Federal Reserve governor Stephen Miran said the dollar would need to register a steeper fall than it already has for it to become a first-order issue that would affect consumer inflation. Meanwhile, President Trump said the U.S. economy could grow by at least 15% with Kevin Warsh in charge at the Fed. And the divergence between capital and labor helps explain the disconnect between a buoyant economy and pessimistic households, writes The Wall Street Journal's Grep Ip—and this will play an outsize role in where the U.S. economy goes from here. Elsewhere, the European Central Bank is unlikely to take action in the event that inflation falls below target for a short-lived period, according to ECB rate-setter Joachim Nagel.

When discussing dollar weakness, Federal Reserve governor Stephen Miran said he does not view it as having material consequences on monetary policy so far. “You need a really big move for it to sort of really be a first order issue that would really affect consumer inflation in the United States,” Miran said Monday in a discussion at Boston University’s Questrom School of Business. “The result is that it doesn’t matter that much for consumer inflation.” 

The ECB rate-setter said that while consumer prices are set to fall below the bank’s goal of 2% in the coming years, forecasts show inflation rebounding to target over the medium term.

In 1985, IBM was America’s most valuable company, one of its most profitable, and among its largest employers, with a payroll of nearly 400,000.

Today, Nvidia is nearly 20 times as valuable and five times as profitable as IBM was back then, adjusted for inflation. Yet it employs roughly a 10th as many people.

That simple comparison says something profound about today’s economy: Its rewards are going disproportionately toward capital instead of labor. Profits have soared since the pandemic, and the market value attached to those profits even more. The result: Capital, which includes businesses, shareholders and superstar employees, is triumphant, while the average worker ekes out marginal gains.

U.S. small-business confidence fell unexpectedly in January, with uncertainty on the rise as owners await a stronger economic revival. The National Federation of Independent Business said Tuesday that its small-business optimism index slipped to 99.3 in the month, from 99.5 in December. The figure remains above the index’s long-term average of 98, and came in below a consensus of economists polled by The Wall Street Journal that expected the index to remain unchanged.

Tuesday’s retail sales report should confirm that the 2025 holiday season beat the odds to become a resounding success. Economists polled by FactSet are projecting a monthly increase of 0.4%. While that marks a slight deceleration from November’s 0.6% rise, it still points toward healthy spending trends throughout the holiday season. (Barron's)

Consumers' long-term inflation expectations held steady in January, according to a survey from the New York Fed, a positive sign for a Federal Reserve that closely watches sentiment about future price increases. Over the next three and five years, consumers said they expect inflation of 3%, unchanged from December, the NY Fed said Monday. One-year inflation expectations declined slightly to 3.1%. (Dow Jones Newswires)

6 a.m.: NFIB index of small-business optimism
8:30 a.m.: U.S. retail sales
8:30 a.m.: U.S. import & export price indexes
8:30 a.m.: U.S. employment cost index
8:55 a.m.: U.S. Johnson Redbook retail sales index
11 a.m.: Federal Reserve Bank of New York Q4 household debt and credit

8:30 a.m.: U.S. Employment Report
10 a.m.: Online Help Wanted Index
10: 15 a.m.: Federal Reserve Bank of Kansas City President Jeffrey Schmid speaks before the Economic Forum of Albuquerque
10:15 a.m.: Federal Reserve Vice Chair Michelle Bowman speaks at Keefe, Bruyette & Woods Winter Financial Services Conference
4 p.m.: Federal Reserve Bank of Cleveland President Beth Hammack speaks at John Glenn College of Public Affairs event
6 p.m.: U.S. Congressional Budget Office releases 'The Budget and Economic Outlook: 2026 to 2036' report

The K-shaped economy thesis may not hold up in the retail industry, Morgan Stanley analysts write in a note, citing data from Numerator. The data suggest that low-income consumers continue to spend, especially at dollar stores, where spending has risen across all income levels since mid-December, they write. "While some of this strength may be a function of better merchandising or improved capabilities, this also challenges the K-shaped narrative given there are signs of trade down from high-income consumers," they write. Rather, it seems that consumers are increasingly seeking value, with Walmart and the dollar stores showing signs of strength while traditional grocers see softer trends. — Elias Schisgall

• After years making outsize bets on the largest U.S. companies, investors are moving more money into international markets, wagering that America’s wide lead on the rest of the world will shrink.
• American shale producers are in a midlife crisis: They know their best days of growth are behind them. Yet it’s too early to call it quits, with oil demand expected to keep growing for a while longer.
• Sterling remained weaker even as U.K. government bond yields turned lower Tuesday as U.K. political concerns lingered.

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.