U.S. Inflation Data Awaited for Steer on Fed; Bank of Canada Expected to Deliver Another Outsize Rate Cut

U.S. Inflation Data Awaited for Steer on Fed; Bank of Canada Expected to Deliver Another Outsize Rate Cut By Vicky Ge Huang

It's CPI day, and traders will be watching closely. Wednesday's inflation data will offer the final major read on the U.S. economy before the Federal Reserve's rate decision next week.

Economists polled by The Wall Street Journal expect the consumer-price index to show that headline prices rose 2.7% in the 12 months through November, versus 2.6% as of October. That would mark the second consecutive modest uptick in the rate.

Investors have grown more confident in recent weeks that central bankers will continue to bring rates lower. As of Wednesday morning, futures prices showed a more than four-in-five chance that the Fed cuts rates by a quarter-percentage point this month.

Also in focus is Canada's interest-rate decision. Most analysts are expecting the Bank of Canada will opt for another half-point rate cut because of the jump in the unemployment rate. Economists warn the rise in the jobless rate threatens to weigh on activity and signals that spare capacity is expanding in the Canadian labor market.

And in currency markets, the yuan slipped against the dollar following a Reuters report that China is considering letting its currency weaken next year, as it braces for higher tariffs from the Donald Trump administration.

Top News Bank of Canada Expected to Deliver Second-Straight Outsize Rate Cut

A sharp rise in the unemployment rate and tepid private-sector demand have economists betting the Bank of Canada will deliver a second-straight half-point rate cut on Wednesday.

Eleven of the 15 economists surveyed on Friday and Monday by The Wall Street Journal said Canada's central bank would cut its benchmark interest rate by a half point this week to 3.25% from its current 3.75%, while the other four predicted a more conventional quarter-point cut.

Canada's FM Signals Size of Deficit No Longer a Key Fiscal Anchor

Canadian Finance Minister Chrystia Freeland says the Liberal government's main fiscal focus is the share of federal-government debt in the economy, a sign she might fail to keep her promise to limit the size of the annual budget deficit. At a press conference Tuesday, she said the government will meet its target of hitting a ratio measuring debt-to-GDP of 42.1%, as projected in the 2024 annual budget plan. Final numbers will be presented to lawmakers and Canadians in a fall economic statement next Monday. (Dow Jones Newswires)

RBA Watching for Tariff War But Won't Prejudge Inflation Fallout

The Reserve Bank of Australia is preparing to deal with the fallout resulting from a major international trade war in the coming years, but the central bank's deputy governor, Andrew Hauser, said it's best to avoid prejudging the consequences for Australia.

India's New Central Bank Chief Raises Expectations for Rate Cuts

India's newest central bank governor brings a pro-growth sensibility to the position that raises the likelihood of lower benchmark policy rates in the South Asian nation early next year, analysts say.

U.S. Economy WSJ CEO Council: Lawmakers, Executives Take Stock of Trump Term

The Wall Street Journal this week convened top executives, politicians and lawmakers to discuss policy, security and the economy at its annual CEO Council Summit in Washington. Treasury Secretary Janet Yellen shared her view on the state of the financial system and current and former senior advisers to President-elect Donald Trump, including Jason Miller, outlined the ambitious agenda he has set out on trade, inflation and taxes.

What Happens If Inflation Data Is Too Hot?

Fed-funds futures traders are around 85% sure the Federal Reserve will deliver a rate cut of 25 basis points next week. That's a level of confidence that's pretty much in line with history this close to a policy decision.

As strategists at Societe Generale pointed out in a note last week, the market is usually more than 80% certain of a Fed move as policymakers enter what is known as the "blackout" period - the stretch ahead of a policy meeting where officials are forbidden to talk about monetary policy. (MarketWatch)

Financial Regulation Crypto Industry Hopes Trump Can Finally Get Them Bank Accounts

Founders and others inside the crypto industry are hoping for new regulators who champion crypto assets at banks and a change to the policy that urges banks to consider a client's reputation.

How Booming Leveraged Funds Can Incinerate Your Money

There is great appeal in the notion of a simple investment product that can reliably provide double or triple the returns of a popular stock or index. The results have been disappointing, vaporizing billions of dollars , but Wall Street keeps finding plenty of eager buyers.

Forward Guidance Wednesday (all times ET)

7 a.m.: MBA Weekly Mortgage Applications Survey

8:30 a.m.: CPI

8:30 a.m.: Real Earnings

9:45 a.m.: Bank of Canada interest rate announcement

Thursday

8:15 a.m.: ECB interest rate announcement

8:30 a.m.: PPI

8:30 a.m.: Unemployment Insurance Weekly Claims Report - Initial Claims

10 a.m.: Quarterly Services

Commentary The Fate of Markets Rests on Trump's Dollar Policy

The dollar has been stronger in real terms than now in only four months since the 1985 Plaza Accord, when the world's leading trading nations got together to devalue the greenback.

The U.S. is about to get a president who thinks the U.S. has a "big currency problem" because the strong dollar hurts domestic manufacturers, writes James Mackintosh for The Wall Street Journal.

Yet, the markets have been betting that Donald Trump's policies will mean an even stronger dollar, with the currency up 5% against developed trading partners and 4% against emerging ones since the start of October, when Trump's win began to be priced in.

Could the market have Trump all wrong? Answering this is hard, but vital: The dollar is the global reserve currency, helping set the price not just for international trade but also for markets in almost everything. Read more .

Research Central Bank Rate Cuts Is Biggest Theme for Credit Investors in 2025

The biggest consensus theme for 2025 among credit investors is the expectation of central bank interest-rate cuts, listed by 33% of respondents, the latest Bank of America credit investor survey shows. The second biggest consensus theme is 'U.S. exceptionalism,' ranked by 22% of investors in the survey, while 18% cite higher tariffs. Lower down on the list of consensus themes for 2025 are improved growth in China, stocks rallying and wars ending, the survey shows. - Miriam Mukuru

Basis Points The Bureau of Labor Statistics said Tuesday it would improve staff training and processes after it determined that human error and a technology glitch were behind three incidents this year that raised questions about how the agency releases market-sensitive data. President-elect Donald Trump on Tuesday selected Andrew Ferguson to lead the Federal Trade Commission, elevating a Republican lawyer who is likely to abandon the Biden administration's liberal approach to policing mergers while keeping the heat on big technology companies. President-elect Donald Trump said his administration would speed the approval of big construction projects for companies that invest more than $1 billion, signaling his intention to push the limits of federal law to boost the economy. France has a debt problem, but the European Union in aggregate does not. Central to the paralysis that has gripped French politics is the government's rising debt , which last week's ousted prime minister was proposing to tame through a combination of tax rises and spending cuts. Asian economies are set to keep growing steadily this year and the next, but momentum has moderated and policy changes under the incoming Trump administration pose a major risk for the region, the Asian Development Bank said. Experts surveyed by Singapore's central bank have raised their 2024 economic growth forecast for the city-state, coming after third-quarter data showed the economy expanded at the fastest in nearly three years. 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 [[e-mail]].

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

(END) Dow Jones Newswires

12-11-24 0715ET