Interviews for the position of Federal Reserve chair are still under way, but the race is unofficially all but over, with President Trump's longtime adviser Kevin Hassett the expected winner. Hassett offers Trump what other candidates don’t: his trust and credibility with markets. Meanwhile, U.S. markets are facing a threat from across the Pacific, as yields on government debt jumped worldwide on Monday after Bank of Japan's governor surprised some investors by hinting at a possible interest-rate hike later this month. Elsewhere, the annual rate of inflation in the eurozone rose further above the European Central Bank’s target in November, making another cut in the key interest rate less likely. And British banks will no longer need to hold so much capital from 2027, as the U.K. joins the U.S. in unwinding some measures put in place after the global financial crisis.

Officially, the search for a new Federal Reserve chair is still under way. A handful of finalists are scheduled to sit down for interviews beginning this week with Vice President JD Vance and senior White House staff.

Unofficially, the process seems to be all but over, with President Trump appearing to favor longtime adviser Kevin Hassett. If Hassett does end up the nominee, it will be because he met Trump’s two key criteria: loyalty, and credibility with the markets.

Strains in the repo market that popped up near the end of October pushed up benchmark overnight rates. The pressure cooled over recent weeks, but it has been evident once more over the past few days as the calendar flipped to December. The tri-party general collateral rate printed at 4.02% on Wednesday and at 4.08% on Friday. Funding pressure is to be expected around end-of-the-month dates as some lenders pull back from the repo market, but such stress has been more pronounced lately and sets up a potentially tense year-end around Dec. 31. Higher borrowing costs prompted more borrowing at the Fed's standing repo facility. The program saw $14 billion of borrowing Wednesday, $24 billion on Friday and $25 billion at the Monday morning auction. (Dow Jones Newswires)

The comments from Ueda pushed the yield on Japan’s 10-year government bond to 1.879%—its highest closing level since June 2008, according to Dow Jones Market Data. The yield on the 10-year U.S. Treasury note also climbed, settling at 4.095%, from just below 4% in the middle of last week.

• Superlong Japanese Government Bond Yields Keep Climbing as Rate Hike Bets Firm

• Europe’s Green Energy Rush Slashed Emissions—and Crippled the Economy

Poor commercial real estate. Fewer investors want to touch it after being burned by falling property values in recent years. They have better options anyway. Why settle for 7% annual returns on real estate when Nvidia is delivering 70%? Yet property is one of the last assets in the U.S. that looks fairly priced and could turn out to be a place to hide if there is an artificial-intelligence bubble.

The benchmark ratio of capital to risk-weighted assets will fall to 13% from 14%, the Bank of England said Tuesday. The BOE, like the Federal Reserve, both regulates banks and sets interest rates. The lenders it oversees include major international players such as HSBC and Barclays, whose shares rose in London.

British banks on average hold capital equivalent to about 17% of risk-weighted assets. It is the first time since the financial crisis that the BOE has cut capital requirements, and the central bank said it expects lenders will be able to lend more to businesses and households as a result. The changes could also allow banks to return more money to shareholders. The reduction will take full effect from the start of 2027.

8:55 a.m.: Johnson Redbook Retail Sales Index
10 a.m.: RCM/TIPP Economic Optimism Index
10 a.m.: Fed Vice Chair for Supervision Michelle Bowman speaks at hearing on oversight of financial regulators before U.S. House Financial Services Committee

8:15 a.m.: ADP National Employment Report
10 a.m.: ISM Report On Business Services PMI

Bank of America economists update their near-term outlook to join the growing consensus that the Fed will cut rates again at its meeting next week. But assuming the central bank ends the year having completed 0.75 percentage point of rate cuts, those moves limit the scope for further easing ahead, the BofA team writes. "We still think the next Fed Chair won't be able to convince the FOMC to cut below 3%," BofA projects, which would leave the Fed only half a percentage point of room for more cuts in 2026. "In fact, by cutting rates next week, we think the Fed would increase the risk of pushing policy into accommodative territory, just as fiscal stimulus kicks in." — Matt Grossman

Short-term rates may fall more quickly than long-term rates, says Invesco's Gareth Isaac in a note. The asset manager retains a bias for steeper yield curves, preferring exposure at the very short end of the curve, such as two-year maturities, the head of global multi sector says. Invesco's base case anticipates that the Federal Reserve will lower interest rates sharply in response to softer economic conditions but could subsequently reverse course should the U.S. economy rebound quickly. Invesco remains underweight at the long end of the yield curves across most developed markets as "structural demand for long-duration bonds has declined in recent years." With inflation remaining elevated and the Fed appearing to prioritize employment over price stability, Invesco expects long-end yields to remain under upward pressure. — Emese Bartha

Changes to the capital framework by the Bank of England are helpful in that they reduce the banking sector's high cost of equity, but other areas with potential were left untouched, J.P. Morgan says in a research note. The BOE trimmed the benchmark for system-wide capital requirements by one percentage point to around 13% of risk-weighed assets on a tier 1 basis, aligning with JPM's base case scenario. However, the bank avoided making adjustments to its countercyclical buffer framework, which could have reduced the capital requirements further. "We...see missed opportunities for further reform with the pace of regulatory change greater in other regions such as the U.S.," analysts write. — Elena Vardon

• Australian consumer confidence was weaker last week on news of a sharp rise in inflation in October. Consumer confidence declined 1.6 points over the week to 85.5 points, according to a survey by ANZ and pollster Roy Morgan. (Dow Jones Newswires)
• South Korea’s headline inflation held steady in November and stayed above the central bank’s 2% target for a third straight month. The consumer-price index rose 2.4% from a year earlier, unchanged from October, the national statistics office said Tuesday.

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.