November Inflation Report May Spur Quarter-Point Rate Increase at Federal Reserve's Next Meeting By James Christie
Good day. Federal Reserve officials began a two-day meeting Tuesday after strongly signaling their intention to raise their benchmark federal-funds rate by 0.5 point today following increases of 0.75 point at their past four meetings. Tuesday's inflation report showing consumer price increases slowed in November is likely to intensify their debate over whether to further dial down the size of rate rises to a more traditional quarter percentage point at their Jan. 31-Feb. 1 gathering. The probability that the Fed would follow this week's anticipated half-percentage-point rate rise with a quarter-point increase in February rose to around 56% late Tuesday morning from 35% on Monday, according to interest-rate futures markets tracked by CME Group.
Now on to today's news and analysis.
Top News Fed Debate Over When to Stop Rate Increases Might Intensify
The Federal Reserve remains on track to lift interest rates by 0.5 percentage point on Wednesday to fight high inflation, but two straight months of moderating price pressures could complicate officials' deliberations over how high to raise rates early next year.
Consumer prices climbed 0.1% in November from the previous month and 7.1% from a year earlier, the Labor Department said Tuesday, both down notably from comparable previous increases.
Unpredictable 10-Year Treasury Yield Poses Puzzle for Investors, Fed
One question looming over the Fed's meeting this week: How much control do officials have over the all-important yield on the 10-year U.S. Treasury note? Fed officials have already sent clear signals about their next move, but what happens to the 10-year Treasury yield, though, is far less certain-especially in light of its surprising recent declines. Yields on longer-term Treasurys like the 10-year note play a critical role in the U.S. economy by setting a floor on borrowing costs for businesses and consumers.
CFOs Look For Clues on Where Rates Are Headed in the New Year
Companies felt the pinch of higher financing costs this year as the Fed raised its benchmark short-term interest rate six times. Finance chiefs, bankers and investors are now looking for guidance on future interest-rate changes.
U.K. Inflation Eased in November, Following Global Trend
The U.K.'s annual rate of inflation fell in November, a fresh sign that the surge in consumer prices globally since early last year is easing as household spending power declines and central banks push borrowing costs higher.
U.S. Economy CPI Report Shows U.S. Inflation Eased in November
Consumer prices rose last month at the slowest 12-month pace since December 2021, closing out a year in which inflation hit the highest level in four decades and challenged the Fed's ability to keep the U.S. economy on track.
Prices for Used Cars, Plane Tickets and Electricity Eased in November
Shrinking Office Building Values a Dilemma for City Budgets
The sharp decline in office building values is likely to become a growing problem for the budgets of cities, schools and other jurisdictions that depend heavily on property taxes from building owners.
Key Developments Around the World China's Zero-Covid Policy Is Ending, but Not Everyone Is Celebrating
After three years of trying to keep Covid-19 at bay, China is finally loosening its draconian zero-Covid rules. But instead of celebrating, many people are hunkering down , cutting spending and avoiding public areas.
India's Manufacturing Push Takes an Audacious Gamble on Chips
India plans to transform a vast tract of marshland in Prime Minister Narendra Modi's home state into the most ambitious demonstration of its push to be recognized as a serious player in advanced manufacturing.
Europe's Energy Crisis Seen Boosting Demand for Oil as Heat Source
A better-than-expected response to Europe's energy crisis and surprising economic resilience in Asia are boosting demand for oil as a heat source, the International Energy Agency said as it lifted its forecast for global crude demand.
Financial Regulation Roundup FTX's Sam Bankman-Fried Charged With Criminal Fraud, Conspiracy
U.S. prosecutors on Tuesday charged FTX founder Sam Bankman-Fried with eight counts of fraud and conspiracy, in what they called a scheme to defraud his crypto exchange's customers and his hedge fund's lenders.
Sam Bankman-Fried Led Yearslong Fraud at Company, SEC Says CFTC Sues Sam Bankman-Fried, FTX and Alameda, Alleging Fraud FTX Fraud Suits Offer Blueprint for Pursuing Offshore Crypto Exchanges Quick Arrest Highlights Faster Pace of White-Collar Prosecutions Danske Bank to Pay $2 Billion to Resolve Money-Laundering Probes
Danske Bank A/S has agreed to pay about $2 billion to settle long-running probes into anti-money-laundering failures that led to suspicious transactions flowing largely unchecked through a former branch in Estonia.
Ken Griffin Sues IRS Over Tax Privacy Breach
News organization ProPublica published articles mentioning billionaire hedge-fund manager Ken Griffin and using information from his tax records, disclosures the IRS inspector general and Justice Department are investigating .
Forward Guidance Wednesday (all times ET)
8:30 a.m.: U.S. import and export price indexes for November
2 p.m.: Federal Reserve rate decision and economic projections
2:30 p.m.: FOMC press conference
Thursday
7 a.m.: Bank of England rate decision
8:15 a.m.: ECB rate decision; Canada housing starts for November
8:30 a.m.: U.S. retail sales for November; U.S. weekly jobless claims
9:15 a.m.: U.S. industrial production and capacity utilization for November
Research ECB to Lift Eurozone Inflation Outlook, Cut Growth Projections
The European Central Bank is likely to upgrade its eurozone inflation forecasts for 2022 and 2023 on Thursday in light of recent stronger inflation prints, AXA Investment Managers economists Hugo Le Damany and François Cabau write in a note. They expect the ECB to forecast average inflation for 2022 at 8.4%, up from September's projected 8.1%, while price growth for 2023 is likely to increase slightly to 5.6% from 5.5%. Meanwhile, the ECB is likely to lower growth projections for 2023 and 2024, currently at 0.9% and 1.9%, respectively, they say. "Although activity data have surprised to the upside, a recession-even shallow one-should now be baseline, pushing down GDP forecast for both next year and 2024," according to the two economists.
-Xavier Fontdegloria
Inflation Faces Long Road to Return to Bank of Canada's Target
Headline inflation in Canada may be trending lower since peaking in June, but TD Securities sees a long road ahead for it until it reaches the Bank of Canada's 2% CPI target, and TD doesn't expect it to get there next year. Much of the recent softening reflects lower gasoline prices, and core inflation measures are still sitting near the highest on record as price pressures remain broadly based, TD says in a report. While TD expects inflation to approach the central bank's target range in the fourth quarter of 2023, it says long-term consumer expectations that have remained "well behaved" so far remain the key risk.
-Robb Stewart
Commentary Inflation's Cold Case
It would be hard for Fed policy makers to not acknowledge inflation has started to come off the boil, and at the very least that suggests they can raise rates in smaller increments next year to see how things pan out, Justin Lahart writes.
Turkey's Unsustainable Economic Model May Be Sustained
After a difficult year, it may be tempting to see 2023 as the point when Turkey either succumbs to its overwhelming financial vulnerabilities or is forced to clean house, but the reality is neither may happen, Jon Sindreu writes.
Basis Points Confidence among U.S. small-business owners rose modestly in November, as easing inflation and improving short-term expectations lifted the small-business optimism index of the National Federation of Independent Business to 91.9 from 91.3 the previous month, beating the 90.8 consensus forecast from economists polled by The Wall Street Journal. (Dow Jones Newswires) U.S. domestic freight demand is waning heading toward the end of a volatile year in shipping, with the closely watched Cass Freight Index down 0.5% in November on a seasonally adjusted basis to the lowest level since July, Cass Information Systems said in its monthly report. The measure was also down 0.4% from a year earlier, a sign retailers and manufacturers are continuing to pare inventories after goods in transit and at warehouses ballooned earlier this year. (DJN) Sentiment among Japan's large manufacturers deteriorated slightly in the three months to December amid concerns over the global economic slowdown. (DJN) Singapore's economy is likely to expand slightly faster than expected in 2022, helped by an improving outlook for construction and wholesale and retail trade, a central bank survey showed Wednesday. (DJN) OPEC maintained its outlook for global oil supply and demand on Tuesday, suggesting it doesn't expect Western attempts to set a price cap for Russian oil to have much impact on global crude flows. Ukraine garnered pledges for fresh aid to help it ride out the winter months after explosions rocked a bridge in the country's east used by Russian forces to transport military hardware to the front lines of the conflict. Ghana reached a $3 billion bailout deal with the IMF that sets the stage for debt-relief negotiations with the West African country's foreign bondholders and government creditors. South Africa's annual inflation rate declined in November, but food prices continued to increase at a double-digit rate.The consumer price index rose 7.4% on year in November, easing from a 7.6% increase in October, according to data from Statistics South Africa. (DJN) Industrial production in the eurozone declined in October, in a sign that the region's factory sector weakened at the beginning of the fourth quarter as high energy prices hit output. Industrial
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12-14-22 0715ET
