Good morning. Four voting members of the Fed's policy committee changed this month, with three of the incomers making hawkish comments recently.

Two new studies are offering surprising answers to the question of where tariffs cause inflation. A San Francisco Fed study looked at data from 1886 to 2017 and found that previous tariff increases usually didn’t lead to higher inflation. Another paper by economists at Northwestern University found inflation picked up only a little following tariff increases. However, both papers conclude tariffs tend to hurt the economy.

Also, U.S. factory activity fell last month amid a pullback in production and inventories, according to a survey of manufacturing firms.

Unusual dissent among Federal Reserve officials, plus President Trump's demands for lower interest rates, have cast extra attention on who gets to vote on U.S. borrowing costs.

Four of the 12 voting members of the Fed's policy committee changed this month. That was due to an annual rotation of voting seats among regional reserve-bank presidents.

Three of the incomers have made hawkish comments in recent months, flagging concerns about cutting rates too much and finding inflation a bigger problem ahead.

The highest tariffs in almost a century haven’t caused the massive surge in inflation many economists feared. But that shouldn’t have come as a surprise, according to two new studies.

Economists at the Federal Reserve Bank of San Francisco combed through data from 1886 to 2017 and found that previous tariff increases usually didn’t lead to higher inflation. On the contrary: They slowed down price growth. A separate recent paper by economists at Northwestern University found that inflation picked up following tariff increases, but only a little.

That’s the good news. The bad news: Both papers conclude that tariffs tend to hurt the economy and that a blow to consumer and business demand likely explains why the impact on inflation is so limited.

After overseeing a brazen operation to oust Venezuela’s Nicolás Maduro, President Trump is turning his attention to other countries over which he wants the U.S. to exert more control.

In the days since Maduro’s capture, Trump has renewed threats against Colombia, criticized Mexico’s leadership, predicted Cuba’s government would fall and reiterated his desire to take over Greenland.

Trump has privately told aides that he is thrilled with the outcome of the Venezuela operation, according to a senior administration official.

The U.S. had threatened to blow up the agreement last year, warning that it interfered with the nation’s prerogative to set its own tax policy. That prompted other countries to seek a path that would accommodate concerns from President Trump and congressional Republicans. The U.S. paused those threats in late June and the administration stayed at the negotiating table for the rest of 2025 to reach the consensus announced Monday by the Organization for Economic Cooperation and Development.

The updated agreement achieves two main U.S. aims. First, it prevents other countries from imposing taxes on American companies based on the idea that U.S. companies pay too little tax on their U.S. operations. Second, it makes minimum-tax math more favorable to the U.S. research-and-development tax credit and similar incentives elsewhere. Those changes should shield U.S. companies from taxes that would otherwise hit them, and foreign-owned companies also won some reprieves.

Saudi Arabia lowered the price of its crude for Asian buyers for the third consecutive month, signaling caution as concerns over excess supply continue to weigh on global markets.

State-owned oil giant Saudi Aramco set the official selling price for February loadings of its flagship Arab Light crude to Asia at $0.30 a barrel above the Oman/Dubai average, down from $0.60 in the prior month. The price is seen as a key indicator of the kingdom’s outlook on regional demand.

Nineteen states raised their minimum wage starting this month, providing a pay bump to an estimated 8.3 million workers.

Workers in a mix of Democratic- and Republican-controlled states will see higher hourly pay this year because of automatic inflation-pegged adjustments, new laws or ballot measures. Thirty states have now set a higher minimum wage than the federal minimum of $7.25 an hour.

The Institute for Supply Management said Monday that its purchasing managers index of manufacturing activity fell to 47.9 in the month, compared with 48.2 in November. A consensus of economists polled by The Wall Street Journal had expected a reading of 48.3.

The wagers on Polymarket, a popular crypto-based betting platform, netted the trader more than $400,000, a 12-fold return on investment—and fueled suspicions that someone used inside knowledge of the closely held U.S. operation to make a quick profit.

8:55 a.m.: Johnson Redbook Retail Sales Index
9:30 a.m.: Canada Services PMI
9:45 a.m.: U.S. Services PMI
11 a.m.: Global Services PMI
7:30 p.m.: Japan Services PMI

8:15 a.m.: ADP National Employment Report
10 a.m.: Manufacturers' Shipments, Inventories & Orders (M3)
10 a.m.: State Employment and Unemployment
10 a.m.: Job Openings & Labor Turnover Survey
10 a.m.: ISM Report On Business Services PMI

U.S. government policies including attacks on Federal Reserve independence are weakening the dollar's position in the global economy, France's central-bank governor says. "Recent U.S. policies have undermined some pillars of the dollar's dominance by attacking the Fed's independence, raising doubts as to U.S. fiscal discipline, and imposing tariffs that diminish U.S. integration with the global economy," Francois Villeroy de Galhau said in a speech in Paris. Fears that the U.S. could "weaponize" dollar-based global payments are leading some jurisdictions to develop alternative payments systems, said Villeroy, who is also a rate-setter at the European Central Bank. Together the policies undermine global investor confidence in dollar-denominated assets and will likely fuel the gradual trend toward diversification, he adds. — Edward Frankl

If the capture of Venezuela President Maduro leads to a larger change in control of the country that allows for a return of U.S. oil majors it could lead to higher production in three to five years and have negative implications for oil prices, BMO Capital Markets' Randy Ollenberger says. And that would be a blow for Canadian heavy crude price differentials, even as it strengthens the case for an oil export pipeline to Canada's west coast, the analyst says. Venezuela holds the largest proved oil reserves in the world, and the majority is heavy oil that has similar refining characteristics to Canadian oil sands output. A revitalized Venezuelan energy industry could be bad for Canadian producers that have been able to capture market share lost by Venezuela due to U.S. sanctions and a lack of investment, Ollenberger says. — Robb Stewart

• French inflation fell slightly in the last month of 2025, reinforcing the European Central Bank’s view that the eurozone remains in a “good place” after keeping interest rates on hold in December. Consumer prices were up 0.7% compared with the same month a year prior, and against a 0.8% rise in November, EU-harmonized figures published by statistics agency Insee showed Tuesday.
• U.K. shop and food price inflation ticked higher in December, when shoppers leaned into promotions to alleviate cost pressures, according to an industry report. Annual shop-price inflation increased to 0.7% in December from 0.6% in November, according to the monthly shop-price index published by NielsenIQ and the British Retail Consortium trade association on Tuesday.
• The U.S. ousting of Venezuela's president, Nicolas Maduro, isn't likely to considerably impact global bonds in the near term, TwentyFour Asset Management's Felipe Villarroel says in a note. "Venezuela is a small country from a GDP point of view, and its relevance in the oil markets has diminished as the country's infrastructure is severely underinvested." (Dow Jones Newswires)

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.