Good day. Canada's consumer-price index rose 4.8% on year in December, marking a 30-year high. The average of the Bank of Canada's preferred measures for underlying core inflation also accelerated last month and also marked a three-decade high. "If the Bank of Canada was looking for a reason to keep rates unchanged in January, they're unlikely to find it in the December CPI report," said Andrew Kelvin, chief Canada strategist at TD Securities. The firm expects the central bank to lift its benchmark interest rate, now at 0.25%, by a quarter-percentage point next week. Meanwhile, Australia's unemployment rate fell in December to its lowest level since 2008, potentially a reason for the Reserve Bank of Australia to bring forward its interest-rate increase guidance, while the People's Bank of China cut its benchmark lending rates for a second straight month.

Now on to today's news and analysis.

Top News

Canada Inflation Hits 30-Year High, Placing Spotlight on Central Bank

Canada's annual inflation rate edged upward in December to reach a three-decade high, a result that is bound to add pressure on the Bank of Canada to begin raising rates as early as next week.

Canada's consumer-price index increased 4.8% on a year-over-year basis in December, Statistics Canada said Wednesday, or slightly faster than the 4.7% rise in November. December data matched market expectations, according to TD Securities. Excluding gasoline, annual prices rose 4% in December.

China Cuts Benchmark Rates to Bolster Flagging Economy

China's central bank lowered its benchmark lending rates, stepping in to support a slowing economy that has been weighed down by a slump in the property market during a politically important year for leader Xi Jinping.

Glynn's Take: Stellar Australian Job Market to Force RBA's Hand

By James Glynn

As Australia's unemployment plummets toward levels last seen when disco was in vogue, there is immense pressure on the Reserve Bank of Australia to radically rethink its policy guidance, which still holds that an interest-rate increase could be years away.

Well over 400,000 new jobs were added to the economy in November and December, which is staggering observers. Unemployment dropped to 4.2% in December, its lowest level since 2008, according to government data reported Thursday. Read more.

U.S. Economy

Stretch of Low Jobless Claims Expected to Extend Into The New Year

Filings for jobless claims are expected to remain near the lowest levels on record when data is released today, as workers and businesses contend with a tight U.S. labor market and Omicron-related disruptions.

Biden's First Year: The Goals He Hit and the Ones He Missed

President Biden took office a year ago, promising to tackle the coronavirus pandemic, revive the economy and strive for unity in a nation roiled by division and crisis. A year later, his record on his promises has been mixed.

Key Developments Around the World

Foreign Investment Recovered but Did Little to Ease Supply Strains

Foreign investment by businesses around the world rebounded last year to exceed its pre-pandemic total, but little of that U.S.-led surge went toward boosting manufacturing capacity despite the widespread shortages of goods.

Turkey's Erdogan Meets El Salvador's Bitcoin-Boosting Leader

Turkey's president is set to meet with the leader of El Salvador, the first country to make bitcoin legal tender, while the Turkish central bank kept interest rates on hold in a move that will likely do little to arrest the country's currency crisis.

Turkey Takes $5 Billion Lifeline From Old Rival U.A.E.

Financial Regulation Roundup

SEC Under Pressure to Implement Agenda in 2022

The clock is ticking for Securities and Exchange Commission Chairman Gary Gensler to implement his agenda. With Democrats at risk of losing their thin majorities in the House and Senate after midterm elections in November, the coming months could be critical for him.

China-Based Auditors Pose Risks for U.S. Companies, Study Shows

Some 200 Chinese companies are under threat to be booted from U.S. stock exchanges because they use China-based auditors whose work can't be inspected by U.S. regulators. The move is designed to protect U.S. investors, lawmakers say.

Macau's Casino Controls to Usher in Biggest Shake-Up in Decades

Macau unveiled legislation outlining tighter government control over casino operators and restrictions on VIP rooms, the biggest overhaul of China's gambling hub since the former monopoly was opened up two decades ago.

Forward Guidance

Thursday (all times ET)

7:30 a.m.: European Central Bank releases minutes of Dec. 15 and 16 governing council monetary policy meeting

10 a.m.: National Association of Realtors releases U.S. existing home sales report of December

6:50 p.m.: Bank of Japan releases Dec. 16-17 meeting minutes

Friday

7:30 a.m.: ECB President Christine Lagarde joins global economic outlook" panel at Davos Agenda 2022

8 a.m.: Release of text of speech by Bank of England's Catherine Mann on returning inflation back to target

Research

Deutsche Bank Games Out Rate Impact of Smaller Fed Balance Sheet

Economists at Deutsche Bank think it is likely the Federal Reserve could allow about $560 billion to run off from its $8.8 trillion balance sheet this year and around $1 trillion next year. Under this scenario, the Fed would begin raising interest rates in March and start shrinking its holdings in July. The economists anticipate four rate increases this year as well as a notable monetary policy impact from a shrinking balance sheet. They wrote in a report that "We estimate that the total drawdown in the balance sheet through end-2023 amounts to somewhere between two and a half and three and a half 25 basis point rate increases."

-- Michael S. Derby

Commentary

Covid-19, Endemic or Not, Will Still Make Us Poorer

Hopes that vaccines would bring herd immunity, that more transmissible variants would always be less deadly, or that the Delta wave would be the last, were misplaced, so be wary of forecasts that Covid-19 is about to become endemic, Greg Ip writes.

Bonds Sometimes Don't Make Sense

Fixed-income markets in developed countries have moved more or less in lockstep since September, when investors started pricing in a hawkish turn among central bankers, but the bond moves underpinning all this don't make complete sense, Jon Sindreu writes.

Investors Aren't Sure About Home Builders' Foundations

Even with price and interest-rate headwinds, home builders might still be able to do very well with a strong job market boosting incomes and the pandemic having helped bring back Americans' taste for homeownership, Justin Lahart writes.

Basis Points

Global oil demand will exceed pre-pandemic levels this year thanks to growing Covid-19 immunization rates and as recent virus waves haven't proved severe enough to warrant a return to strict lockdown measures, the International Energy Agency said.

Housing starts in the U.S., a measure of homebuilding, rose 1.4% in December from November and 2.5% from a year earlier to a seasonally adjusted annual rate of 1.702 million, their highest level since March, data from the Commerce Department showed. (Dow Jones Newswires)

Canadian wholesale sales rose 3.5% on a seasonally adjusted basis in November to 75.63 billion Canadian dollars, or the equivalent of $60.43 billion, their fourth consecutive monthly increase led by strength in the building materials and supplies and miscellaneous products sectors, Statistics Canada said. (DJN)

Malaysia's central bank maintained its benchmark interest rate at a record low amid global inflation concerns, as growth risks within the Southeast Asian economy remain tilted to the downside even after economic activity rebounded in the final quarter last year. Bank Negara Malaysia kept its overnight policy rate at 1.75%, as forecast by all 11 economists polled by The Wall Street Journal. (DJN)

Bank Indonesia maintained its benchmark interest rate to safeguard the stability of the rupiah and keep inflation in check. The central bank kept its seven-day reverse repo rate unchanged at 3.50%. In a Wall Street Journal poll of seven analysts, the central bank was widely expected to stand pat. (DJN)

The Monetary Authority of Singapore and a banking industry body are introducing new steps to bolster digital-banking security in the country, in light of recent scams targeting bank customers. Banks in Singapore, in consultation with the MAS, will work to put into place more stringent measures within the next two weeks, the MAS and the Association of Banks in Singapore said. (DJN)

Turkey's central bank held its benchmark rate steady at 14%, a move that is largely viewed by analysts as a halt to the easing cycle that began in September rather than end to it. The decision to stay put was widely expected and follows a slew of rate cuts that reduced the policy rate by a total of 500 basis points over the final four months of 2021. (DJN)

Norway's central bank kept its key policy rate at 0.50%, as expected, and reconfirmed that a further hike is likely in March. In September, Norges Bank became the first major western central bank to raise interest rates since the onset of the Covid-19 pandemic, when it lifted its key rate to 0.25% from zero, and followed that up with a further hike in December to 0.50%. (DJN)


(END) Dow Jones Newswires

01-20-22 0919ET