US Consumer Borrowing Drops on Plunge in Credit-Card Balances
Total credit dropped $7.5 billion after a revised $17.3 billion gain in October, according to Federal Reserve data released Wednesday. The median estimate in a Bloomberg survey of economists called for a $10.5 billion advance. The figures aren’t adjusted for inflation.
Outstanding credit-card and other revolving debt decreased $13.7 billion, the most since early in the pandemic, after surging a month earlier. Non-revolving credit, such as loans for vehicle purchases and school tuition, increased $6.2 billion, the Fed’s report showed.
The data suggest consumers are making an effort to pay down credit-card balances as borrowing rates remain near a record well above 20%. (…)
Meanwhile, the rise in non-revolving credit likely reflected stronger auto sales, which accelerated in November at the fastest pace in more than three years, based on Ward’s Automotive Group data. They continued to rise in December as lower auto-loan rates and more manufacturer incentives helped lure buyers to showrooms. (…)
Fed Minutes Suggest Officials Will Hold Rates Steady for Now Central bank cut rates last month, but saw risks of somewhat firmer price pressures this year due to potential tariff increases by President-elect Trump
Federal Reserve officials saw risks of higher-than-expected inflation, due in part to potential tariffs by President-elect Donald Trump, when they made a “finely balanced” decision last month to lower interest rates, according to minutes of the meeting published Wednesday.
The written account of the Dec. 17-18 policy meeting showed officials thought inflation was likely to continue moving down to the central bank’s 2% target, but “the process could take longer than previously anticipated” due in part to possible changes to trade and immigration policy.
The “vast majority” of the 19 officials who participated in that meeting thought a quarter-point rate cut was appropriate, the minutes said. But some officials thought there was merit in keeping rates unchanged last month, and a majority had indicated the decision to cut rates was a close call, according to the minutes.
The minutes further suggest officials were broadly comfortable holding rates steady at their coming meeting at the end of this month. “Participants indicated that the committee was at or near the point at which it would be appropriate to slow the pace of policy easing,” the minutes said. Officials thought under their current outlook for economic activity, the Fed could continue to cut rates at a slower pace than they had in recent months. (…)
“Almost all participants judged that upside risks to the inflation outlook had increased,” the minutes said.
The economic forecast prepared by the Fed’s staff of economists also incorporated some initial assumptions about changes to tariffs that would lead inflation to be higher than previously anticipated in 2025 before resuming its recent decline after that. (…)
Investors in interest-rate futures markets expect the Fed to stay on hold until May or June, according to CME Group. (…)
So, the increase at the December meeting in the median core PCED inflation projection of the FOMC participants from 2.2% to 2.5% was really because of the tariffs threats.
The minutes also noted that some participants said risks were tilted to the labor market, not inflation. The FOMC is more worried about rising unemployment than inflation.
Yesterday’s claims data showed that initial jobless claims fell to 201,000 for the week ended January 4, the lowest since last February 2024. But while the data are seasonally adjusted, notice the mini-seasonality that troughed in January in both 2023 and 2024…
US Dockworkers, Employers Reach Deal to Avert Strike
“We are pleased to announce that ILA and USMX have reached a tentative agreement on a new six-year ILA-USMX Master Contract, subject to ratification, thus averting any work stoppage on Jan. 15, 2025,” the International Longshoremen’s Association and US Maritime Alliance said in a joint statement on Wednesday. (…)
The deal also preserves the 62% pay raise agreed to in October and continues to bar fully automated terminals. (…)
China Consumer Prices Weaken Further, Adding to Deflation Worries Consumer inflation decelerated for fourth straight month
The consumer price index rose 0.1% in December from a year earlier, in line with the median forecast of economists surveyed by Bloomberg. Factory deflation extended into a 27th month, though the producer price index recorded a slower drop of 2.3%, the National Bureau of Statistics said Thursday. (…)
In a more encouraging sign for policymakers, core CPI — which excludes volatile food and fuel prices — picked up for a third month to 0.4% from a year ago, reaching the highest level since July. (…)
Non-food CPI inflation rose to +0.2% yoy in December from 0.0% yoy in November. After excluding food and energy prices, core CPI inflation edged up to +0.4% yoy in December (vs. +0.3% in November). Our core goods inflation measure edged up to +0.2% yoy in December (vs. +0.1% yoy in November). Services inflation also inched up to +0.5% yoy in December from +0.4% yoy in November. (GS)
AI CORNER
Wall Street Job Losses May Top 200,000 as AI Replaces Roles Back, middle office roles at risk, Bloomberg Intelligence says
Chief information and technology officers surveyed for BI indicated that on average they expect a net 3% of their workforce to be cut, according to a report published Thursday.
Back office, middle office and operations are likely to be most at risk, according to Tomasz Noetzel, the BI senior analyst who wrote the report. Customer services could see changes as bots manage client functions, while know-your-customer duties would also be vulnerable. “Any jobs involving routine, repetitive tasks are at risk,” he said. “But AI will not eliminate them fully, rather it will lead to workforce transformation.”
Nearly a quarter of the 93 respondents predict a steeper decline of between 5% and 10% of total headcount. (…)
In 2027, banks could see pretax profits 12% to 17% higher than they would otherwise have been — adding as much as $180 billion to their combined bottom line — as AI powers an increase in productivity, according to BI. Eight in ten respondents expect generative AI to increase productivity and revenue generation by at least 5% in the next three to five years. (…)
Citi said in a report in June that AI is likely to displace more jobs across the banking industry than in any other sector. About 54% of jobs across banking have a high potential to be automated, Citi said at the time.
Still, many firms have stressed that the shift will result in roles being changed by technology, rather than replaced altogether. Teresa Heitsenrether, who oversees JPMorgan’s AI efforts, said in November that the bank’s adoption of generative AI was so far augmenting jobs. (…)
Royal Bank of Canada and artificial-intelligence company Cohere Inc. are building a bank-wide generative AI platform for financial services, a step that the country’s largest lender says is the first for a Canadian bank.
Canada’s biggest banks have increasingly been adopting AI to help employees do their jobs more efficiently. But generative AI has largely been restricted to more niche operations or testing programs.
On Thursday, RBC and Toronto-based Cohere launched an exclusive partnership to co-develop and deploy across the bank’s operations a customized version of the company’s new generative AI platform.
The platform, called North for Banking, will help employees complete tasks and find information, including searching for answers and solutions specific to customers’ needs. Generative AI allows employees to submit the context of the individual’s or the client’s circumstances in the assessment, which enables the platform to solve problems and provide advice. (…)
In October, the bank was ranked in the top three in the world for artificial intelligence maturity among 50 global financial institutions in the Evident AI Index. Canada’s five largest lenders were on the list, with Toronto-Dominion Bank ranking in ninth place.
Cohere, founded in 2019, builds large language models (LLMs) that power chatbots and generative AI platforms, which analyze text and media to create responses. Businesses can tailor Cohere’s North for Banking to their own needs, such as assessing procedure and policy documents, answering questions and automating processes. (…)
In the case of RBC’s work with Cohere, all the data will be powered and stored internally within the bank’s systems.
The process of building LLMs is costly and requires a significant amount of computing power from graphic processing units, or GPUs, which trains AI systems with large amounts of data. While Cohere has computing resources, RBC will be using its own system to run the internal platform.
In recent years, RBC has built one of the largest GPU farms among Canadian businesses, Ms. Agrafioti said. (…)
Ms. Agrafioti said that much of the risk with data and privacy breaches stems from generative AI systems predominantly running on cloud platforms or shared services.
“Bringing all of that infrastructure onto our premises in our data centers is what addresses that risk off the bat in a definitive way,” she said. “It’s a very complex equation but you’re immediately removing that factor out of it, and all of a sudden that opens a ton of opportunity.”
Better than DOGE, here’s how to cut the U.S. health care costs per the NY Post via ADG:
Residents of Belcastro in the southern region of Calabria — one of the poorest regions in Italy — are “ordered to avoid contracting any illness that may require emergency medical assistance,” a decree from Mayor Antonio Torchia stated.
The ordinance also instructs residents not to take risks or get in accidents that could end up endangering their health, local media reported.