals, reduced coverage and expensive policy conditions, from paying for a new roof to cutting down trees. For tens of millions of Americans, home insurance will never be the same , insurers and analysts say.

Dollar Stores Are Flashing a Warning About Lower-Income Consumers

Inflation has eased, wage growth has been decent and Americans on average still have more in savings than they used to prepandemic. Some might even say the economy has reached a much-vaunted "soft landing." Low-income consumers, though, aren't feeling any of that .

U.S. Manufacturers Are Stocking Up on Imports Ahead of Tariffs

U.S. manufacturers are stockpiling imported parts and raw materials in anticipation of President-elect Donald Trump imposing new tariffs next year.

Trump Expresses Support for U.S. Dockworkers

President-elect Donald Trump threw his support behind a dockworker's union locked in contentious labor talks with port employers.

Trump Rings Bell at NYSE, Says He Wants to Slice Corporate Taxes

President-elect Donald Trump told business leaders assembled at the New York Stock Exchange that he would try to cut the corporate tax rate to 15% from 21% .

Financial Regulation Trump Advisers Seek to Shrink or Eliminate Bank Regulators

Bank executives are optimistic President-elect Donald Trump will ease a host of regulations on capital cushions and consumer protections, as well as scrutiny of consolidation in the industry. But FDIC deposit insurance is considered near sacred. Any move that threatened to undermine even the perception of deposit insurance could quickly ripple through banks and in a crisis might compound customer fears.

Crypto Cheerleader French Hill Wins Top Congressional Finance Post

The congressional leader with the most influence in the finance world will soon be a community banker from Arkansas who has worked to bring comprehensive regulatory reform to the world of cryptocurrencies.

Forward Guidance Friday (all times ET)

8:30 a.m.: Import & Export Price Indexes

Monday

8:30 a.m.: Empire State Manufacturing Survey

9:45 a.m.: US Flash Manufacturing PMI

9:45 a.m.: US Flash Services PMI

10 a.m.: ISM Semiannual Report On Business Economic Forecast

Research ECB Could Cut Rates By Another Full Percentage Point In 2025

The European Central Bank could cut interest rates by another full percentage point in 2025, says State Street Global Advisors' Des Lawrence after the ECB lowered interest rates by 25 basis points. The ECB can and should cut rates further in the coming quarters, the senior investment strategist says in a note. PMI data have shown recently that the slowdown is broadening beyond the troubled manufacturing sector, with the services sector also under pressure, Lawrence says. - Emese Bartha

Basis Points One lesson from an unprecedented year of elections around the world is that voters in industrialized countries are particularly unhappy , ready to boot unpopular leaders out of office and making it more difficult for politicians in power to enact bold programs of change. Initial jobless claims in the U.S. rose by 17,000 to 242,000 in the week that ended Dec. 7, the Labor Department said Thursday. That's the highest level since mid-October. (MarketWatch) While all Americans can get tax breaks for giving, those 70 1/2 or older have the best choices. Here's a rundown on two key tax-favored ways to give. The Canadian government is weighing an export tax on certain commodities to the U.S. if President-elect Donald Trump fulfills his pledge of slapping a 25% tariff on all Canadian imports, according to a person familiar with the matter. U.K. economic activity continued to decline at the start of the year's final quarter, pouring cold water on the new government's hopes that growth can fund its plans to spend more. The mood among U.K. consumers is just a little less gloomy this month, suggesting household spending won't offer a major boost to growth at the end of the year. China's leaders promised more government support for their struggling economy next year as they brace for the return of Trump and another big showdown over trade. New loans issued by Chinese banks came in lower than expected in November, official data showed Friday, as Beijing pledged to loosen its monetary stance in response to slowing growth. Sentiment among large Japanese manufacturers improved slightly in the final quarter of the year, adding more evidence of economic recovery just a week before a closely watched meeting at the Bank of Japan. Executive Insights

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

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Starved for liquidity, institutional investors plan to turn away familiar private-equity managers next year, a survey shows.

The Public Company Accounting Oversight Board could see major changes if Paul Atkins is confirmed as leader of the Securities and Exchange Commission, the regulator that oversees it.

About Us

WSJ Pro Central Banking brings you central banking news, analysis and insights from WSJ's global team of reporters and editors. This newsletter was compiled by markets reporter Vicky Ge Huang in New York. Send your tips, suggestions and feedback to v icky.huang@wsj.com .

This article is a text version of a Wall Street Journal newsletter published earlier today.


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12-13-24 0716ET