Chairman Jerome Powell’s comments next week will be closely analyzed by investors for clues about how long the Fed intends to wait before cutting rates.
The last time the U.S. central bank chair spoke, he pointed to the lack of further progress in curbing inflation and the continued strength of the labor market, suggesting that policymakers expect borrowing costs to remain low for longer than previously expected. He suggested that there is a high possibility of maintaining the level at a high level.
The Fed chief is unlikely to change his tune, with the latest price data showing stubborn underlying inflation, paralleling hopes for a solid jobs report on Friday.
Chairman Powell is scheduled to speak to reporters after the Fed’s rate decision on Wednesday, when the Fed is widely expected to keep borrowing costs at the highest level in more than 20 years. Expectations for rate cuts have been pushed back to 2024, with investors now betting on up to two rate cuts by the end of the year.
The week concludes with the monthly jobs report, which provides a new look at the current state of the U.S. labor market. Economists expect nonfarm payroll growth to slow to a still-strong pace in April due to stable and low unemployment.
Bloomberg Economics says:
“We expect Mr. Powell to take a more hawkish turn. He could at least signal that the median FOMC member expects the rate cuts to be “less” this year. expensive. A more hawkish line could hint at the possibility of no rate cut, or even suggest that a rate hike, although not at the current baseline, is on the table. ”
—Anna Wong, Stuart Paul, Eliza Winger, Estelle Wu, economists.
It also updates closely monitored employment cost indicators on a quarterly basis, as well as monthly figures on job openings and manufacturing.
Looking north, Canada’s gross domestic product (GDP) data for February could show a slight boost for the economy, giving the Bank of Canada options as it considers when to pivot to accommodative policy. there is a possibility.
Elsewhere, eurozone data could show that inflation has stopped slowing and the economy is starting to grow again, while China’s research will point to the strength of the eurozone’s expansion. Central banks from Norway to Colombia decide interest rates, while the Paris-based OECD releases new global forecasts on Thursday.
Asia
China sheds light on prospects to further develop its economic expansion in the first quarter with the release of official Purchasing Managers Index data on Tuesday. The report will show whether manufacturing activity expanded in the second month of April.
While there may be some seasonal softening due to fewer business days, the overall momentum will likely point to a continued recovery, according to Bloomberg Economics. The Caixin index is scheduled to be released on the same day, and has been above 50, the dividing line between economic expansion and contraction, for five months.
All eyes will be on global trade as Australia, South Korea, Thailand, Sri Lanka and Vietnam release their trade figures this week.
Japan will release a trove of data on Tuesday showing that industrial production is expected to recover in March, as well as retail sales and the unemployment rate.
South Korea’s consumer inflation data on Thursday is also expected to show price growth slowing slightly while remaining above the Bank of Korea’s target, providing further incentive for the central bank to postpone policy changes.
Europe, Middle East, Africa
In the euro zone, data could show that slowing inflation stalled in April for the first time this year. Consumer prices likely rose by 2.4% year-on-year on the back of rising energy costs, consistent with March results.
Fundamental steps to exclude such volatile items could reassure officials that the direction of travel remains down, although national statistics will likely reveal some divergence. There is. Inflation may have accelerated in Germany and Spain, which are expected to release figures on Monday.
The eurozone report will be released on Tuesday, along with the latest GDP figures. Economists expect the region to have returned to growth of 0.1% in the first quarter, likely the slowest after the shallow recession it experienced in the second half of 2023.
As with inflation, Tuesday’s numbers could mask uneven results across the region. For a taste of that, investors will be closely watching Ireland’s growth data on Monday, which has historically been volatile.
Altogether, these reports could be in line with European Central Bank President Christine Lagarde’s view this month that the economy is in a slump and is “facing difficulties” in the inflation path.
Switzerland will release consumer price data on Thursday, which could show that inflation remains well below the central bank’s 2% ceiling.
And next day in Turkey, investors will be watching for developments in the slowdown in consumer price growth.
Most markets expect Turkey’s inflation rate to continue accelerating to around 75% in the coming months, from 68.5% in March, despite nearly a year of aggressive rate hikes. Bond investors are unlikely to rush back into the lira bond market, a key target of the Turkish government, until price increases slow.
Three financial decisions are made over a wider area.
- Malawian authorities could be persuaded on Tuesday to raise key interest rates again in a bid to curb inflation, which is likely to remain high due to crop damage caused by bad weather.
- The Czech central bank is expected to announce its latest decision on Thursday, with policymakers expected to cut borrowing costs by 50 basis points.
- Norges Bank could leave deposit rates unchanged next day after Norway’s economy developed better than expected, even though inflation slowed faster than expected. Investors will be watching for clues as to whether policymakers are becoming more cautious about starting to cut borrowing costs in the fall.
latin america
Mexico’s preliminary production data for the first quarter is likely to show the economy suffered a slight contraction in the three months to December. Analysts’ consensus is that growth in 2023 will slow for the third consecutive year, to about 2.4% from 3.2% in 2023.
Brazil will release a number of reports, including the broadest inflation indicators, the central bank’s expectations survey, current account balance, industrial production and national unemployment rate.
Since June last year, the unemployment rate in Latin America’s largest economy has been below 8%, which many Brazil watchers view as an indication that the economy’s unemployment rate is not accelerating.
Chile has released a number of indicators for March, including retail sales, unemployment, industrial production, manufacturing, copper production and proxy figures for GDP. The central bank slowed the pace of easing earlier this month after stronger-than-expected growth and accelerating inflation.
In Peru, the April inflation report for the country’s metropolitan capital, Lima, could show that prices have finally returned to an acceptable range of 1% to 3%, but are still above the 2% target. There is.
Colombia’s central bank is widely expected to extend its easing cycle with a second straight 0.5 percentage point cut in its key policy rate to 11.75% as inflation steadily eases. BanRep will also release its quarterly inflation report, updating its growth and inflation forecasts, as well as announcing a revised monetary policy outlook.
