Philadelphia Fed President Anna Paulson said that the Federal Reserve may be able to cut interest rates further if inflation cools—but suggested that any additional reductions might not be coming right away. Meanwhile, U.S. jobs data for December and ISM data on U.S. manufacturing and services-sector activity will be the key focus this week as investors gauge the health of the economy and the likely timing of the next interest-rate cut by the Fed.

Philadelphia Fed chief Anna Paulson, entering her first year as a voting member of the Federal Reserve' policy committee, said she is cautiously optimistic price increases may ease in the months ahead. She said that at 3.5% to 3.75%, the Fed’s interest-rate target is still “a little restrictive,” meaning it is high enough to lean against inflation, which could eventually allow further cuts.

Financial institutions borrowed $74.6 billion from the Federal Reserve's standing repo facility last Wednesday, a record level. Higher usage of the facility was anticipated around the final few days of the year, when lenders' pullback from the repo market can add to greater funding pressure. Repo markets were tighter late in 2025 as the Fed wrapped up a long-running balance-sheet reduction program, but new reserve-management purchases that began last month could ease those strains over time or at least prevent further tightening. SRF usage quieted down Friday morning with $3 billion in borrowing. —Matt Grossman

The Midwest has historically been cheaper than many other parts of the country, but the other side of the affordability equation is wages, and the Midwest seems to be winning on that score lately, too.

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The first trial in the Mississippi welfare scandal is set to begin this week, nearly six years after it erupted in one of America’s poorest states. The scheme, involving misuse of at least $77 million in federal aid given to the state under programs including Temporary Assistance for Needy Families, or TANF, resembles the sprawling safety-net scandal in Minnesota, Mississippi’s Republican auditor, Shad White, said publicly in recent days. He noted on X that “these kinds of programs, both in Minnesota and Mississippi, were shot through with fraud.”

• Minnesota Fraud Scandal Challenges Gov. Tim Walz’s Re-Election Bid

10 a.m.: U.S. ISM Report On Business Manufacturing PMI

4 a.m.: Eurozone Services PMI
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

For consumers, 2025 was filled with a series of anxiety-inducing tariff announcements. Tax cuts will help pad wallets in 2026, but not across all income levels, writes WSJ’s Jinjoo Lee. The One Big Beautiful Bill Act, which passed in July, includes tax cuts as well as reductions to programs such as Medicaid and the Supplemental Nutrition Assistance Program, also known as food stamps. So what will the net impact be on American households? The big picture is that total tax cuts are expected to exceed tariffs and benefit cuts, according to estimates from Evercore. But the distribution is uneven, with the bounty largely going to higher-income households.

• A private gauge of China’s service activity showed expansion at the softest pace in six months, weighed by slowing sales. The RatingDog China general services purchasing managers index fell to 52.0 in December from 52.1 in November, according to a statement on Monday.
• Wall Street is betting that falling interest rates and strong corporate earnings will be enough to eke out yet one more year of stock-market gains. It’s going to be close.

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 Michael Maloney and Michael Dabaie in New York.