Good day. Discussing the possibility of raising the Fed's short-term interest-rate target, Federal Reserve Bank of New York President John Williams said Friday that "Given the clear signs of a very strong labor market, we are approaching a decision to get that process under way." The vice chairman of the rate-setting Federal Open Market Committee added that he sees the target rising gradually to around 2% over time. On Monday, the People's Bank of China went in the other direction, cutting two key interest rates that would likely translate into lower benchmark lending rates, in a bid to provide more support for a slowing economy.

Now on to today's news and analysis.

Top News

Williams Says Fed's Next Step Is Gradual Rate Rises

Federal Reserve Bank of New York President John Williams said the U.S. central bank is getting closer to the point when it will need to raise its short-term interest-rate target, but he declined to say when he would like that to happen.

With the Fed having accelerated the speed at which it is pulling back on its bond-buying stimulus, "the next step in reducing monetary accommodation to the economy will be to gradually bring the target range for the federal-funds rate from its current very low level back to more normal levels," Mr. Williams said Friday in a virtual appearance.

Fed Releases Transcripts of 2016 Policy Meetings

Transcripts released by the Federal Reserve on Friday revealed the extent of officials' 2016 debate over how fast to move up interest rates after lifting them from near zero at the end of the previous year.

Sarah Bloom Raskin in Her Own Words

If Sarah Bloom Raskin becomes the Fed's point person on banking oversight, it could be poised for a more expansive effort to address financial risks caused by a warming environment. Here are some samples of her policy views.

Biden Moves to Remake the Federal Reserve

U.S. Economy

Democrats Face Costs of Rising Inflation With Few Options Left

Democrats are trying to use their control of Congress and the White House to curb inflation, but economists say price increases have reached a point beyond what any political party can easily do to tame them quickly.

U.S. Retail Spending Drops as Omicron and Inflation Surge

Sales at U.S. retail stores, online and restaurants dropped by 1.9% in December, a sharp decline following record-level retail sales that started with a 1.8% gain in October from the prior month, the Commerce Department reported.

Texas, Arizona Have Recovered All the Jobs Lost When Covid-19 Hit

Texas and Arizona have joined two other states in recovering all the jobs they lost at the start of the Covid-19 pandemic, leading a trend that is expected to include another dozen states by the middle of this year.

In Battle for Workers, the Humble 401(k) Gets Richer in 2022

Facebook's parent and consulting firm KPMG U.S. are among a growing number of companies putting more money into employees' 401(k) retirement accounts, employing another lever to attract and retain staff.

Offices Are Leased Up, Thanks to Gifts for Tenants, Months of Free Rent

Key Developments Around the World

Full Recovery in Global Labor Market Could Take Years

It will take at least two years before global unemployment falls back to pre-pandemic levels, according to fresh projections, with joblessness in poor countries remaining high even as labor markets in rich countries become increasingly tight.

China Seeks to Cushion Blow of Economic Pain as Momentum Slows

China's leaders are hoping that they can put a floor under the economy, which officials said Monday expanded by just 4% in the fourth quarter of last year, the slowest pace since the beginning of the Covid-19 recovery in the second quarter of 2020.

China Cuts Two Key Rates to Support Slowing Economy

China GDP Grew 8.1% in 2021, Economy Slowed in Fourth Quarter

In China, the Economic Buzzword for 2022 Is Stability

China's Population Stalls, Births in 2021 the Lowest in Modern History

Financial Regulation Roundup

Credit Suisse Chairman to Leave After Breaking Covid-19 Travel Rules

Credit Suisse Group AG Chairman António Horta-Osório is leaving the global bank following a board investigation into his travel and personal conduct, according to people familiar with the bank.

Raskin May Face Rough Confirmation For Bank Supervision Post

Sarah Bloom Raskin, President Biden's pick to become the Fed's top banking regulator, could face a contentious nomination process due to her support for tougher banking rules and for using financial regulation to address climate-change positions.

Pandemic Profits Begin to Ebb at America's Biggest Banks

Some of the forces that pushed bank profits to new records are starting to weaken, with JPMorgan saying the shifting environment and higher costs would mean it wouldn't hit its longer-term profitability targets in 2022 and maybe 2023.

Forward Guidance

Tuesday (all times ET)

Time N/A: Bank of Japan releases policy statement and outlook for economic activity and prices

Wednesday

8:30 a.m.: U.S. Commerce Department releases December housing starts

9:15 a.m.: Bank of England's Bailey and Cunliffe testify on financial stability report

Commentary

Why China's Central Bankers Are Still Worried

With infrastructure investment still struggling to accelerate and consumers hunkering down, it is difficult to imagine a floor for overall Chinese growth without more definitive signs of a bottom in real estate, Nathaniel Taplin writes.

Bond Market Forecasts Bad Economic News

With the best job growth in over 40 years, inflation a national obsession and the Fed preparing to raise interest rates, it is easy to forget how different the world was before the pandemic, which could be where the U.S. is headed again, Greg Ip writes.

It Will Take Time to Dig Out of This Consumer-Spending Hole

The disruptions the Omicron variant is causing appear likely to weigh on spending for some weeks, and it seems all but certain the economy will grow at a much slower pace this quarter than in the fourth, Justin Lahart writes.

Bank Investors Must Wait for the Benefits of Rising Interest Rates

Likely Fed rate increases should be a solid foundation for big banks, driving lending income higher, and there ought to be a tailwind from economic growth, but a number of challenges might offset these positives in the year ahead, Telis Demos writes.

Glynn's Take: RBA and Markets Set to Square Off in Clash of Wills

By James Glynn

Australian inflation data next week are likely to show that the country continues to sit outside the bonfire of rising prices now menacing economies like the U.S., U.K. and Europe.

If fourth-quarter consumer-price index data on Jan. 25 is relatively benign, that would immediately challenge financial markets' current bet that the Reserve Bank of Australia will raise interest rates within months. That view contrasts with the far longer timetable of late 2023 or 2024 that the RBA has given. Read more.

Basis Points

U.S. industrial production dropped 0.1% in December from November, its first decline since September, with manufacturing output down by 0.3% as supply-chain issues continue to affect output, the Federal Reserve said. (Dow Jones Newswires)

U.S. consumer sentiment worsened in early January amid a surge in Covid-19 cases due to the Omicron variant, causing the preliminary estimate of the University of Michigan index of consumer sentiment to drop from 70.6 in December to 68.8. Economists polled by The Wall Street Journal had forecast a 70.0 reading. (DJN)

U.S. import prices fell 0.2% in December, the first monthly decline since August, led by a 6% decrease in petroleum prices, while natural-gas prices dropped by 13.7%, according to the Labor Department. (DJN)

U.S. businesses continued restocking at a robust pace in November in an effort to meet strong sales, liftng manufacturing and trade inventories by 1.3% on month in November, the same growth rate as in October, according to data from the Commerce Department. (DJN)

Canadian businesses anticipate raising wages over the next 12 months to attract and retain workers as labor shortages intensify, according to the latest quarterly business-outlook survey from the Bank of Canada published Monday, which likely increases pressure on the central bank to raise rates. (DJN)

Canadian factory sales climbed 2.6% in November from the previous month to a seasonally-adjusted 63.07 billion Canadian dollars, or the equivalent to $50.23 billion, Statistics Canada said Monday. (DJN)

China's central bank said it would act early and more forcefully to help stabilize the economy in 2022, a politically important year for Chinese leaders. (DJN)

The Bank of Japan raised its price forecast slightly amid pandemic-related supply shortages, although it still expects its 2% inflation target won't be reached for at least the next two years. In its quarterly outlook, the bank's policy board projected inflation would increase 1.1% in the year ending March 2023 and 1.1% in the following year, up from previous proje

(END) Dow Jones Newswires

January 18, 2022 08:54 ET (13:54 GMT)

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