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Consumer prices rose 6.5% in the 12 months through December, marking the slowest inflation rate in more than a year and a sending a clear signal that the Federal Reserve’s tightening campaign is working. So-called core inflation, which excludes food and energy, was up 5.7% over the same period, the smallest advance in a year. The figures, which matched forecasts, puts the Fed on track to downshift to smaller interest-rate increases and raised hopes for an elusive soft landing for the economy — or dodging a recession. While stocks climbed, the Fed has repeatedly warned investors it will need to continue raising interest rates to combat inflation. Here’s your markets wrap.  —Margaret Sutherlin

Attorney General Merrick Garland will appoint a special counsel to investigate how classified documents ended up at President Joe Biden’s former office and his home. It’s a complication for the White House, which has sought to quickly move past the episode, and for the Justice Department, which appointed a separate special counsel to investigate former President Donald Trump’s handling of classified documents that were found at his Florida home. Biden and the White House thus far have defended the handling of the situation, saying they were cooperating fully with the Justice Department.

US President Joe Biden   Photographer: Al Drago/Bloomberg

The abrupt end of Covid Zero in China hasn’t created just a public health crisis, it’s created an economic one too. Millions of workers across China who enforced Beijing’s edict for three years now face layoffs, unpaid wages and an uncertain future. The sudden end to the policy also signals a reversal of fortunes for companies that benefited from the boom in demand for testing and food distribution during lockdowns, while the immense cost of the world’s strictest virus controls has strained local government coffers. Meanwhile, Beijing stopped updating daily Covid virus cases, adding additional concerns that the government is letting the virus run rampant. 

Brazil continues its clean up after supporters of former president Jair Bolsonaro attacked government buildings Sunday. In the US, ​​Congressional Democrats heaped pressure on Biden to kick Bolsonaro out of the country, even as US officials stick to a wait-and-see approach in hopes that the former president of Brazil will make good on a promise to return home on his own. Democrats said the violence was “built upon months of pre- and post-election fabrications by Mr. Bolsonaro and his allies” about the October election that Luiz Inácio Lula da Silva narrowly won. Bolsonaro has been in Florida and was briefly hospitalized during his US visit and said he would cut his trip short. 

Record rains and devastating floods that have killed at least 17 people and displaced thousands of others have done little to resolve California’s drought, new figures show. Just over 95% of the state remains in drought, down from about 98% the week before. 

A resident in California cleans up on Jan. 11 after floodwaters have killed at least 17 people, closed highways and sent residents fleeing. Photographer: Nic Coury/Bloomberg

Former Proud Boys leader Enrique Tarrio and four lieutenants charged with seditious conspiracy in the Jan. 6 Capitol insurrection went on trial Thursday. Prosecutors said the leaders agreed to “use any means necessary” in their violent attack which they hoped would prevent Joe Biden from becoming president. 

Microsoft’s purchase of Activision just encountered another hurdle. Google and Nvidia, along with Sony, have raised concerns with US regulators, adding fuel to the government’s case against the $69 billion deal. The FTC sued to block the deal in December.

Some of the world’s most beautiful places — Belize, Gabon, Sri Lanka — are also the most indebted, on the hook with international creditors for billions. Some investors see the combination as a fertile ground for a financial experiment: Debt relief for conservation. But will it work?

Scuba divers in Belize. Photographer: VW Pics/Universal Images Group Editorial

Bloomberg continues to track the global coronavirus pandemic. Click here for daily updates.

• T-Mobile could buy Ryan Reynolds’ Mint Mobile.
• LGBTQ rights supporters in India just got a powerful new backer.
• Mike Novogratz has lost at least $3 billion in the crypto fallout. 
• The housing downturn is going to be worse depending on where you live.
• Retail investors are being hit hard by Tesla’s slide — one lost $1.5 million.
• The Osage Nation’s massive mineral estate may get new protections. 
• Unlimited vacation time isn’t all it’s cracked up to be.

Bankers that started after the 2008 financial crisis are in for a rude awakening. Many on Wall Street are bracing for the first prolonged sourness of their careers, with strategists forecasting a recession, if not one of the worst years for the world economy in four decades. The era of free money is gone and after a decade-long run of trillion-dollar profits for the biggest banks, the new conditions could deliver countless layoffs, slumping deals, choppier markets and grim expectations.

The New York Stock Exchange Photographer: Michael Nagle/Bloomberg

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