Fed Watchers Will Be Looking for Clues Today on Timing of Rate Shift By James Christie

Good day. Federal Reserve officials appear ready to keep interest rates on hold today as they conclude their meeting, while Chair Jerome Powell's news conference that follows will be scrutinized for signs about when and how the central bank might shift its policy stance this year. Inflation has fallen faster than many officials have anticipated, so the key question for many Fed watchers is whether Powell and the rate-setting Federal Open Market Committee will provide clues about their plans for coming months. Investors in interest-rate markets have in recent days put the odds of a rate cut at the Fed's March meeting at around 50%.

Now on to today's news and analysis.

Top News Where Are Rates Headed? What to Expect From the Fed Meeting

Federal Reserve officials are set to hold interest rates steady this week at a 23-year high, putting the focus on what, if anything, they say about when they might lower rates.

At their last three meetings, central-bank officials made no changes to their policy rate but debated whether they had to raise rates more. Now, officials are turning their attention to when they might lower rates, though several have signaled they are in no hurry.

Bank of England to Keep Rates at Near 16-Year High on Thursday

The Bank of England on Thursday is expected to follow the European Central Bank last week and the Federal Reserve on Wednesday in leaving interest rates unchanged. The Bank Rate will remain at 5.25%, the highest since March 2008, for the fourth meeting in a row, according to bets in futures markets. Consequently, traders will be focusing on what the BoE's Monetary Policy Committee says in its accompanying statement and economic projections as a guide to when rate cuts may begin. ( MarketWatch )

U.S. Economy Home-Price Growth Accelerated in November

The S&P CoreLogic Case-Shiller National Home Price Index rose 5.1% from a year earlier in November, compared with a 4.7% annual increase the prior month. The index rose a seasonally adjusted 0.2% from October.

Two Ways the Fed's Rate Moves Could Help Home Buyers in 2024 Job Quitting Fell 12% Last Year-That's Bad News for the Economy

Americans quit 6.1 million fewer jobs last year than in 2022- a decline of 12% , which is a sign that confidence in the labor market is falling as the U.S. economy is expected to slow and Americans are taking longer to find new jobs.

UPS to Cut 12,000 Jobs, Mandate Return to Offices Five Days a Week

Most of these cuts will be full-time and part-time management positions and contract workers, United Parcel Service executives said, adding the jobs aren't likely to return even when parcel volumes rebound.

Layoffs in 2024: A List of Companies Cutting Jobs This Year Companies Now Need Human 'Robot Wranglers' Key Developments Around the World BOJ Discussed Possibility of Ending Negative Rates, Summary Shows

The Bank of Japan's policy board discussed the possibility of ending negative interest rates in the near future, according to a summary of opinions from its latest January meeting released on Wednesday.

Negative Takes on China's Economy Are Disappearing From Internet

Several prominent commentaries by economists and journalists in China have vanished from the internet in recent weeks, raising concerns that Beijing is stepping up its censorship efforts as it tries to put a positive spin on the economy.

China's Economic Pain Worsens as Real-Estate Sales Plummet Chinese Lithium Producers' Shares Drop in Wake of Profit Warnings U.S. and China Talk Fentanyl in Latest Sign of Thawing Ties Central Banks Continued to Load Up on Gold Last Year, WGC Says

Global central banks continued to hoover up gold in 2023 and are expected to keep buying at impressive rates as economic uncertainties and geopolitical tensions spur a rush for safe-haven assets, according to the World Gold Council. Banks' annual net purchases amounted to 1,037 tons last year, falling just 45 tons short of the previous year's record of 1,082 tons, the industry group said in its latest report. The buying spree-a testament to gold's role as an inflation hedge and store of value in times of crisis-was led by People's Bank of China, the largest single gold buyer. ( Dow Jones Newswires [https://www.marketwatch.com/story/central-banks-continued-to-load-up-on-gold-last-year-wgc-says-32b91be1#::text=Global%20central%20banks%20continued%20to, to%20the%20World%20Gold%20Council.])

'Deep France' Collides With Macron in Tractor Blockade

Tractor convoys have occupied the main highways around Paris in what farmers are describing as a siege of the French capital . They are threatening to trundle all the way to Rungis, the main food distribution hub for the region.

Glynn's Take: RBA Will Resist Calls to Cut Interest Rates for Some Time By James Glynn

Australia's inflation rate fell to a two-year low in the final months of last year, but even as relief over the rapid retreat of price pressures washes over the Reserve Bank of Australia, it is premature to think the central bank will soon consider cutting interest rates.

Some economists are now expecting the central bank to start reversing its record run of interest-rate increases by around May or June. But that's probably too optimistic. Read more .

Financial Regulation Roundup Citigroup Sued Over Handling of Online Scams

New York Attorney General Letitia James sued a unit of Citigroup, alleging the bank failed to protect its customers from online scams and then illegally denied those account holders reimbursements.

China's Latest Stock Market Remedy Is Another Small Fix

China's suspension of restricted share lending is the latest in a series of small measures aimed at restoring confidence in local stocks, which analysts don't expect will do much to address the larger forces roiling markets in the long run.

Evergrande Is Finished. China's Property Woes Aren't.

Economists say much more forceful action is needed from policymakers in China to stabilize the country's real-estate sector and prevent its troubles from weighing so heavily on the wider economy.

Banking Industry May Need to Spend Millions to Access Database

The banking industry may need to spend hundreds of millions of dollars in the first year to set up protocols to access a new corporate-ownership information database , the U.S. Treasury Department said.

Forward Guidance Wednesday (all times ET)

Time N/A: Federal Open Market Committee meeting

8:15 a.m.: ADP National Employment Report for U.S. for January

8:30 a.m.: U.S. employment cost index for fourth quarter; Canada gross domestic product for November

9:45 a.m.: Chicago Business Barometer for January

2 p.m.: Federal Reserve interest rate decision

2:30 p.m.: Federal Reserve's Powell holds press conference on interest rate decision

Thursday

4 a.m.: Eurozone manufacturing PMI for January

4:30 a.m.: S&P global U.K. manufacturing PMI for January

5 a.m.: Eurozone inflation flash estimate for January

6:30 a.m.: ECB's Lane speaks at Einaudi Institute for Economics and Finance event in Rome

7 a.m.: Bank of England interest rate decision

8:30 a.m.: U.S. productivity and costs, preliminary for fourth quarter; U.S. weekly jobless claims

10 a.m.: ISM Report on Business Manufacturing PMI for January

Research China's PBOC May Announce More RRR Cuts This Year

China will likely see further cuts in the reserve requirement ratio this year, and the first loan prime rate cut could be as early as February, Citi China Economics analysts say in a research note. The analysts expect two more RRR cuts of 50bps this year. Mixed PMI performance indicates the need for further policy intervention to keep economic growth on track, they say. Manufacturing PMI was slightly lower than estimated while the gauge for employment came in at its lowest reading in over a year, they note. The Pledged Supplemental Lending operation by the PBOC could resume to support property investment, they add.

-Kimberley Kao

ECB May Eye Faster Rate Cuts as Sentiment Stays Stuck

Glum sentiment among eurozone businesses and consumers at the start of the year suggests any economic rebound may take some time, supporting a more proactive approach to interest rate cuts by the European Central Bank, Melanie Debono at Pantheon Macroeconomics writes in a note. The bloc's economic sentiment indicator ticked down in January, thwarting hopes of a rapid recovery from the stagnation of the latter half of 2023. "The surveys confirm our hunch that the recovery will be slow coming, supporting a dovish shift from the ECB," Debono writes.

-Joshua Kirby

Commentary Will a Hiring Slowdown Push the Fed to Cut Rates Soon?

Federal Reserve policymakers could quickly find themselves in a situation that makes them shift from thinking they could maybe, possibly cut rates soon by a bit, to cutting rates deeply in a hurry , Justin Lahart writes.

Europe Regulates Its Way to Last Place

From mergers to AI, the EU's aggressive rule making hampers its ability to compete with China and the U.S. If it is going to compete, it will need to rethink its balance between regulation and innovation, Greg Ip writes.

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01-31-24 0748ET