Good day. Efforts to lower inflation are at the top of the
Federal Reserve's to-do list, Fed governor Lael Brainard, the White
House nominee to serve as the central bank's No. 2 official, told
Congress on Thursday, underscoring how the Fed has pivoted toward
fighting inflation. "Our monetary policy is focused on getting
inflation back down to 2% while sustaining a recovery that includes
everyone," Ms. Brainard told lawmakers. Speaking separately, Fed
governor Christopher Waller said the central bank would have to
move interest rates up more aggressively if inflation stays high
through the first half of the year, while Chicago Fed President
Charles Evans said inflation now is the Fed's top challenge and its
surge caught the central bank off guard. "This is going to be a
year where we readjust monetary policy," Mr. Evans added. Also on
Thursday, the White House said President Biden would nominate
former Fed governor Sarah Bloom Raskin to serve as the central
bank's vice chairwoman of supervision. He also plans to nominate
two economists for other Fed board seats: Lisa Cook, a professor of
economics and international relations at Michigan State University;
and Philip Jefferson, a professor and administrator at Davidson
College in North Carolina.
Please note the WSJ Pro Central Banking newsletter will not
publish on Monday in observance of Martin Luther King Jr. Day.
Now on to today's news and analysis.
Top News
Fed's Brainard Says Reducing Inflation Is Top Priority
Federal Reserve governor Lael Brainard joined the central bank
in 2014. PHOTO: SUSAN WALSH/ASSOCIATED PRESS
Federal Reserve governor Lael Brainard, the White House nominee
to serve as the central bank's No. 2 official, told Congress that
efforts to reduce inflation are the central bank's "most important
task."
Her comments Thursday morning at a confirmation hearing before
the Senate Banking Committee is the latest sign of how the central
bank has firmly pivoted toward fighting inflation. Fed officials
have signaled in recent days that they could raise interest rates
at their meeting in mid-March.
Fed's Evans: Time to Move Toward Tighter Monetary Policy
Federal Reserve Bank of Chicago President Charles Evans said
Thursday monetary policy isn't positioned to deal with surging
inflation and that he supports the central bank's recent shift
toward expecting to raise interest rates.
Waller Says High Inflation Caught Fed Off Guard
Federal Reserve governor Christopher Waller warned that the
central bank would have to move interest rates up more aggressively
this year if inflation stays high through the first half of the
year.
Biden to Nominate Sarah Bloom Raskin as Top Fed Banking
Regulator
President Biden will nominate former Fed governor Sarah Bloom
Raskin to serve as the central bank's top banking regulator, and
plans to tap Lisa Cook, a professor at Michigan State University,
and Philip Jefferson, a professor at Davidson College, for other
Fed board seats.
U.S. Economy
Economy's Fate Might Hinge on Question of 'Full Employment'
The Federal Reserve is hashing out whether the U.S. is at full
employment as it determines how quickly to raise interest rates.
Resolving the matter will help shape Americans' ability to get
jobs, command higher wages and improve living standards in the
years ahead.
Bond Market Forecasts Bad Economic News
Hedge Funds Keyed to Growth Stocks Stall Out
People Want to Start Spending Again and Inflation Is Ruining
It
Americans are better off than they've been in some time, with
rising 401(k) balances, record savings and ample job openings. Not
that it's helping all of them feel more secure, and millions are
feeling their lives and financial growth are on hold.
Producer-Price Increases Slowed From Record Pace in December
The Labor Department said its producer-price index rose 0.2% in
December from November, the slowest pace since November 2020 and
down sharply from a revised 1.0% the prior month -- a possible sign
of easing inflationary pressures in the U.S. supply chain.
Mortgage Rates Jump to Highest Level Since March 2020
The average rate for a 30-year fixed-rate loan rose to 3.45% for
the week ended Thursday, mortgage finance giant Freddie Mac said,
from 3.22% a week ago as expectations the Federal Reserve will
raise interest rates multiple times this year drive up mortgage
rates.
Retail Sales Seen Leveling Off as Record Holiday Season
Ended
Sales at U.S. retail stores, online vendors and restaurants are
expected to have leveled off in December, ending a record holiday
shopping season that included a resurgent pandemic, high inflation
and supply-chain snags.
Key Developments Around the World
Bank of Korea Raises Rate Back to Pre-Pandemic Level
The Bank of Korea increased its benchmark seven-day repurchase
rate by 25 basis points to 1.25% on Friday, raising it a third time
in less than half a year to fight inflation and bringing it back to
a pre-pandemic level.
How Covid-19 Has Widened the Gap Between Rich and Poor
Countries
The Covid-19 pandemic is widening the gap between rich and poor
countries, a trend that threatens to reverse years of economic
progress and set back efforts to alleviate global poverty.
China Securing Supplies as Strains With U.S. and Its Allies
Grow
China is trying to fortify its economy against prolonged tension
with the U.S. and other countries, stockpiling essentials and
planning on more domestic production as it speeds efforts to make
China less dependent on the world.
Chinese Economist Suggests China Spend More to Boost Its
Birthrate -- and Is Blocked From Social Media
Financial Regulation Roundup
Crypto Platform BitMEX Taps New Risk Boss
BitMEX, which last year agreed to a $100 million settlement with
U.S. enforcers over compliance issues, has hired Marcus Hughes, a
former managing director at Coinbase Global Inc., to serve as the
cryptocurrency platform's new chief risk officer.
Student-Loan Processor Navient to Cancel $1.7 Billion of
Debts
Navient Corp., one of the largest U.S. student-loan processors,
will cancel the debt of 66,000 borrowers, totaling $1.7 billion, in
an agreement with 40 state attorneys general that resolve six
outstanding state lawsuits.
China's 11th-Hour Tax Reprieve Cheers Foreign Workers -- For
Now
When China reversed plans to raise taxes on expatriates hours
before they were scheduled to take effect, the Western business
community welcomed the move, but the last-minute decision
underscored challenges for foreign businesses there.
Forward Guidance
Friday (all times ET)
8:30 a.m.: U.S. Commerce Department releases December retail
sales; U.S. Labor Department releases December U.S. import and
export price indexes
9:15 a.m.: Federal Reserve releases December industrial
production and capacity utilization
10 a.m.: University of Michigan releases preliminary consumer
sentiment survey for January
Monday
Time N/A: Bank of Japan monetary policy meeting
10:30 a.m.: Bank of Canada releases business outlook survey
Research
Paper by Fed's Clarida Says Underlying Inflation Rate Near
2%
Outgoing Federal Reserve second-in-command Richard Clarida in a
paper released Thursday took a parting shot in his official
capacity at weighing in on the economic outlook. Mr. Clarida in the
paper touted the value of the Fed's new policy-making framework
amid high inflation, noting that "I continue to believe that the
underlying rate of inflation in the U.S. economy is hovering close
to our 2% longer-run objective and, thus, that the unwelcome surge
in inflation in 2021, once these relative price adjustments are
complete and bottlenecks have unclogged, will in the end prove to
be largely transitory under appropriate monetary policy."
-- Michael S. Derby
Commentary
Four Reasons to Keep Worrying About Inflation
If we focus only on reasons for why inflation in the U.S. should
be lower in 2022, we risk ignoring four countervailing forces that
will push toward higher inflation this year, according to Jason
Furman.
Mr. Furman, a professor of the practice economic policy at
Harvard University, was chairman of the White House Council of
Economic Advisers, 2013--17.
How Too Many Boys Skew China's Economy
It is worth remembering how deep and powerful the cultural,
demographic and financial forces are that China is confronting as
it tries to wrestle its economy onto a more productive, less
housing-centric path, Nathaniel Taplin writes.
Basis Points
U.S. median home sale prices hit an all-time high in the first
full week of 2022, surging 16% year on year as the supply drought
deepened while demand increased, according to Redfin. (Dow Jones
Newswires)
The producer-price index rose 0.2% in December from November,
the U.S. Labor Department said, marking the slowest pace since
November 2020 and down from a revised 1.0% the prior month -- a
possible sign of easing inflationary pressures in the supply chain.
(DJN)
Canada is joining Mexico in calling for a USMCA panel to resolve
a dispute with the U.S. over the interpretation of rules of origin
regarding regional value content in the automotive industry,
Canada's trade minister Mary Ng said, calling the U.S.
interpretation of the rules inconsistent with what was negotiated
in the pact. (DJN)
Services activity in Brazil grew 2.4% by volume and 1.9% by
revenue in November from October, with volume up 10% from November
2020. The consensus was for activity to expand only 0.2% on month
in November. (DJN)
The Reserve Bank of Australia will exit QE early next year,
according to Capital Economics. There's a lot of confusing cross
currents now visible in Australian economic data thanks to a strong
recovery in activity that followed the end of 3Q lockdowns, and the
emergence of the Covid-19 Omicron variant. Still, Capital Economics
says the RBA will look through the haze and exit QE in February.
(DJN)
Chinese aviation authorities ordered more flights from the U
(END) Dow Jones Newswires
January 14, 2022 09:41 ET (14:41 GMT)
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