ECB’s Rehn: Restrictive monetary policy to end latest by mid-summer

    Finnish ECB Governing Council member Olli Rehn reaffirmed the central bank’s commitment to easing monetary policy as disinflation remains on track and the region faces a weakening growth outlook. Speaking with Bloomberg TV, Rehn stated that it “makes sense to continue rate cuts.”

    Rehn projected that ECB is likely to exit restrictive monetary territory “sometime in the spring-winter,” a timeline he clarified could range from January to June in Finland’s seasonal context.

    He added, “I would say at the latest by midsummer, we should have left restrictive territory.”

    Rehn also emphasized ECB’s independence in policy decisions, distancing it from the Fed’s approach.

    “The ECB is not the 13th federal district of the Federal Reserve System,” he noted, reinforcing that the bank’s decisions are guided solely by its mandate to maintain price stability within the Eurozone.

     

    ECB’s Lane stresses the need for “middle path” on interest rates

      ECB Chief Economist Philip Lane, in an interview with Der Standard, highlighted that a “middle path” is essential to achieving the inflation target without stifling economic growth or allowing inflationary pressures to persist.

      Lane warned that if interest rates fall too quickly, it could undermine efforts to bring services inflation under control. On the other hand, keeping rates too high for too long risks that inflation could “materially fall below target”.

      “We think inflation pressure will continue to ease this year,” Lane stated, while adding that wage increases in 2025 are expected to moderate significantly, which could contribute to a softer inflationary environment.

      While acknowledging that the overall direction of monetary policy is clear, Lane underlined the complexities of striking the right balance of “being neither too aggressive nor too cautious.”

      Full interview of ECB’s Lane here.

      China’s monthly trade surplus soars to USD 104.8B as exports jumps 10.7% yoy

        China’s trade data for December delivered a solid performance, reflecting resilience in exports and a surprising recovery in imports.

        Exports surged 10.7% yoy, significantly outpacing the 7.3% yoy expected growth and accelerating from November’s 6.7%.

        Shipments to major markets rose sharply, with exports to the US jumping 18.9% yoy, ASEAN by 15.6% yoy, and the EU by 8.7% yoy. Some analysts highlighted that front-loading ahead of the Lunar New Year and trade policy shifts under Donald Trump’s incoming administration likely bolstered the month’s figures.

        Imports grew 1.0% yoy, defying expectations of a -1.5% yoy decline and marking a rebound after consecutive contractions of -3.9% yoy in November and -2.3% yoy in October. This recovery was driven in part by increased purchases of commodities like copper and iron ore, with importers potentially capitalizing on lower prices.

        Regionally, imports from the US rose by 2.6% yoy, while ASEAN imports grew 5.4% yoy. However, imports from the EU fell by -4.9% yoy.

        Trade surplus widened from USD 97.4B in November to USD 104.8B in December, surpassing expectations of USD 100B.

        Looking ahead, markets will closely monitor China’s upcoming GDP figures, due for release on Friday. Expectations are for fourth-quarter growth to clock in at 5.0% yoy.

        Canada’s employment rises 91k in Dec, unemployment rate down to 6.7%

          Canada’s labor market closed 2024 on a strong note, with employment soaring by 91k in December, far exceeding expectations of 24.9k. Full-time positions accounted for a significant portion of the gains, with 56k new roles added.

          Unemployment rate fell to 6.7%, defying expectations of an increase to 6.9%, and marked an improvement from the previous month’s 6.8%. Employment rate also increased by 0.2 percentage points to 60.8%, marking the first uptick since January 2023.

          Total hours worked rose 0.5% mom and were 2.1% higher than a year earlier. Meanwhile, average hourly wages grew 3.8% yoy, a deceleration from November’s 4.1% yoy.

          Full Canada job data release here.

          US NFP grows 256k, unemployment rate ticks down to 4.1%

            US labor market showcased its resilience in December, with non-farm payrolls surging by 256k, significantly outpacing expectations of 150k. This impressive figure also surpassed the average monthly gain of 186k for 2024.

            Unemployment rate edged down to 4.1%, beating forecasts of remaining steady at 4.2%. This marks the seventh consecutive month where the unemployment rate has hovered within a tight range of 4.1% to 4.2%, reflecting a steady labor market. Meanwhile, the labor force participation rate held steady at 62.5%, a level consistent with its range since late 2023.

            Wage growth showed a measured pace, with average hourly earnings rising by 0.3% mom, in line with market expectations. On a yearly basis, wage growth softened slightly to 3.9% from 4.0% yoy previously.

            Full US non-farm payrolls release here.

            Japan’s household spending falls for fourth month, minister flags critical economic transition

              Japan’s household spending declined for the fourth consecutive month in November, falling -0.4% yoy. While this was an improvement from October’s -1.3% drop and surpassed expectations of -0.8%, it still reflects ongoing consumer caution.

              The decline was driven by significant cuts in expenditures on home appliances and food, highlighting weak domestic demand.

              Spending on furniture and electric appliances plummeted by -13.8%, marking the third straight month of decline, while clothing and footwear saw a similar drop -of 13.7%, down for the second consecutive month. Food purchases also contracted slightly, falling by-0.6%.

              Separately, Economy Minister Ryosei Akazawa acknowledged the challenges, stating that Japan’s economy is at a “critical stage” in shifting public sentiment away from deflation and toward sustainable growth driven by higher wages and investment.

              BoE’s Breeden: Pace of rate cut uncertain, gradual easing expected

                BoE Deputy Governor Sarah Breeden today reinforced expectations for gradual easing of monetary policy, citing the abating effects of past economic shocks.

                “I expect to continue to remove restrictiveness gradually over time,” she added.

                However, she cautioned against prescriptive timelines, remarking that it is “difficult to know” how quickly rates should fall.

                Fed’s Harker: To maintain easing bias but pause briefly to assess impact

                  Philadelphia Fed President Patrick Harker reaffirmed his view today that Fed remains on a “downward policy rate path,” but emphasized flexibility based on future data.

                  “Looking at everything before me now, I am not about to walk off this path or turn around,” he stated at an event.

                  However, Harker suggested that the current stage of the policy cycle calls for some patience. “I think it’s appropriate for us to take a bit of a pause right now and see how things shake out,” he said, hinting at a temporary hold in rate adjustments to assess the economic impact of past cuts.

                  While advocating for a short pause, Harker added that Fed likely won’t remain in this holding pattern for long.

                  Fed’s Collins advocates gradual and patient approach on rate cuts

                    Boston Fed President Susan Collins noted in a speech today that the economy is overall in a “good place” and inflation steadily retreating from its 2022 peak. She added that current monetary policy is already closer to a neutral stance, allowing Fed to proceed with a “gradual and patient approach” as it evaluates further steps.

                    Collins acknowledged the significant progress in lowering inflation, describing it as moving “gradually, if unevenly,” toward Fed’s 2% target. Importantly, this progress has been achieved alongside a “healthy overall” labor market that has shown signs of rebalancing from previously overheated conditions.

                    Reflecting on Fed’s decision to cut rates last month, Collins her support as a “close call,” as the move provided “some additional insurance” to support the labor market while maintaining a restrictive stance necessary to restore price stability.

                    Eurozone retail sales marginally rise 0.1% mom in Nov, lag expectations

                      Eurozone retail sales edged up by 0.1% mom in November, falling short of expectations for 0.3% mom increase. Within the retail sectors, volume of sales rose slightly for food, drinks, and tobacco by 0.1%, while non-food product sales, excluding automotive fuel, contracted by -0.6%. Meanwhile, sales of automotive fuel increased by 0.8%, providing a modest lift to the overall figure.

                      At the EU level, retail sales grew by 0.2% mom. Among member states, Cyprus posted the strongest retail performance with a 2.3% increase, followed by Bulgaria at 1.3%, and Denmark and Latvia, both recording a 1.1% rise. Conversely, Belgium faced the sharpest contraction at -2.4%, with Germany and Spain both reporting a -0.6% decline. Poland and Finland also recorded slight decreases of -0.2%.

                      Full Eurozone retail sales release here.

                      BoJ regional report highlights broadening price hikes

                        BoJ, in its latest Regional Economic Report, upgraded its economic outlook for two of Japan’s nine regions—Tohoku and Hokuriku—citing signs of moderate recovery.

                        The assessment for the remaining seven regions was left unchanged, with all areas described as either “picking up” or “recovering moderately.”

                        The report highlighted an increasingly widespread trend of price hikes by firms aiming to accommodate rising wages. While some companies, particularly larger ones, are already deliberating the scale of wage increases, smaller firms remain cautious. Concerns about the impact of higher costs on profit margins have slowed their willingness to commit to pay raises.

                        Full BoJ Regional Economic Report here.

                        Australia’s retail sales growth misses expectations at 0.8% mom in Nov

                          Australia’s retail sales increased by 0.8% mom in November, falling short of market expectations for 1.1% mom rise. Despite the miss, all retail industries recorded growth during the month, reflecting the ongoing impact of Black Friday.

                          This marks the third consecutive month of retail sales growth, following gains of 0.5% mom October and 0.4% mom in September. The steady trend highlights a degree of resilience in consumer spending, though the pace remains moderate.

                          Robert Ewing, head of business statistics at the Australian Bureau of Statistics, noted “Black Friday sales events proved once again to be a big hit”. He also pointed out that the sales promotions now extend beyond the traditional weekend, influencing spending patterns across the entire month of November.

                          Full Australia retail sales release here.

                          China’s inflation stalls at 0.1% in Dec, factory prices remain deflationary

                            China’s inflation decelerated again in December, with the CPI rising only 0.1% yoy, matching expectations and marking the slowest pace since April.

                            This brings full-year inflation for 2024 to 0.2%, far below the official target of around 3%, extending a 13-year streak of missing the annual inflation goal.

                            Core inflation, which strips out volatile food and energy prices, offered a slight reprieve, ticking up from 0.3% yoy to 0.4% yoy, the highest in five months.

                            PPI data showed a marginal improvement, with factory-gate prices contracting by -2.3% yoy compared to -2.5% yoy in November, slightly better than market expectations of -2.4% yoy. However, PPI has now stayed in deflationary territory for an extended 27 months.

                            Japan’s nominal wage gains hit 3% in Nov, but inflation erodes real earnings

                              Japan’s real wages fell by -0.3% yoy in November, marking the fourth consecutive monthly decline as wage growth failed to outpace inflation again.

                              While nominal wages rose by a robust 3.0% yoy—beating expectations of 2.7% yoy and extending a 35-month streak of growth—consumer prices grew at an even faster pace of 3.4% yoy during the same period, up from 2.6% yoy in October.

                              A notable highlight in the data was the sharp rise in special cash earnings, including bonuses, which surged by 7.9% yoy. Excluding bonuses and nonscheduled payments, average wages increased by 2.7% yoy, the fastest rate in 32 years, suggesting some underlying improvement in base wages.

                              FOMC minutes signal nearness to slow pace of rate cuts

                                The minutes from Fed’s December meeting revealed divided sentiment among policymakers regarding the latest rate cut. While the decision to lower rates was ultimately made, it was described as “finely balanced,” with some participants emphasizing the “merits” of pausing rate reductions given persistent challenges in curbing inflation.

                                The minutes highlighted a growing sense within the FOMC that monetary easing might need to slow. After a cumulative 100 basis points of cuts in 2024, participants noted that the Committee is “at or near the point at which it would be appropriate to slow the pace of policy easing.” Most agreed that a more cautious approach would be prudent when considering additional rate adjustments.

                                The inflation outlook remained a key area of focus. While participants expected inflation to gradually align with the 2% target, recent higher-than-anticipated inflation readings and uncertainty stemming from potential changes in trade and immigration policy raised concerns.

                                These developments suggest that the disinflation process may “take longer than previously anticipated”, with some participants observing signs that progress might have stalled temporarily.

                                Full FOMC minutes here.

                                Fed’s Waller backs further rate cuts, flags tariffs as potential inflation risk

                                  Fed Governor Christopher Waller reaffirmed his support for continued rate cuts in 2025, while emphasizing that the pace will hinge on inflation progress and labor market stability.

                                  In a speech today today, Waller noted that the median expectation from the latest Summary of Economic Projections suggests two 25-basis-point cuts this year, but highlighted the “range of views is quite large” within the FOMC, from no cuts to as many as five. But his “bottom-line message” is that “more cuts will be appropriate”.

                                  Waller described the US economy as being on “solid footing,” with a labor market near the maximum-employment objective. “I have seen nothing in the data or forecasts” that suggests the labor market will dramatically weaken over coming months,” he added.

                                  The governor pointed to steady progress on inflation but acknowledged upside risks, including geopolitical conflicts and new tariff proposals. “Tariff proposals raise the possibility that a new source of upward pressure on inflation could emerge,” he said. However, he downplayed the likelihood of tariffs significantly altering monetary policy, assuming their effects on prices are neither substantial nor persistent.

                                  Full speech of Fed’s Waller here.

                                  US initial jobless claims fall to 201k vs exp 218k

                                    US initial jobless claims fell -10k to 201k in the week ending January 4, below expectation of 218k. That’s also the slowest number since February 2024. Four-week moving average of initial claims fell -10k to 223k.

                                    Continuing claims rose 33k to 1867k in the week ending December 28. Four-week moving average of continuing claims fell -3k to 1866k.

                                    Full US jobless claims release here.

                                    US ADP employment rises 122k, growth slows in Dec

                                      US ADP private employment data revealed a slowdown in job creation for December, with 122k jobs added, missing market expectations of 143k, and prior month’s 146k.

                                      Breaking down the numbers, goods-producing sectors added 10k jobs, while service-providing industries contributed 112k. Among these, healthcare emerged as a standout performer, leading job creation across sectors in the latter half of 2024.

                                      By establishment size, large companies drove the gains with 97k new hires, while medium-sized businesses added 9k, and small firms contributed a modest 5k.

                                      Wage growth continued to decelerate, with year-over-year pay increases for job-stayers at 4.6%, the slowest since July 2021. Job-changers saw slightly better gains at 7.1%, though this marked a decline from November.

                                      Commenting on the results, Nela Richardson, Chief Economist at ADP, noted, “The labor market downshifted to a more modest pace of growth in the final month of 2024, with a slowdown in both hiring and pay gains.”

                                      Full US ADP employment release here.

                                      Eurozone PPI rises 1.6% mom, energy prices drive monthly gains

                                        Eurozone producer prices rebounded more than expected in November, with PPI rising 1.6% mom, surpassing market forecasts of 1.5% mom. On an annual basis, PPI improved to -1.2% yoy from -3.3% in October, slightly better than the anticipated -1.3% yoy. The data highlights the ongoing influence of energy price volatility on the region’s industrial sector.

                                        Breaking down the monthly changes, Eurozone’s energy prices surged by 5.4% mom, providing the largest contribution to the overall increase. Intermediate goods saw a modest decline of -0.1% mom, while prices for capital goods and non-durable consumer goods remained stable. Durable consumer goods recorded a slight decline of -0.2% mom.

                                        At the EU level, industrial producer prices climbed by 1.7% mom but fell -1.1% yoy. Among member states, Bulgaria (+4.9%), Ireland (+4.5%), and Sweden (+4.2%) posted the highest monthly gains in producer prices, reflecting the energy-driven rise. Conversely, Estonia, Cyprus (-1.4% each), Slovakia (-0.5%), and Luxembourg (-0.4%) saw the sharpest declines, highlighting regional disparities.

                                        Full Eurozone PPI release here.

                                        Australian monthly CPI rises to 2.3%, but easing core pressures offer RBA relief

                                          Australia’s monthly CPI rose from 2.1% yoy to 2.3% yoy in November, slightly above market expectations of 2.2%. Inflation excluding volatile items and holiday travel jumped from 2.4% yoy to 2.8% yoy. However, trimmed mean CPI, a measure closely watched by RBA, declined from 3.5% to 3.2%, signaling some relief in underlying inflationary pressures.

                                          The rise in CPI was influenced by the reduced impact of government electricity rebates compared to previous months. According to Michelle Marquardt, head of prices statistics at ABS, Electricity prices were -21.5% lower in November, compared to a -35.6% annual fall in October.” Excluding government rebates, electricity prices would have declined by only -1.7% over the same period.

                                          Full Australia monthly CPI release here.