|
|
|
|
|
The Fed Prepares to Put Policy Shift in Gear at This Week's Meeting
|
|
|
|
|
|
Good day. How the Federal Reserve should go about shrinking its nearly $9 trillion asset portfolio will be among the top matters before central bank officials at their meeting tomorrow and Wednesday. Officials must resolve a series of technical questions, including which securities should be purchased with the proceeds of maturing ones and whether to consider active sales of mortgage-backed securities. Meanwhile, Fed officials must also contend with an unemployment rate that has dropped like a stone while consumer prices have surged, the reason they are likely to signal this week they could begin raising interest rates, also in March.
Now on to today’s news and analysis.
|
|
|
Fed Steps Up Deliberations on Shrinking Its $9 Trillion Asset Portfolio
|
|
|
Federal Reserve officials are set to resume discussions this week over how fast they will shrink their nearly $9 trillion bond portfolio when the time comes, which would serve as a tool for tightening monetary policy as they try to curb high inflation.
Officials are on track at their meeting Tuesday and Wednesday to approve a final tranche of bond purchases, allowing them to end the stimulus program by March—when they are likely to raise interest rates to cool the economy, according to their recent public comments.
|
|
Inflation Poses Risks of Faster, Less Predictable Fed Rate Increases
|
|
The U.S. central bank is entering an unfamiliar environment at the start of 2022: For the first time in decades, Federal Reserve officials are preparing to raise interest rates when inflation is uncomfortably high rather than very low.
|
|
|
|
Workers Are Having Their Moment. How Long Can It Last?
|
|
Most workers are benefiting from a tight labor market that developed during the nation’s recovery from Covid-19, and those in highest demand are in some cases the ones who started out further behind.
|
|
|
Yellen Views Biden Policies as Modernized Supply-Side Economics
|
|
Treasury Secretary Janet Yellen said the Biden administration is aiming to boost U.S. economic capacity by focusing on issues like labor supply and public infrastructure, an approach she called “modern supply-side economics.”
|
|
|
Democrats Push to Revive Tech Investment Bill to Counter China
|
|
A $250 billion spending initiative to boost U.S. investment in high-tech research and manufacturing has stalled in the House, despite lawmakers’ increasing concerns over global competitiveness.
|
|
|
U.S. Food Supply Is Under Pressure, From Plants to Store Shelves
|
|
Food-industry executives warn the situation could persist for weeks or months, while virus-related absences among workers have added to continuing supply and transportation disruptions, keeping some foods scarce.
|
|
|
|
|
Key Developments Around the World
|
|
|
Omicron Slows Europe’s Economy but Supply-Chain Strains Ease
|
|
|
Chile’s Incoming Leftist President Moves to Calm Markets
|
|
Chile’s President-elect Gabriel Boric said he would appoint central bank chief Mario Marcel as finance minister, seeking to ease investor concerns that the incoming administration will move the country far to the left.
|
|
|
Germany’s Reliance on Russian Gas Limits Europe’s Options
|
|
A decision to phase out nuclear power and moves to cut reliance on coal to bring down CO2 emissions mean Germany is now more reliant on Russian gas than most of its neighbors for heating and power generation.
|
|
|
A Covid Contact-Tracing Contrast Lays Bare China’s Inequalities
|
|
Two Covid-19 contact-tracing efforts in China’s capital have opened a window into extreme inequality engrossing many in the world’s most populous country as the social mobility that helped lift millions out of poverty slows.
|
|
|
How a Small Town Learned to Stop Worrying and Love Amazon
|
|
Many retailers in the old English market town of Darlington have long held Amazon.com Inc. partially to blame for the closures of a raft of local shops in recent years. Then, Amazon opened a warehouse there.
|
|
|
‘Farms Are Failing’ as Fertilizer Prices Drive Up Cost of Food
|
|
From South America’s avocado, corn and coffee farms to Southeast Asia’s plantations of coconuts and oil palms, high fertilizer prices are weighing on farmers across the developing world, forcing many to cut back on production.
|
|
|
|
Financial Regulation Roundup
|
|
|
Tax Season 2022 Is Here, Pandemic-Related Complications Remain
|
|
It’s that time of the year again. Tax-filing season is here, and the pandemic and its aftereffects are still causing complications. Here’s a guide to what you should expect as you prepare and file your returns.
|
|
|
How Bad Are Things in China’s Property Market?
|
|
Government curbs on borrowing in China’s property sector have helped set off a spiral of falling home sales, surging corporate bond yields and waning confidence among investors and home buyers. Here’s where the market stands.
|
|
|
|
|
Time N/A: U.S. Federal Reserve begins two-day monetary policy meeting; Hungarian National Bank releases policy statement; Central Bank of Nigeria releases policy statement
6:50 p.m.: Bank of Japan releases summary of opinions at Jan. 17-18 policy meeting
|
|
|
8:30 a.m.: U.S. Commerce Department releases December advance economic indicators report
10 a.m.: Bank of Canada releases interest-rate announcement and monetary policy report; U.S. Commerce Department releases December new-home sales
11 a.m.: Bank of Canada’s Macklem and Rogers speak at press conference
2 p.m.: U.S. Federal Reserve releases policy statement
2:30 p.m.: Fed’s Powell speaks at press conference
|
|
|
Bank of America: Fed Needs to Shift Hard Toward Tightening
|
|
The stickiness of long-term yields is a sign the Federal Reserve is behind the curve on its work to keep inflation under control, underscoring the central bank needs to change policy gears quickly, according to economists at Bank of America. “What does a real inflation-fighting Fed look like? The first step is to abandon the idea of a slow motion return to neutral,” they wrote in a note to clients on Friday. “As long as the funds rate is below neutral, Fed policy will only mean an even tighter labor market.” That means the Fed needs to move monetary policy toward a restrictive stance to cool the economy and regain price stability, they added, noting it is possible the near-zero federal-funds rate rises to 3% by the end of the tightening cycle.
—Michael S. Derby
|
|
|
Higher Interest Rates Won’t Pay Europe’s Banks Right Away
|
|
Rising rates aren’t the straightforward boon to long-suffering European banks they may appear to be because extraordinary financial support measures need to be unraveled before banking returns to normal, Rochelle Toplensky writes.
|
|
|
Why the Sustainable Investment Craze Is Flawed
|
|
The financial industry has spotted an opportunity to make money by helping people feel good about themselves. These investments don’t do much to make the world a better place, James Mackintosh writes in WSJ's Streetwise.
|
|
|
|
China’s Economic Downturn Gives Rise to a Winter of Discontent
|
|
China’s economy could face tougher times in 2022, leading many to expect the stimulus spigot to be opened for President Xi Jinping’s election year, and if so, there may be louder rumblings of political discontent, Kevin Rudd writes.
|
|
|
Mr. Rudd is global president of the Asia Society. He served as Australia’s prime minister, 2007-10 and 2013.
|
|
|
-
The Leading Economic Index, a Conference Board measure of U.S. business cycles, rose 0.8% to 120.8 in December from November, in line with the forecast by economists polled by The Wall Street Journal. (Dow Jones Newswires)
-
U.S. mortgage rates are back to prepandemic levels, but that won't keep single-family home buyers on the sidelines, Freddie Mac said, noting it expects 6.9 million home sales this year, even with 2021 levels, while prices are expected to rise 6.2%, compared with last year’s nearly 16% rise. Freddie said it expects 30-year fixed-rate mortgages, which averaged 3% last year, to hit 3.6% this year and 3.9% in 2023. (DJN)
-
Canadian retail sales rose 0.7% in November from October to a seasonally adjusted 58.08 billion Canadian dollars, or the equivalent of $46.45 billion, led by higher sales at gasoline stations, Statistics Canada said. The consensus was for a 1.2% rise, TD Securities said. (DJN)
-
Canadian new-house prices slowed in December, marking the smallest month-over-month gain in 18 months, Statistics Canada said, noting its new-house price index rose by 0.2% from November and by 11.6% from a year earlier. New-home prices, rose by 10.3% in 2021, the fastest pace in over 30 years, reflecting a hot market underpinned by strong demand and record-low housing inventory. (DJN)
-
Eurozone consumer confidence fell for the fourth consecutive month in January, the European Commission said, noting its confidence measure decreased from minus 8.4 in December to minus 8.5. Economists polled by the Journal forecast a minus 9.0 reading. (DJN)
-
Eurozone business activity growth slowed for a second consecutive month in January, as the spread of the Omicron variant took an increasing toll, IHS Markit says. The eurozone composite PMI fell to 52.4 in January from 53.3 in December, according to the flash estimate. The latest reading indicates the slowest rate of output growth since the recovery from lockdowns started in March 2021. (DJN)
-
The U.K. economy was held back by the rise in Covid-19 cases at the start of the year, with hospitality, leisure and travel sectors struggling due to restrictions, data from a purchasing managers survey shows. The IHS Markit flash composite PMI stood at 53.4 in January, down slightly from 53.6 the previous month and the lowest level in 11 months. (DJN)
|
|
|
This newsletter is compiled by James Christie in San Francisco.
Send us your tips, suggestions and feedback. Write to:
Jon Hilsenrath, Michael Derby, Nell Henderson, Nick Timiraos, Jason Douglas, Paul Hannon, Harriet Torry, Kate Davidson, David Harrison, Kim Mackrael, Tom Fairless, Megumi Fujikawa, Michael Maloney, Paul Kiernan, James Glynn
Follow us on Twitter:
@WSJCentralBanks, @NHendersonWSJ, @michaelsderby, @NickTimiraos, @PaulHannon29, @wsj_douglasj, @HarrietTorry, @KateDavidson, @d_harrison, @kimmackrael, @TomFairless, @megumifujikawa, @mikemaloneyny, @pkwsj, @JamesGlynnWSJ
|
|
|
|