U.S. Consumer-Price Index Suggests Uneven Path Back to 2% Inflation By James Christie
Good day. U.S. consumer prices rose 3.1% in January from a year earlier, marking the lowest reading since June, the government reported on Tuesday. But the rise was higher than the forecast 2.9% and suggests the path back to the Federal Reserve's 2% inflation target could be uneven. Fed officials have said they aren't ready to entertain interest-rate cuts at their next meeting in March because they want more evidence inflation is returning to their target. The January consumer-price index report certainly disappointed investors hoping the central bank will cut rates sooner rather than later. The three major U.S. stock indexes closed lower, with the Nasdaq leading the declines. The Dow industrials shed more than 500 points.
Now on to today's news ...
Top News Hotter Than Expected Inflation Clouds Rate-Cut Outlook
Inflation cooled again in January but came in above Wall Street's expectations, clouding the Federal Reserve's path to rate cuts and potentially giving the central bank breathing space to wait until the middle of the year.
The Labor Department reported Tuesday that consumer prices rose 3.1% in January from a year earlier, versus a December gain of 3.4%. That marked the lowest reading since June. Still, the consumer-price index was higher than the predicted 2.9%, a disappointment for investors who hope the Fed will cut rates sooner rather than later.
Inflation Tracker: At 3.1%, See the Items Keeping Prices High Stocks Drop After Hot Inflation Report Video: Why Inflation Is Holding Above 3%
Inflation Report Keeps Fed on Hold
Tuesday's inflation report underscores why Federal Reserve officials have been dismissive of market expectations of an imminent rate cut. Officials have said they aren't ready to entertain rate cuts at their next meeting, March 19-20, because they want to see more evidence that inflation is returning to their 2% target. The latest report further muddies the waters over when the central bank might begin lowering rates and could provide ammunition to officials who want to wait until the middle of the year before cutting interest rates.
-Nick Timiraos
U.S. Economy Warehousing Demand Is Starting to Shrink
The once-booming U.S. warehousing market is coping with signs of contraction as businesses consolidate warehouses and in some cases upgrade existing sites rather than add facilities amid a big drawdown of inventories.
The Six Months That Short-Circuited the Electric-Vehicle Revolution
The Michigan plant where the F-150 Lightning electric truck is built used to vibrate with excitement. Now Ford is cutting its output by half, and workers are relocating to other facilities making gas-powered vehicles.
Key Developments Around the World China's Shipyards Are Ready for a Protracted War. America's Aren't.
China emerged as a global power by turning itself into the world's factory floor. It is expanding that power, and its military might, with another striking industrial feat: becoming the world's shipyard .
Tiger Cub Economy Hustling for Big Break Without Apple, Tesla
Indonesia, the world's fourth most-populous country, has long punched below its weight , and companies eager to diversify manufacturing out of China have largely looked beyond the Southeast Asian nation.
U.K. Inflation Holds Steady, Raising Prospects of Interest-Rate Cuts
U.K. inflation held steady in January , defying expectations of an increase and raising the possibility that the Bank of England could soon begin to cut interest rates from the current 15-year high.
Eurozone Industrial Production Unexpectedly Expands
Eurozone manufacturing is showing signs of life again after industrial production jumped unexpectedly in December, further signaling that the recent slump in manufacturing in the bloc may be coming to a close.
Financial Regulation Roundup U.S. Urges Anti-Money-Laundering Controls for Investment Advisers
U.S. investment advisers will soon need to start detecting and reporting suspected money laundering to the U.S. government under a newly proposed rule as the U.S. again attempts to increase regulatory scrutiny on the sector.
Tougher Rent Laws Are Behind Trouble at NYCB
When New York Community Bancorp posted large losses last month and warned of more difficulties to come, it pointed to a significant cause for concern: troubled loans in a sinking corner of the New York City apartment market .
MSCI Drops 66 Companies From China Index Amid Market Slump
The deletions from the broad gauge of Chinese shares, which will take effect at the end of the month , include the likes of China Southern Airlines, Greentown China, Weibo and China Everbright Environment Group.
Forward Guidance Wednesday (all times ET)
9:30 a.m.: Chicago Fed's Goolsbee speaks to Council on Foreign Relations
2:30 p.m.: Bank of Canada's Mendes speaks at Lazaridis School of Business & Economics at Wilfrid Laurier University
4 p.m.: Fed's Barr speaks at 40th Annual National Association for Business Economics Economic Policy Conference, Washington, D.C.
Thursday
2 a.m.: UK industrial production for December; UK gross-domestic product for December, estimate, and first-quarter, estimate
8:15 a.m.: Canada housing starts for January
8:30 a.m.: U.S. weekly jobless claims; U.S. retail sales advance report for January; U.S. import and export price index data for January; Philadelphia Fed Manufacturing Survey; New York Fed's Empire State Manufacturing Survey
9:15 a.m.: U.S. industrial production and capacity utilization for January
10 a.m.: U.S. business inventories for December
1:15 p.m.: Fed's Waller speaks at Global Interdependence Center and University of the Bahamas Conference: Climate, Currency, and Central Banking, Nassau, Bahamas
7 p.m.: Atlanta Fed's Bostic speaks to Money Marketeers of New York University
Research Bank of England Likely to Wait for More Data Before Cuts Begin
While U.K. inflation data came in below Bank of England forecasts, there are still enough domestic price pressures to suggest it will wait before easing interest rates, Investec economist Philip Shaw says in a note. The 4.0% reading for headline inflation in January undershot the Bank of England's 4.1% prediction, while the BOE penciled in 6.7% for services, above the 6.5% result. However, labor-market conditions remain tight, according to data released Tuesday, which also showed unemployment on a falling trend, Shaw cautions. "We judge that it is more likely that the [BOE's monetary-policy] committee will wait for signs that pay growth is subsiding toward more sustainable levels and for more clarity on employment and jobless trends," he says.
-Ed Frankl
Commentary Rate Cuts Might Be Delayed. That's No Reason to Panic.
How much does it matter if the Fed starts cutting rates in June instead of May? Not much to the broader economy, or even to investors. But that sure isn't how they reacted to the consumer-price-index report, Aaron Back writes.
Basis Points U.S. small business confidence unexpectedly weakened in January as business owners' income expectations took a turn for the worse amid still-high inflation. The National Federation of Independent Business said Tuesday its small-business optimism index declined to 89.9 from 91.9 in December. (Dow Jones Newswires) The increase in Germany's ZEW economic-sentiment index in February shows there is still light at the end of an admittedly very long tunnel for the country's economy, Carsten Brzeski, ING's global head of macro, says in a note. The index rose for the seventh straight month to 19.9 in February from 15.2 in January, albeit alongside sliding sentiment for current conditions in the economy. (DJN) U.K. labor-market statistics follow other data in pointing to a reacceleration of the economy, HSBC senior economist Elizabeth Martins says in a note. Gross domestic product data on Thursday could show the U.K. ended 2023 in a mild recession, but activity and confidence now are improving and the jobs market remains remarkably strong, she says. (DJN) The Organization of the Petroleum Exporting Countries left its expectations for global oil-demand growth unchanged, but raised its economic forecast amid easing inflation and anticipated interest-rate cuts. The Vienna-based cartel said in its monthly report that it expects oil demand to grow by 2.2 million barrels a day this year , in line with its previous estimates. It also held its forecast for 2025 steady at 1.8 million barrels a day. Feedback Loop
This newsletter is compiled by James Christie in San Francisco.
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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
02-14-24 0716ET
