* Israel executes drone strike targeting defense compound in Iran
* German economy unexpectedly contracts in Q4
* Will wages or low unemployment drive Fed’s inflation-taming policy?
* Japan and Netherlands join US to limit chip tech exports to China
* Fed’s preferred inflation gauge eased again in December
* Pending home sales in US rose in December for first time since May
* US consumer spending fell for second month in December:
Federal Reserve appears set to soften its next rate hike to a 25-basis-points increase at this week’s policy meeting (the rate announcement is scheduled for Feb. 1). “They’re going to stay vigilant on inflation — I don’t think they’re going to break out the ‘mission accomplished’ banner just yet,” says Gennadiy Goldberg, a rates strategist at TD Securities. “If they don’t send the signal that they really want to get inflation under control, the market could over-interpret that as a signal that they’re done. That’s not the message they want to send.”