No Change in Rates by Bank of Canada Expected Today; Powell to Testify Before House Committee

No Change in Rates by Bank of Canada Expected Today; Powell to Testify Before House Committee By James Christie

Good day. The Bank of Canada today will keep interest rates on hold, according to a poll of economists by The Wall Street Journal. It found they predict the central bank will leave its target for the overnight rate at 5%. In its most recent decision in late January, which left the benchmark rate steady at 5%, senior Bank of Canada officials said they were focused on how long the rate needs to stay at its current level to wrestle down stubbornly high inflation. Also today, Federal Reserve Chair Jerome Powell testifies before the House Financial Services Committee. He is expected to bolster recent comments by Fed policymakers that there is no rush to cut interest rates. Powell will testify before the Senate Banking Committee on Thursday.

Now on to today's news and analysis.

Top News Bank of Canada to Keep Rates Steady, Moving to Possible June Cut

OTTAWA-The Bank of Canada is expected to keep its main interest rate unchanged on Wednesday, with most economists believing the central bank is inching closer to rate cuts starting in June amid signs of slowing inflation, anemic consumption and lackluster business investment.

All 14 economists polled last week by The Wall Street Journal predict the Bank of Canada will leave its target for the overnight rate at 5% when it issues its latest monetary-policy decision. Bank of Canada Gov. Tiff Macklem and Senior Deputy Gov. Carolyn Wilkins are scheduled to hold a press conference after the rate decision to explain their rationale.

U.S. Economy Yes, Even Cookie Monster Is Upset About 'Shrinkflation'

Cookie Monster is a muppet who lives on a fake street, but even he is sick of a real menace in supermarket aisles. "Me hate shrinkflation!," the "Sesame Street" character wrote to his 626,000 followers on X. "Me cookies are getting smaller."

Super Tuesday Sets Up Familiar but Unprecedented Rerun

With the last embers of the Republican primary extinguished, the country is lurching into a new phase in the 2024 presidential election : a one-on-one matchup between President Biden and former President Donald Trump.

Nikki Haley to Exit Republican Presidential Race Key Developments Around the World ICC Issues Arrest Warrants for Top Russian Commanders

The International Criminal Court issued arrest warrants Tuesday for two Russian commanders it accused of targeting Ukraine's power grid , ramping up an investigation into war crimes during Moscow's invasion.

China Budgets 7.2% Rise in Military Spending

China plans to boost its military spending by 7.2% this year, matching the pace of last year's expansion as Chinese leader Xi Jinping stays the course on his expensive campaign to modernize the armed forces.

China's New Funding Model: Keep It Central Egypt Makes Surprise Economic Reforms Demanded by IMF, Investors

Egypt moved to shore up international aid for a teetering economy that had taken a hit from the war in Gaza, letting its currency float freely on the market and sharply raising interest rates in a surprise announcement on Wednesday.

Financial Regulation Roundup Federal Agencies Probe Private-Equity Profiteering in Healthcare

Federal agencies are asking for public input as they probe the effects of private-equity investment in healthcare, as regulators attempt to stamp out financial transactions they say harm patients and medical workers.

Why People Are Switching to Their Hometown Banks

Some bank customers are going small, pushing back against a wave of consolidation that has concentrated deposits and loans in a handful of the largest banks, and many are also earning more and paying less .

The Believers Who Rode Bitcoin to a Record High

Today, those who hold, or once held, the best-known cryptocurrency fall into two main groups: FOMO and told ya. Some who sat out this bitcoin rally, meanwhile, now wonder if and when they should buy back in.

Forward Guidance Wednesday (all times ET)

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

9:45 a.m.: Bank of Canada interest rate decision

10 a.m.: U.S. wholesale inventories for January; U.S. Job Openings and Labor Turnover Survey (JOLTS) for January; Fed's Powell presents Semiannual Monetary Policy Report to Congress to House Financial Services Committee

12 p.m.: San Francisco Fed's Daly speaks at 2024 National Interagency Community Reinvestment Conference

2 p.m.: Federal Reserve Beige Book

4:15 p.m.: Minneapolis Fed's Kashkari in Q&A session at 2024 WSJ CFO Network Summit

Thursday

8:15 a.m.: ECB interest rate decision

8:30 a.m.: U.S. weekly jobless claims; U.S. productivity and costs, fourth quarter 2023; U.S. trade report for January; Canada trade report for January

8:45 a.m.: ECB interest rate decision press conference

10 a.m.: Fed's Powell presents Semiannual Monetary Policy Report to Congress to Senate Banking Committee; ECB Lagarde's podcast on latest monetary policy decisions

11:30 a.m.: Cleveland Fed's Mester speaks at European Economics and Financial Centre's Distinguished Speaker Series

3 p.m.: U.S. consumer credit

4:30 p.m.: Fed balance sheet

Research Last Mile of U.S. Disinflation Depends on Unemployment

Inflation behavior in the U.S. "depends critically on expectations of changes in labor market conditions," according to researchers in a paper published by the Federal Reserve Bank of New York's Liberty Street Economics. While the researchers note their model-based projections aren't official, they say declining inflation is typically associated with rising unemployment, but the abatement of pandemic-related supply shocks has allowed inflation to slow as labor remains tight. Their model "predicts that further disinflation...is likely to be gradual." If unemployment, currently below 4%, rises fast, underlying inflation reaches its long-term trend just above 2% by the end of 2025. The baseline forecast indicates slower disinflation.

-Paulo Trevisani

Commentary China's Boom Is Over-Beijing Is Making It Worse

China's fundamental challenges are tough, but it is also clear that much of what is plaguing the country amounts to a nasty cyclical downturn exacerbated by Beijing's poor policy choices , Nathaniel Taplin writes.

Listen: What China's 5% Growth Target Means for the World Watch: How China's Falling Consumer Prices Threaten Global Economy

The Problem Isn't Big Banks-It's Banks Getting Bigger

Recent regional banking crises have revived debates about the size of banks, as larger banks have been more insulated from some of the pressures hitting their smaller peers, Telis Demos writes.

Basis Points U.S. services-sector growth lost pace in February, amid weaker employment and more volatile demand, according to survey data from the Institute for Supply Management. Its services-activity index fell from 53.4 in January to 52.6 last month. Economists expected a 53.0 reading, according to a poll compiled by The Wall Street Journal. Readings above 50 indicate expansion in the sector, which has grown for the last 14 months and 44 of the past 45, ISM said. (Dow Jones Newswires) Insolvencies in Canada rose in January, government data indicate, and in some cases are now well above prepandemic levels. Data analyzed by Charles St-Arnaud, chief economist at Alberta Central, a trade group for credit unions, suggest total insolvencies on a seasonally adjusted basis rose 12.5% in January from the prior month and over 27% from a year earlier. (DJN) China will issue the equivalent of $139 billion in special ultralong bonds this year, part of plans to boost business activity and achieve its economic growth target of around 5% for 2024. Premier Li Qiang said Tuesday in a report seen by Dow Jones Newswires that Beijing will issue CNY1 trillion of "ultralong special central government bonds" in 2024 and may continue doing so for "the next few consecutive years." The report said proceeds will be used to fund megaprojects and support sectors aligning with key strategic development, as well as helping with national security. (DJN) Beijing signaled more liquidity support for the country's stumbling economy, and senior officials made unexpected trade-data disclosures, marking a new trend of surprise policy and data announcements. (DJN) South Korea's headline inflation has reaccelerated after three consecutive months of easing, backing the central bank's view that monetary policy needs to stay tight in the face of sticky price growth. (DJN) Feedback Loop

This newsletter is compiled by James Christie in San Francisco.

Send us your tips, suggestions and feedback. Write to:

James Christie , Perry Cleveland-Peck [mailto:perry.cleveland-peck@wsj.com], Nihad Ahmed , Michael Maloney

This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

03-06-24 0726ET