The Inflation Data Don't Move the Needle for a Fed on Hold By Vicky Ge Huang
Investors have puzzled this year over a range of possible outcomes for the Fed: whether the central bank might cut rates this spring; whether the central bank will reduce rates at all this year; and whether the next move, whenever it comes, might even be a rate increase. The latest numbers don't much move the needle on that front.
Also, Bank of Japan Gov. Kazuo Ueda again signaled the chance of a rate hike next week.
Elsewhere, the Bank of Korea unexpectedly held its policy rate steady.
Top News The Inflation Data Don't Move the Needle for a Fed on Hold
Wednesday's inflation report doesn't do much to change the outlook for a Federal Reserve that was already taking a break from cutting interest rates.
Higher food and gas prices in December drove the largest month-over-month increase in the consumer-price index in nearly a year. But core prices, which exclude volatile food and energy items, posted the mildest increase in six months.
Bank of Japan Chief Again Signals Chance of Rate Hike Next Week
Bank of Japan Gov. Kazuo Ueda repeated his pledge to discuss an interest-rate increase next week, echoing recent comments that have revived market expectations for imminent policy action.
"If improvements in the economy and prices continue this year, we will adjust the degree of monetary easing by raising interest rates," Ueda said at a gathering of regional bank executives on Thursday.
That underlines remarks from both him and his deputy earlier this week that a rate hike at the upcoming Jan. 23-24 meeting is firmly on the table.
Bank of Korea Surprises by Holding Rates Steady as Uncertainty Lingers
South Korea's central bank unexpectedly held its policy rate steady amid ongoing pressure to cut further in order to support growth in Asia's fourth-largest economy.
The Bank of Korea kept its benchmark seven-day repurchase rate unchanged at 3.00% on Thursday, following a back-to-back rate cut in November.
Eurozone Trade Surplus Grows as U.S. Exports Tick Higher
The eurozone's trade surplus widened in November as exports outpaced imports, with a small uptick in exports to the U.S. suggesting importers there may be purchasing European goods ahead of proposed tariffs.
The seasonally adjusted surplus was 12.9 billion euros ($13.28 billion), up from 7.0 billion euros in October, the European Union's statistics agency said Thursday.
The increase was driven by a higher surplus for chemicals and a shift in the balance from a deficit to surplus for some types of manufactured products, Eurostat said.
U.K. Economy Returns to Growth, But Faces Uncertain Outlook
The U.K. economy returned to growth in November, but that is unlikely to mark the start of a recovery that will be strong enough to ease concerns about the government's ability to tame its rising debts.
The Office for National Statistics Thursday said gross domestic product was 0.1% higher in November than it was in October, a weaker outcome than the 0.2% rise expected by economists. That marked a modest return to expansion after small declines in output during the two previous months.
Australia's Surging Jobs Growth Clouds Rate-Cut Hopes
Australia's economy continued to generate strong jobs growth in December, raising doubts about the Reserve Bank of Australia's ability to deliver an interest-rate cut next month.
Employment surged by 56,300 in December, nearly four times what economists had expected.
Still, the unemployment rate rose to 4.0% in December from 3.9% in November as participation in the job market jumped to a record high.
U.S. Economy Inflation Ticks Up to 2.9%, but Underlying Price Gains Are Muted
U.S. inflation picked up last month as gas prices rose sharply, though price gains for other items were more muted.
The consumer price index rose 0.4% in December from November and finished the year up 2.9%, the Labor Department said Wednesday. Economists surveyed by The Wall Street Journal had expected the CPI to advance 0.3% last month from November and 2.9% from December 2023.
Fed's Williams Wants More Progress Toward Inflation Target
New York Fed President John Williams said he expects inflation to continue cooling toward the central bank's 2% target this year, adding that he won't be satisfied until the goal is reached.
Wednesday morning's inflation report brought reassuring signs that price pressures cooled through the end of 2024, but the new figures look set to leave the core version of the Federal Reserve's preferred inflation gauge well above target last month.
Inflation has slowed significantly since it peaked in 2022, but the Fed won't be satisfied without a further downtrend, Williams said.
"You want to see inflation move from where it is today...steadily moving toward the 2% goal," Williams said at a Connecticut business conference Wednesday. "Two percent inflation on a sustained basis is something I absolutely want to see happen."
Financial Regulation Republicans Again Introduce Bills to Repeal Corporate Transparency Act
A group of Republican lawmakers are attempting to repeal the Corporate Transparency Act, which requires companies to disclose their true ownership, proclaiming the law "a big government overreach."
Sen. Tommy Tuberville (R., Ala.) on Wednesday reintroduced the Repealing Big Brother Overreach Act, a bill that aims to repeal the CTA with a stated goal of protecting small-business owners. The bill has so far received support from about 21 Republican senators but no Democrats have yet signed on, according to Tuberville's office.
Former Wamco Executive Said Star Investor's Suspicious Trades Go Back a Decade
A retired Western Asset Management executive has alleged that the firm's longtime investment chief, Kenneth Leech, defrauded some clients nearly a decade earlier than what federal prosecutors asserted in their recent criminal indictment.
U.S. authorities charged Leech with multiple felony counts in November, accusing him of running a fraudulent trading scheme between 2021 and 2023 that favored certain clients over others. According to the government's indictment, Leech routinely "cherry-picked," allocating certain profitable trades to favored clients while shunting money-losing positions to others.
Asset Manager Ashford Settles SEC Allegations It Failed to Disclose Extent of Hack
Asset manager Ashford agreed to settle Securities and Exchange Commission charges that it made misleading disclosures about a cyberattack , as the U.S. regulator wrapped up one of its last cyber-related cases before Chair Gary Gensler steps down next week.
The SEC alleged that Ashford, a Dallas-based company that provides asset-management services primarily to the hospitality industry, failed to adequately disclose that hackers who breached its servers in 2023 had gained access to sensitive information about 46,000 people. This included photographs of identity cards used to check into hotels, the last four digits of some credit-card numbers, bank-account numbers and vehicle registration information.
Former Wells Fargo Executives Fined for Role in Fraudulent Bank Accounts
Three former Wells Fargo executives have been fined a total of $18.5 million for their alleged roles in opening fraudulent bank accounts , the Office of the Comptroller of the Currency said Tuesday.
The fines are related to sales misconduct in the mid-2010s. In 2016, the Consumer Financial Protection Bureau fined Wells Fargo for illegally creating millions of fraudulent bank accounts for clients without their consent or knowledge. It was the result of aggressive internal sales goals, the OCC said.
Forward Guidance Thursday (all times ET)
8:30 a.m.: Import & Export Price Indexes
8:30 a.m.: Unemployment Insurance Weekly Claims Report - Initial Claims
10 a.m.: NAHB Housing Market Index
10:30 a.m.: U.S. Senate Finance Committee hearing on Scott Bessent's nomination for Treasury secretary
Friday
8:30 a.m.: New Residential Construction - Housing Starts and Building Permits
9:15 a.m.: Industrial Production and Capacity Utilization
4 p.m.: Treasury International Capital Data
Research Supercore CPI Watchers Are Super Pleased
Analysts trying to make sense of the underlying trend in inflation look at "supercore" inflation, defined as core services inflation excluding housing. Chair Jerome Powell has cited this metric as an important way to understand the evolving inflation path. Supercore prices rose 0.2% month over month in December, the smallest monthly gain since July, economists at Stifel write. And through 2024 on the whole, supercore prices rose by 4.2%--down from a 4.3% 12-month gain in November and the smallest annual increase in a year. Inflation optimists may take those numbers as reassurance that price increases continue to cool bit-by-bit. - Matt Grossman
Long-Term U.S. Rates Might Still Rise
There are too many potential risks that could lead to a reacceleration in U.S. inflation and consequently higher interest rates in the longer term, says SEI's Jim Smigiel. This means U.S. Treasury yields could rise further. "The bond market seems to share our concerns, as long-term U.S. yields have risen roughly 90 basis points since the Federal Reserve pivoted to lower interest rates with a surprising 50-basis-point cut in mid-September of 2024," the chief investment officer says in a note. Money markets currently price 37 basis points of interest-rate cuts by the Fed this year, according to LSEG data. Rate cut expectations have risen from around one cut of 25 basis points priced before Wednesday's U.S. inflation data. -Emese Bartha
Bank of Canada May Be Among First Central Bank to Halt Rate Cuts
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01-16-25 0741ET