Get Ready for Central-Bank Digital Currencies; WSJ Survey Points to U.S. Recession

Get Ready for Central-Bank Digital Currencies; WSJ Survey Points to U.S. Recession By James Christie

Good day. More than 100 countries are exploring digital currencies, and their collective economies represent more than 95% of the world's GDP, according to the Atlantic Council's Central Bank Digital Currency tracker. Some countries, including China, India, Nigeria and the Bahamas, have already rolled out digital currencies. The Federal Reserve for now has no plans to create one, and won't do so without direction from Congress. Wall Street Journal technology columnist Christopher Mims looks at how central-bank digital currencies could lead to big changes in the most basic activity of any banking system: making and distributing money. Meanwhile, business and academic economists polled by the Journal put the probability of a recession in the U.S. in the next 12 months at 61%. The Fed had initially hoped it could bring down inflation with a so-called soft landing. But three-quarters of respondents to the Journal's latest quarterly survey said the central bank wouldn't achieve that this year.

Now on to today's news and analysis.

Top News Central-Bank Digital Currencies Are Coming

"Central-bank digital currency" doesn't exactly roll off the tongue. But you might want to get used to saying it. These so-called CBDCs, or digital versions of dollars, yuan, euros, yen or any other currency, are coming, say those who study them. And depending on how they are designed and rolled out, their impact on the banking system could be profound .

Pressure Rises on Bank of Japan for Further Policy Shift

The Bank of Japan is under pressure to revise policy again at its meeting ending Wednesday after investors repeatedly attacked the central bank's new 0.5% cap for the 10-year government bond yield.

China's PBOC Leaves Key Policy Rates Unchanged

China's central bank kept its key policy rates unchanged Monday, which may suggest a hold on benchmark lending rates later this month, and injected CNY82 billion and CNY74 billion of funds via reverse repurchase agreements.

China's GDP Growth Fell to Near-Historic Lows as Covid Took a Bite Fed Talks: A Conversation With St. Louis Fed President James Bullard

Federal Reserve Bank of St. Louis President James Bullard was an outspoken advocate last year for rapidly raising interest rates to combat high inflation. He joins Nick Timiraos, The Wall Street Journal's chief economics correspondent, to discuss his outlook for the economy, inflation and interest rates in 2023. Join this WSJ Live Q&A at 9:30 a.m. ET on Jan. 18 .

U.S. Economy Economists in WSJ Survey Still See Recession This Year

Despite signs that inflation has started to recede, economists still expect higher interest rates to push the U.S. economy into a recession in the coming year, according to The Wall Street Journal's latest quarterly survey.

America's Biggest Banks Are Girding for a Recession At Davos, Mood Is Somber as Many CEOs Question Economy's Future

Yellen Calls on Congress to Raise Debt Limit

Treasury Secretary Janet Yellen in a formal letter to party leaders in Congress urged lawmakers to raise the debt ceiling as soon as possible , warning that the government could become unable to pay its bills after early June.

McCarthy Renews Calls for Spending Cuts to Raise Debt Ceiling Republicans Face Internal Fight on Where to Cut Federal Spending

Rising Interest Rates Hit Landlords Who Can't Afford Hedging Costs

The cost of insuring commercial real-estate loans against a rise in interest rates has exploded over the past year, raising the prospect of a market selloff since many property owners will no longer be able to afford these hedges.

Key Developments Around the World Global Unemployment to Steady Despite Economic Slowdown

Unemployment will stay mostly stable around the world this year and next despite a sharp economic slowdown, reflecting a shortage of workers in rich countries among other factors, the International Labour Organization said.

Four Signs Consumers Are Pessimistic About the Economy

There is no widely referenced universal survey of consumer sentiment around the world, but data on monthly wage growth, wealth and retirement, unemployment and inflation help paint a picture of an anxious global public .

IMF Warns Unraveling Economic Ties Could Shrink Global Output

Declining international cooperation and commerce could shrink the global economy , particularly harming low-income countries, according to a new study by the International Monetary Fund.

Russia's Energy Clout Is Waning, Weakening Its Global Influence

Russian President Vladimir Putin's use of energy as a weapon of financial war is increasingly backfiring, threatening the core of Russia's beleaguered economy and curtailing its geopolitical influence.

EU Readies Subsidy Response to U.S. Clean-Tech Tax Breaks

Europe aims to provide more support to its domestic clean-tech industry in a push to counter subsidies from the U.S. and China, European Commission President Ursula von der Leyen said Tuesday.

Financial Regulation Roundup CFPB Weighs Tougher Rules for Overseas Money Transfers

Regulators say they are studying whether differences in the way providers of overseas money transfers disclose exchange rates and certain fees can make it difficult for consumers to choose the lowest-cost option .

FTC Plan to Ban Noncompete Clauses Turns to Deferred Pay, NDAs

Businesses and lawyers are beginning to assess what the FTC's proposed ban of noncompete clauses in employment contracts could mean for worker mobility , wages and the way future compensation agreements are structured.

Goldman Sachs Lost $3 Billion on Consumer Lending Push

Goldman Sachs Group Inc. said a big chunk of its consumer lending business lost slightly more than $3 billion since 2020, revealing for the first time the costly toll of the Wall Street giant's Main Street effort.

Plans Underway to Launch Platform for Distressed Crypto Debt

The founders of a bankrupt crypto hedge-fund firm Three Arrows Capital are seeking to launch an exchange where creditors to insolvent digital-assets firms, including their own, would be able to buy and sell claims.

Forward Guidance Tuesday (all times ET)

Time N/A: ECB's de Guindos in ECOFIN meeting in Brussels

8:30 a.m.: Canada consumer-price index for December

3 p.m.: New York Fed's Williams speaks at 'An Economy That Works for All: Moving Towards Equitable Growth' event

Wednesday

2 a.m.: U.K. consumer-price index for December

5 a.m.: EU harmonized consumer-price index for December

5:30 a.m.: ECB's Schnabel in meeting with finance committee of German Bundestag

8:30 a.m.: U.S. producer-price index for December; U.S. retail sales for December

9:15 a.m.: U.S. industrial production and capacity utilization for December

9:30 a.m.: St. Louis Fed's Bullard speaks at virtual WSJ Live Q&A event

10 a.m.: NAHB/Wells Fargo Housing Market Index for January; U.S. manufacturing and trade inventories and sales for November

1 p.m.: Kansas City Fed's George speaks to The Exchequer Club of Washington, D.C.

3 p.m.: Philadelphia Fed's Harker speaks at 2023 Lyons CEEE Economic Forecast

5 p.m.: Dallas Fed's Logan speaks at University of Texas at Austin McCombs School of Business

Research Eurozone Expected to Face Mild Recession Despite Resilient Quarter

Recent data suggest the risk of a recession in the eurozone this winter has fallen, but economic momentum is likely to be sluggish in the near term, Pantheon Macroeconomics senior Europe economist Melanie Debono says in a note. Pantheon expects the eurozone economy to shrink by 0.1% in the fourth quarter, less than the 0.3% fall previously expected, but still forecasts the region to fall into a mild recession as gross domestic product is expected to decline by another 0.2% in the first quarter. Further ahead, China's reopening, new fiscal packages and the rapid fall in energy prices are likely to support the eurozone's economic growth from the second quarter to the fourth quarter, Ms. Debono says.

-Xavier Fontdegloria

Commentary Who Is Going to Police the New World Trading System?

The globalization boom that began in the 1990s didn't happen by itself, Greg Ip writes, noting it was lubricated by the biggest economies' willingness to write, enforce and obey shared rules, and that consensus is now crumbling .

Journal Reports: Globalization Isn't Dead. But It's Changing . OPEC Cartel Has Nothing on China's Clean-Energy Monopoly

Countries that import oil and gas worry about the clout of producing nations, particularly since Russia invaded Ukraine. Yet an even bigger vulnerability is building in the global supply chain for green energy, Carol Ryan writes.

Basis Points U.S. consumer sentiment improved more than expected in early January, reaching its highest level in nine months, driven by lower concerns over inflation and an upcoming recession. The University of Michigan said Friday its preliminary January sentiment index rose to 64.6 from 59.7 in December. Economists polled by The Wall Street Journal expected a reading of 60.7. (Dow Jones Newswires) Prices for imported goods in the U.S. rose in December, breaking a streak of five consecutive months of declines, on higher prices for natural gas. Import prices rose 0.4% on month after dropping 0.7% in November, data from the Labor Department showed. Economists polled by The Wall Street Journal expected prices to decline 0.8%. (DJN) Business confidence in Canada fell in the fourth quarter to its lowest level in over two years, with nearly a third of companies anticipating sales to decline over the next 12 months, according to a Bank of Canada quarterly survey. (DJN) Canadian existing-home sales edged higher in December but remained sharply below the level of sales recorded a year earlier, capping a big shift for the housing market in 2022 as interest rates rose sharply. The Canadian Real Estate Association said sales of existing homes rose 1.3% from the month before and on a non-adjusted basis transactions were roughly 39%

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01-17-23 0716ET