“Absorb what is useful, discard what is not, add what is uniquely your own”. — B. Lee

1. Fed Minutes Show Several Officials Nod to Rate-Hike Scenario — Federal Reserve officials signaled renewed worries over inflation with “several” policymakers suggesting the central bank may need to raise interest rates if inflation stays above their goal. Minutes of the Federal Open Market Committee’s Jan. 27-28 meeting released Wednesday also revealed that a “vast majority of participants judged that downside risks to employment had moderated in recent months while the risk of more persistent inflation remained.” Several officials saw the likelihood for more rate cuts if inflation declined as they expected, though most said inflation progress could be slower than generally forecast.
2. US Notches One of Its Biggest Annual Trade Gaps Since 1960 — The goods and services trade gap expanded from the prior month to $70.3 billion, Commerce Department data showed . The shortfall culminated in a full-year deficit of $901.5 billion, still one of the largest in data back to 1960. The December deficit — which was wider than all but one estimate in a Bloomberg survey of economists — reflected a 3.6% increase in the value of imports, including gains in computer accessories and motor vehicles. Exports of goods and services declined 1.7%, largely reflecting fewer outbound shipments of gold. After the report, several economists estimated trade would provide a smaller boost, or even a drag on fourth-quarter gross domestic product, which is due Friday. The latest GDPNow forecast from the Federal Reserve Bank of Atlanta reflected as much, predicting net exports will barely add to fourth-quarter growth, now estimated at 3%.
3. US GDP Grows 1.4%, Missing Forecasts on Shutdown, Trade — Inflation-adjusted gross domestic product increased an annualized 1.4% in the fourth quarter after rising 4.4% in the prior period, according to the government’s initial estimate. Overall, the economy expanded 2.2% last year, data from the Bureau of Economic Analysis showed.
The weak quarterly result — which was below all forecasts in a Bloomberg survey of economists — came as the US government was shut down for almost half of the three-month period. The BEA said the reduction in federal services during the shutdown subtracted about 1 percentage point from GDP, though the full impact couldn’t be estimated.Despite the year-end slowdown, the data still cap a solid year for the US economy, which shrank in the first quarter amid a monumental pre-tariff surge in imports, only to bounce back later in the year. The turnaround came after Trump backed off of his most punitive levies and the Federal Reserve lowered interest rates, helping drive the stock market to record highs and enabling wealthier Americans to keep spending.

The week ahead — Economic data from Econoday.com:

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