By David Lawder and Lawrence Delevingne

WASHINGTON (Reuters) -Scott Bessent, U.S. President-elect Donald Trump’s choice to head the Treasury Department, on Wednesday vowed to ensure that the dollar remains the world’s reserve currency as he laid out a vision for a “new economic golden age”.

Bessent, who faces questioning before the U.S. Senate Finance Committee on Thursday, said in prepared testimony that the new Trump administration must prioritize productive investment that grows the economy over “wasteful spending that drives inflation.”

“We must secure supply chains that are vulnerable to strategic competitors, and we must carefully deploy sanctions as part of a whole-of-government approach to address our national security requirements,” Bessent said in the remarks.

“And critically, we must ensure that the U.S. dollar remains the world’s reserve currency.”

Bessent, a hedge fund manager who has advocated for Trump’s plans to impose significantly higher tariffs on imports, did not single out China in his remarks, but he has previously said China’s trade practices have hollowed out American industry.

Trump has threatened a 60% tariff on imports from China and a 10% duty on global imports. Trump has also said he would impose 25% duties on Canadian and Mexican imports, until those two countries halt the flow of illegal immigrants and fentanyl into the United States.

$4 TRILLION TAX HIKE

Bessent also said the administration and Congress need to “make permanent” the expiring provisions of Trump’s 2017 Tax Cuts and Jobs Act.

“If Congress fails to act, Americans will face the largest tax increase in history, a crushing $4 trillion tax hike,” Bessent said.

The Trump administration and Congress also need to implement “pro-growth policies to reduce the tax burden on American manufacturers service workers and seniors,” he said.

The latter policies refer to Trump’s campaign promises to lower the corporate tax rate to 15% from 21% for companies manufacturing products in the United States, and to exempt income from tips and Social Security from taxation.

Bessent said that with support from Congress, the Trump administration could usher in a new, more balanced era of prosperity for Americans that he called “a generational opportunity to unleash a new economic golden age”.

Investing.com– South Korea’s central bank unexpectedly kept interest rates unchanged on Thursday amid heightened political uncertainty in the country after the recent arrest of impeached President Yung Suk Yeol. 

The Bank of Korea left its benchmark rate at 3%, compared to expectations that it would cut the rate to 2.75%. 

The central bank had cut interest rates twice in 2024, as it kicked off an easing cycle to help support economic growth. Consistently softer inflation in the country sparked expectations of more rate cuts.

But these expectations were dented by heightened political uncertainty in the country, after President Yoon attempted to unsuccessfully implement military law in December.

Yoon was impeached, and was arrested at the Presidential compound on Wednesday. 

Investors had also expected more easing by the BOK to help offset the impact of increased political uncertainty, especially after South Korean stocks and the won were battered over the past month. The won in particular slumped to its weakest level in 15 years. 

Analysts said that the central bank was likely to cut rates soon, amid increasing signs of economic pressure from the ongoing political crisis. The BOK’s latest easing cycle was triggered largely by signs of weaker economic growth, high household debt and slowing inflation.

“There are good reasons to expect the central bank to resume its easing cycle soon amid signs the political crisis is weighing on the economy. But even if the crisis is resolved soon, GDP growth is expected to struggle,” analysts at Capital Economics wrote in a note.

Focus is now on an upcoming press conference by BOK Governor Rhee Chang-Yong for more cues on policy.

By Cynthia Kim and Jihoon Lee

SEOUL (Reuters) – South Korea’s central bank unexpectedly left its policy interest rate unchanged on Thursday, weighing the impact of its back-to-back cuts last year while supporting the won which weakened to a 15-year low versus the U.S. dollar in recent weeks.

The Bank of Korea held its benchmark interest rate at 3.00% at its monetary policy review, an outcome expected by only seven of 34 economists polled by Reuters. The remaining 27 had expected the bank to cut the rate by 25 basis points.

The decision is the first since impeached President Yoon Suk Yeol’s attempt to impose martial law in early December threw Asia’s fourth-largest economy into its biggest political crisis in decades. The turmoil prompted the government to cut its 2025 economic growth forecast to 1.8% from 2.2%.

The crash of Jeju Air flight 7C2216, which killed 179 people in the deadliest air disaster on South Korean soil, has also weighed on the economy.

On top of that, the won’s slide has been a major concern among policymakers. In the final three months of 2024, the currency weakened 10.6% against the dollar, the biggest quarterly drop since the third quarter of 2008.

Local currency dealers said South Korea has been relying on smoothing operations in the onshore dollar-won market as well as the National Pension Service’s currency hedging operations to support the won.

“(Thursday’s rate decision) would be due to its (the BOK’s) greater focus on economic and financial stability concerns, until political uncertainty eases. Instead of January, we expect the BOK to cut the policy rate again at its February meeting, after it revises its economic outlook.” said Park Jeong-Woo, an analyst at Nomura Securities who was one of the seven analysts who correctly predicted the rate decision.

Analysts now see the central bank eying a more gradual pace of interest rate reduction in the year ahead.

Median forecasts in the survey showed one interest rate cut of 25 basis points this quarter and cuts of the same degree in both the second and third quarters taking the rate to 2.25%.

Market focus now switches to Governor Rhee Chang-yong’s press conference at 0210 GMT, where the names of any dissenters to the policy decision could be announced. Dissenting votes typically lead to policy changes in subsequent months.

By Andrea Shalal

NEW YORK (Reuters) – U.S. Treasury Secretary Janet Yellen said on Wednesday U.S. President-elect Donald Trump’s plan to set up a new government agency to collect tariffs would duplicate an existing agency and was unlikely to save money.

Yellen, taping an appearance on “The Late Show with Stephen Colbert,” dismissed Trump’s plan for an “External Revenue Service,” first announced on Tuesday on his social media platform Truth Social.

“If they’re looking to save money for American taxpayers, setting up a duplicative agency doesn’t seem like a good first step,” she told the U.S. television comedian.

Trump on Tuesday said he would create the new agency on Jan. 20, the day he takes office, “to collect tariffs, duties, and all revenue” from foreign sources.

He did not specify if the new agency would replace collections of tariffs, duties, fees and fines by the existing U.S. Customs and Border Protection, or the collection of taxes on foreign corporate and individual income by the Internal Revenue Service.

It was unclear whether the move would create additional government bureaucracy, which would appear to go against the plans of Trump’s informal Department of Government Efficiency, an effort led by billionaire Elon Musk and former biotech executive Vivek Ramaswamy aimed at finding trillions of dollars in budget savings by streamlining government operations.

Yellen also took aim at Trump’s repeated promises to impose new tariffs, saying they would amount to a “tax increase for the American consumer.”

Trump has proposed a 10% tariff on global imports, a 25% punitive duty on imports from Canada and Mexico until they clamp down on drugs and migrants crossing borders into the U.S., and a 60% tariff on Chinese goods.

Trade experts say the duties would upend trade flows, raise costs and draw retaliation against U.S. exports.

Yellen said U.S. consumers would face higher costs for any imported goods and tariffs would make U.S. companies less competitive globally, while failing to address Americans’ concerns about higher prices.

“What they’re going to see is the cost of making goods and services is going to go up. They’re going to be less competitive in the global economy,” she said. “So this doesn’t seem like a way to address the things that Americans have said are bothering them.”

BEIJING (Reuters) – Apple (NASDAQ:AAPL) smartphone shipments in China fell 25% in the fourth quarter, while Huawei’s rose 24%, data from research firm Canalys showed on Thursday.

Apple shipped 13.1 million units versus Huawei’s 12.9 million, the data showed. That give Apple a share of 17% and number one position, followed closely by Huawei.

Total (EPA:TTEF) fourth quarter smartphone shipments from China increased 5% year-over-year to 77.4 million units.

Annual shipments of smartphones in China in 2024 increased 4% year-over-year to 285 million units.

CARACAS (Reuters) – Venezuela inflation was 48% annually in 2024, the lowest in 12 years, Venezuelan President Nicolas Maduro told lawmakers in an annual address to the national assembly and other officials on Wednesday, just days after he was inaugurated for a third term.

Maduro, whose nearly 12 years in office have been marked by deep economic and social crisis and mass migration, was sworn in for a third term on Friday, despite a six-month-long election dispute and international calls for him to stand aside.

The government has employed orthodox methods to try to tamp down inflation, which has reached triple digits in recent years, with some success. Inflation was 189.8% in 2023, according to the central bank. Maduro said this month that the economy grew 9% last year.

TOKYO (Reuters) – Two-thirds of Japanese companies are experiencing a serious business impact from a shortage of workers, a Reuters survey showed on Thursday, as the country’s population continues to shrink and age rapidly.

Labour shortages in Japan, particularly among non-manufacturers and small firms, are reaching historic levels, the government has said, stoking concerns that this supply-side constraint could stifle economic growth.

Some 66% of respondents indicated that labour shortfalls were seriously or fairly seriously affecting their businesses, while 32% said the impact was not very serious.

“It goes without saying this drives up personnel costs, but it could even pose a business continuity risk,” a manager at a railroad operator wrote in the survey.

The number of bankruptcies caused by labour shortages in 2024 surged 32% from a year earlier to a record 342 cases, according to credit research firm Teikoku Databank.

Nearly a third of respondents to the Reuters survey said the labour shortage is worsening, with only 4% reporting improvements and 56% saying the situation is neither getting better nor worse.

The survey was conducted by Nikkei Research for Reuters from Dec. 24 to Jan. 10. Nikkei Research reached out to 505 companies and 235 responded on condition of anonymity.

When asked about specific measures to address the labour shortfall in a question that allowed multiple answers, 69% said they were intensifying recruitment activities for new graduates and 59% were implementing such measures as extending retirement ages and re-hiring retired employees.

The official retirement age is set at 60 for about two-thirds of Japanese companies, although most have introduced measures allowing employees to keep working until they turn 65, a poll by the Health Ministry showed last year.

In response to a Reuters survey question about investment priorities for 2025, 69% chose capital investment and 63% selected wage hikes and other human resources-related investments. This question also allowed multiple answers.

“What’s essential are wage hikes for retaining employees and capital investment for rationalising production,” an official at a chemicals company said.

This trend in investment priority among Japanese firms aligns with the government’s policy of seeking economic growth through higher wages and investments.

With labour shortages driving up wages and a weak yen raising import costs, 44% of Japanese companies plan to raise prices for their goods and services this year, the survey found. That compares with 17% that intend to keep their prices unchanged and 26% that plan to raise some prices but cut others.

“We just cannot help but raise prices because of an across-the-board increase in wages and other fixed costs, in transportation costs and in costs of raw materials,” a manager at a metals company said in the survey.

Tokyo’s core consumer price index, which excludes volatile fresh food costs, rose 2.4% in December from a year earlier. That was an acceleration from a 2.2% rise in November, keeping alive market expectations for a near-term interest rate hike.

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets. 

At last, some breathing room for investors after U.S. and UK inflation figures on Wednesday eased the vice-like grip that the soaring dollar and global bond yields had increasingly been exerting over markets.

It is too early to say this marks a turning point, but fixed income and emerging markets have been beaten down so much lately that they were primed for a ‘good news’ reversal. Upbeat U.S. bank earnings and, on the margins, the ceasefire between Israel and Hamas will also help support market sentiment on Thursday.

But it’s the UK and especially the U.S. inflation news that will drive markets more, and the rapid slide in bond yields and jump in stocks should pave the way for a positive day in Asia on Thursday.

These numbers may not ultimately alter the Fed’s direction or even pace of rate cuts this year. But they do take the heat off policymakers and buy them more time to assess their next steps.

For investors, they were instant triggers to reverse some of the bond selling that had snowballed in recent weeks and which had started to bleed into equity markets. Yields across the U.S. Treasury curve posted their biggest one-day declines since Nov. 25, and rates traders brought forward the next expected Fed rate cut to June from September.

Curiously, however, the impact on the dollar was muted. It fell sharply against the yen, but barely budged against the euro. Perhaps country-specific factors are playing a greater role in setting exchange rates right now rather than solely U.S. yields and rate expectations.

That may be the case in Asia, where policy and politics are spicing up local markets. Indonesia’s rupiah sank to its lowest in more than six months and the country’s stocks leaped on Wednesday after the central bank delivered a surprise rate cut.

Not one of the 30 analysts polled by Reuters expected the move.

The Bank of Korea delivers its latest decision on Thursday, and it could not be at a more volatile time for the country, after impeached President Yoon Suk Yeol was arrested on Wednesday and questioned for hours by investigators in relation to a criminal insurrection probe.

The BoK is expected to cut its base rate by 25 basis points to 2.75%, according to 27 out of 34 economists polled by Reuters, with the remaining seven forecasting no change.

Given the tense domestic political situation and in light of the cooler-than-expected U.S. inflation data, could the BoK surprise markets with a 50 bps cut to try and boost growth and loosen financial conditions? 

Bank Indonesia’s shock move shows that even unanimous consensus forecasts are not always the one-way bet they might seem.

Here are key developments that could provide more direction to markets on Thursday:

– South Korea interest rate decision

– South Korea fallout from President Yoon’s arrest

– Australia unemployment (December)

By Ann Saphir

(Reuters) -The U.S. economy ended 2024 with a slight to moderate increase in activity and a tick upward in employment, the Federal Reserve said on Wednesday, but businesses flagged a range of concerns about the potential for policies under President-elect Donald Trump to push prices higher.

The findings, which draw on observations from the business and community contacts of each of the Fed’s 12 regional banks through Jan. 6, provide a snapshot of the economy before Trump returns to the White House next week.

“More contacts were optimistic about the outlook for 2025 than were pessimistic about it, though contacts in several Districts expressed concerns that changes in immigration and tariff policy could negatively affect the economy,” the U.S. central bank said in its summary of surveys and interviews from across the country known collectively as the Beige Book.

“Contacts expected prices to continue to rise in 2025, with some noting the potential for higher tariffs to contribute to price increases.”

Concerns were evident even in regions where Trump performed strongly in his Nov. 5 election victory over Democrat Kamala Harris on a platform of hefty tariff increases and stiff restrictions on immigration.

“Outlooks continued to improve although there was concern regarding potentially adverse effects of future immigration and trade policies,” the Dallas Fed said.

“Food manufacturing and agricultural contacts in Kansas and Nebraska indicated restrictions on temporary migrant labor could lead to significant supply constraints,” the Kansas City Fed reported. “Similarly, leisure and hospitality contacts in Colorado suggested immigration restrictions could exacerbate labor shortages in towns near resort communities. Technology industry contacts expressed additional concerns surrounding the ability to employ overseas technology workers if offshoring policies were to shift.”

Manufacturers in the Richmond Fed’s district were already factoring tariffs into higher inflation expectations, the survey showed. “Firms’ expectations for price growth a year from now increased,” the bank said. “Manufacturers expected prices to rise at a faster rate a year from now compared to nonmanufacturers, with several citing tariffs on inputs as a reason for higher expected price growth in the future.”

The survey data was collected before the start of the California wildfires.

Fed policymakers cut the policy rate by a full percentage point in the final four months of last year to a current range of 4.25%-4.50%. Most project a smaller reduction this year, given slowing progress toward the Fed’s 2% inflation goal in recent months and a strong labor market.

Consumer prices rose 2.9% in the 12 months through December, data published on Wednesday showed, the largest rise since July and an acceleration from November’s 2.7% increase. December’s unemployment rate was 4.1%, lower than the prior month.

Going forward, uncertainty around how Trump’s planned tariffs, tax cuts and other policies will affect the economy also has Fed policymakers in wait-and-see mode.

Financial markets are betting on no policy rate reduction until June at the earliest.

By Suzanne McGee and Saqib Iqbal Ahmed

(Reuters) – A relatively benign U.S. reading on consumer price increases triggered a sharp relief rally in stocks and bonds on Wednesday, but traders and investors warn that markets are likely to remain anxious about the pace of inflation.

The path ahead remains shadowed by ongoing uncertainty about the outlook for further Federal Reserve interest rate cuts and incoming president Donald Trump’s actions on issues like taxes and tariffs, market participants said.

“The issues that have been driving rates higher and weighing on stocks are still out there,” said Art Hogan, market strategist at B. Riley Wealth. “We just don’t know whether we’ll see tariffs that are surgical or sweeping, what kind of policy moves we’ll see in other areas that could feed into inflation or growth.”

While the consumer price index for December rose at a faster-than-expected pace, markets seized on the core CPI, which excludes the volatile food and energy components. Core CPI increased 0.2% in December after rising 0.3% for four straight months.

Stocks surged following the CPI report with the benchmark S&P 500 jumping 1.8%.

The benchmark 10-year Treasury reversed losses incurred in the wake of last Friday’s strong job creation report, pushing yields back down to 4.66%. Yields fall when bond prices rise.

“This reading beat expectations modestly, but traders pounce aggressively on any whiff of good news,” said Steve Sosnick, market strategist at Interactive Brokers (NASDAQ:IBKR). “It’s a number and a reaction that we have to view positively, although quite possibly it’s magnified by the negativity we’ve been battling.”

Yields had climbed sharply in recent weeks after the Fed in December tempered its outlook for rate cuts and projected firmer inflation in 2025 than it had previously.

Before the CPI report, “there was some whispering that we might actually see a rate hike,” said Jeff Weniger, head of equity strategy at WisdomTree Inc., a New York asset management firm.

But fears about the potential fallout that Trump’s policies could have on inflation remain a concern. Fed officials on Wednesday noted heightened uncertainty in the coming months as they await a first glimpse of the incoming administration’s policies, even as they said Wednesday’s data showed inflation was continuing to ease.

Following the CPI report, Rick Rieder, BlackRock’s chief investment officer of global fixed income, said progress on inflation “may be slow and uneven, not least due to the great uncertainties that face the economy with fiscal policy changes coming over the next year.”

For example, Rieder said in emailed comments, changes to the tariffs and trade regime “do hold the potential to increase core goods inflation for a time.”

As the market remains data dependent, volatility could become more common. Kevin Flanagan, head of fixed income strategy at WisdomTree, expects that moves of 10 to 15 basis points daily for the 10-year Treasury could become the new norm.

Following the data, traders of interest-rate futures still projected the Fed waiting until June to deliver its next rate cut. But now they are pricing about even odds the central bank will follow with a second rate cut by year’s end. Before the report, markets reflected bets on only a single cut in 2025.

Tina Adatia, head of fixed income client portfolio management for Goldman Sachs Asset Management, said in a note to clients that the CPI data strengthens arguments for further cuts but “the Fed has scope to be patient.”

“More good inflation data will be required for the Fed to deliver further easing,” Adatia said.