It is looking more plausible that inflation could return to the Federal Reserve’s 2% goal without a recession, especially since Friday’s inflation report showed core prices rose 2.5% in January from a year earlier—the lowest since the pandemic price surge began in 2021. But the battle isn't won yet, with higher tariffs, labor and health-insurance costs pushing many businesses to raise prices.

The vital signs of the American economy are pointing in the same, favorable direction more convincingly than at any point since before the pandemic. Inflation is falling. The labor market is holding. Growth has been solid. It is a snapshot, not a verdict—but it is the closest the economy has come to achieving a soft landing, a moderation in inflation without recession.

• Inflation Slowed to 2.4% in January, Helped by Lower ​Gasoline Prices
• We Asked What Makes an Economic Optimist. Here’s What You Said.

After holding the line on prices for several months, companies—big and small—have begun a new round of increases, in some cases by high-single-digit percentage points.

Treasury Secretary Scott Bessent urges the Senate to push forward Kevin Warsh's nomination to succeed Jerome Powell as Fed chair. The nomination has been stalled since President Trump chose Warsh last month, because some Republican senators have resisted confirming Fed nominees while Powell is still under criminal investigation. In an interview on CNBC, Bessent downplayed the Powell criminal probe, saying that the subpoenas that were issued may not lead to charges. "It's important to get the [Warsh] hearings under way," Bessent said, adding that a confirmation hearing may proceed in the Senate even if some Republican senators aren't willing to vote yet to advance Bessent's nomination. (Dow Jones Newswires)

He added the labor market has been cooling modestly. While Goolsbee expects tariffs to have an impact on price levels, overall inflation will eventually come down. He warned, however, that Friday’s CPI report had elevated inflation in categories in the services sector, a category he says has limited tariff exposure. (DJN)

The Japanese economy narrowly ​returned to growth in the final quarter of 2025, largely defying the U.S. tariff hit and giving the central bank room to keep raising rates. The modest expansion comes as welcome news for policymakers, who have been working to revive an economy emerging from decades of stagnation. But some economists say the rebound was so tepid that it could justify Prime Minister Sanae Takaichi’s pursuit of more aggressive government spending.

Michelle Bowman, the Fed's vice chair for supervision, calls the shift of the U.S. mortgage business away from banks and toward nonbank lenders a concerning trend. Bowman laid some of the blame on restrictive capital requirements applied to mortgage-servicing rights. MSRs are an asset on banks' balance sheets that represent the net fees they can expect to receive from servicing a mortgage over the life of a loan. Banks face high regulatory risk weights for holding MSRs, Bowman said, which "may impede a bank's ability to build a profitable servicing business." She acknowledges that these rules were prompted by legitimate concerns, but argues that a recalibration should be considered. (DJN)

8:30 a.m.: Empire State Manufacturing Survey
10 a.m.: Employment Trends Index
10 a.m.: Online Help Wanted Index
10 a.m.: NAHB Housing Market Index
12:45 p.m.: Federal Reserve Governor Michael Barr speech on the Labour Market and AI
2:30 p.m.: FRB San Francisco President Mary Daly speech on AI and the economy

8:30 a.m.: New Residential Construction - Housing Starts and Building Permits
9 a.m.: Johnson Redbook Retail Sales Index
9:15 a.m.: Industrial Production and Capacity Utilization
1 p.m.: Federal Reserve Vice Chair Michelle Bowman speaks at Exchequer Club of Washington D.C. event
2 p.m.: Federal Open Market Committee meeting minutes published
4 p.m.: Treasury International Capital Data

As global central banks reduce their ownership of Treasurys and retail investors pick up the slack, yields have an added upward pressure, says Stephen Douglass of NISA Investment Advisors. The Treasury "has been issuing a lot of bonds" and foreign central banks' ownership has declined. That means "a higher share of [Treasurys] has to go to domestic private investors, and that is a more price-sensitive class of investor than central banks." The Treasury, he says, is "selling to a more fickle buyer base." Douglass describes this trend as a "slow-moving tectonic plate shifting." (DJN)

Minutes from the Reserve Bank of Australia's February meeting suggest that the central bank likely needs to deliver more rate increases than NAB's current expectations of one more rate hike this year. "At face value, the RBA's forecasts and updated assessment of financial conditions imply" this, says NAB's Gareth Spence in commentary. However, NAB expects small downside surprises to the RBA's forecasts for inflation over next two quarters and for the unemployment rate to rise slightly faster in the near-term. "That is consistent in our view with only one further hike this year," says the head of Australian Economics. (DJN)

• Lenders to U.S. commercial real-estate owners are reaching the breaking point, calling in tens of billions of dollars of troubled loans. Refinancing property debt has become difficult since interest rates started to soar in 2022.
• The Trump administration is officially paving the way for global oil companies to jump back into Venezuela, a country that most of the U.S. oil industry has stayed out of for the past two decades.
• The U.S. under President Trump has lost trust across Europe, but Italian Prime Minister Giorgia Meloni is sticking with America. Meloni is doing all she can to keep the troubled trans-Atlantic relationship alive.
• Canadian manufacturing activity picked up somewhat in December, driven by sales of motor vehicles and food products.

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 vicky.huang@wsj.com.