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Cheat Sheet for FOMC Meeting; One More Rate Rise Expected From Bank of Canada Today

Cheat Sheet for FOMC Meeting; One More Rate Rise Expected From Bank of Canada Today By James Christie

Good day. Federal Reserve officials have been suggesting they intend to slow the pace of their rate-raising campaign so they can have more time to gain insight into how increases are working their way through the U.S. economy. Today, we are offering a roundup of their recent comments regarding their outlook for rates ahead of the Federal Open Market Committee's next meeting on Jan. 31-Feb. 1. Meanwhile, economists surveyed by The Wall Street Journal were nearly unanimous in their opinion that the Bank of Canada today will raise its main interest rate by a quarter point to 4.50%, its highest level in over 15 years. The economists predicting a quarter-point rise also expect it to be the final rate increase by the BOC for the foreseeable future.

Now on to today's news and analysis.

Top News What Fed Officials Said Before Their Jan. 31-Feb. 1 Meeting

Federal Reserve officials have said they still have work to do to lower inflation but also indicated they expect to raise interest rates more slowly than last year's aggressive pace. A number of officials said easing the rate-raising campaign should allow them to better gauge the effects of rate increases already made. They expressed relief that price pressures have moderated recently but stressed that, with inflation still significantly above the central bank's 2% target, the battle isn't over. As they head into their Jan. 31-Feb. 1 Federal Open Market Committee meeting, here is a roundup of what Fed officials have said about monetary policy since their last gathering in December.

Bank of Canada Expected to Deliver One Final Rate Rise

A surprisingly strong labor market and elevated inflation expectations among businesses and consumers have analysts predicting the Bank of Canada will raise interest rates on Wednesday for the last time in the foreseeable future.

Jittery Investors Turn to Cash in Hunt for Yield

The dash for cash on Wall Street is back on. Investors have added about $135 billion to global money-market funds over the past four weeks, according to EPFR data through Jan. 18. That is the best stretch since the four-week period ended May 2020. Increased cash allocations are the latest sign of caution among investors who are questioning whether the recent rebound in stocks and bonds will continue. Many expect markets to remain volatile because Fed officials have repeatedly said they are committed to fighting inflation with higher interest rates. The flows are also an indication that investors are hungry for yield.

U.S. Economy Janet Yellen Takes Measures to Ease Debt-Ceiling Woes

The Treasury Department will stop fully investing in a government investment vehicle for federal employees as the U.S. bumps up against its debt ceiling, Secretary Janet Yellen said Tuesday in a letter to congressional leaders.

The Job Market for Remote Workers Is Shrinking

Many prospective workers who were determined to get a remote job just a few months ago are hitting a wall as remote listings rapidly dwindle . Fewer employers now feel the need to lure talent with the promise of working from home.

Consumers Tired of Inflation Scrimp-and Splurge

After more than a year of high inflation, consumers are exhausted from the budgeting micro-decisions they must make in a given day, and yet some with at least a little wiggle room in their budgets are deciding to splurge .

Key Developments Around the World U.S. Energy Subsidies Kick Off Global Battle for Jobs

Massive clean-energy incentives in the U.S. have set off a global competition for green investment, spurring companies to rethink where they put their money and prompting America's trading partners to consider their own subsidies.

Bank of Thailand Raises Policy Rate to Rein in Inflation

Thailand's central bank on Wednesday raised its policy rate in a bid to tame inflation. The Bank of Thailand said its policy committee voted unanimously to increase its one-day repurchase rate by 25 basis points to 1.50%, effective immediately. All seven economists polled by The Wall Street Journal had expected that the central bank would raise the policy rate by a quarter percentage point.

Financial Regulation Roundup Dozens of NYSE Stocks Halted in Opening Minutes

An apparent glitch at the New York Stock Exchange on Tuesday briefly caused wild price swings and a temporary trading freeze in stocks of major companies such as Exxon Mobil Corp., McDonalds Corp. and Walmart Inc.

Lender Popular Bank Fined Over Bad Covid Relief Loans

Popular Bank has been fined $2.3 million for allegedly failing to stop fraud by applicants to the Paycheck Protection Program, the federal government's massive Covid-related bailout for struggling small businesses. The Federal Reserve announced the fine Tuesday, saying New York-based Popular Bank, a subsidiary of Puerto Rico-based Popular Inc., had processed six PPP loans worth about $1.1 million despite having detected significant signs of potential fraud.

Musk Testifies in Tesla Tweets Trial He Was Trying to Inform Investors

Elon Musk testified in federal court Tuesday that he tweeted about potentially taking Tesla private in 2018 to share his thinking with shareholders and that he intended to convey that funding wouldn't be an issue.

Forward Guidance Wednesday (all times ET)

10 a.m.: Bank of Canada interest-rate decision and monetary-policy report

11 a.m.: Bank of Canada press conference on interest-rate decision and monetary-policy report


8:30 a.m.: U.S. gross domestic product, advance estimate for fourth quarter; U.S. durable goods new orders for December; U.S. weekly jobless claims

10 a.m.: U.S. new-home sales for December

Research ECB on Track for Half-Point Rate Rises in February, March

Major concern over the eurozone economy has passed, paving the way for the European Central Bank to raise interest rates by 50 basis points at both of the upcoming policy meetings in February and March, says Matteo Cominetta, head of macroeconomic research at Barings Investment Institute, after Tuesday's flash estimate purchasing managers' surveys. " The ECB can now stay its course of two 50bp hikes in the next two meetings without too much worry of exacerbating an incoming downturn," he says in a note. Should the winter remain mild and China not consume too much gas, a soft landing--where inflation is lowered without causing an economic recession--may actually materialize in Europe, he says.

-Emese Bartha

RBA Rate Pause Seems a Long Way Off

Australia's 4Q CPI data warrants a higher terminal official cash rate, Citi Australia's chief economist Josh Williamson says. With core inflation running at a higher-than-expected 6.9% on year, inflation remains stubbornly high and the RBA can't pause its rate-rise cycle in February, he says. Williamson now expects a peak RBA cash rate of 3.85% versus 3.35% in 2023, implying that rate increases will continue until midyear.

-James Glynn

Economists Lower Official Cash Rate Peak Forecasts for RBNZ

Economists are rushing to lower their forecasts for the peak in the RBNZ's official cash rate on news that 4Q CPI data printed below where the central bank thought it would. Jarrod Kerr, economist at Kiwibank says a peak in inflation is now evident, and the outlook for inflation, both offshore and onshore, is improving. "The world war on inflation is being won," he says. Kerr now expects the RBNZ to deliver a 50 basis point rate increase in February, lower than the outsized 75bp increase it has signaled. A peak OCR of 5.5% is likely to be a step too far. Kerr says he now expects a move to 5% from the current OCR rate of 4.25%.

-James Glynn

Commentary Energy Was Scarce in Europe Last Year. Credit Could Be Next.

Surveys suggest European credit conditions are already deteriorating, and ECB President Christine Lagarde shows no sign of deviating from her plan to raise rates further to bring inflation down, Stephen Wilmot writes.

Basis Points U.S. business activity weakened again in January, adding to signs of a slowing economy as still-high inflation and rapidly increasing interest rates weigh on demand. The S&P Global Flash Composite Output Index, which gauges activity in the manufacturing and services sectors, rose from 45.0 in December to 46.6, a three-month high but still under the 50 level separating expansion from contraction for a seventh consecutive month. (Dow Jones Newswires) Factory activity in the U.S. central Atlantic region contracted in January after eking out a small gain in December. The Federal Reserve Bank of Richmond said its Fifth District Survey of Manufacturing Activity's index decreased from 1 in December to minus 11, the lowest level since May 2020 and missing the minus 3 consensus forecast from economists polled by The Wall Street Journal. Readings below zero signal contraction. (DJN) Mexico's inflation rose slightly in the first half of January, led by higher prices at restaurants and annual increases in government services. The consumer price index increased by 0.46% in the first two weeks of the month and by 7.94% from a year earlier, the National Statistics Institute said. The 12-month rate was 7.82% at the end of December. (DJN) Australian consumer prices rose by more than expected in the fourth quarter, dashing hopes that the Reserve Bank of Australia would soon pull back from aggressively raising interest rates. The jump in prices came as Australians eagerly booked domestic and overseas holidays. Inflation in the fourth quarter was 7.8% compared with the same period a year earlier, more than the 7.6% expected by economists, the Australian Bureau of Statistics said. (DJN) Consumer prices in New Zealand rose slightly more than expected in the fourth quarter, keeping the door open for further interest-rate increases over coming months. The consumer price index increased 7.2% in the 12 months to December 2022, maintaining the pace set in the third quarter, Statistics NZ said. In quarterly terms, the CPI increased 1.4%. Economists had expected the

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January 25, 2023 07:19 ET (12:19 GMT)

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