European Central Bank (ECB) officials may be preparing investors for further interest rate cuts after the longest summer break in the bank’s history.
With policymakers needing time to assess the strength of lingering inflation pressures making a rate hike on Thursday virtually impossible, traders will likely be watching for clues from ECB President Christine Lagarde about the outlook for a Sept. 12 decision.
By then, the ECB will have two more monthly consumer price index releases and a fresh set of forecasts at hand, and several policymakers have said they would prefer to act quarterly when updated forecasts are available.
Officials may have a clearer idea of ​​the Federal Reserve’s intentions by then: Latest data showed U.S. inflation set to settle at its lowest level since 2021, raising speculation that U.S. policymakers will also aim to cut interest rates in September.
New information the Governing Council will see before its decision on Thursday includes Monday’s release of an index of industrial production for May – expected to mark a second consecutive month of contraction – and a final reading of inflation for June on Wednesday.
Besides questions about borrowing cost trends, the ECB president is also likely to be quizzed this week on France, which is facing intense scrutiny in financial markets due to a suspended parliament following a snap election and concerns over its fiscal outlook. The situation could also be a focus when European finance ministers meet in Brussels on Monday.
Bloomberg Economics:
“Rates are almost certain to remain on hold this month, but investors will be closely watching the ECB’s meeting on July 18 to fine-tune expectations for the timing of the next rate cut. Lagarde is likely to hint at further moves in September, but is unlikely to be too definitive.”
—David Powell, Senior Eurozone Economist. For more detailed analysis, click here.
Lagarde’s news conference may resonate even more than usual with her summer beach-going colleagues largely silent at this time of year. Similarly, ECB officials’ attendance at the Federal Reserve’s annual meeting in Jackson Hole, Wyoming, in late August could draw extra attention.
This year’s eight weeks between rate decisions marks the Governing Council’s longest summer break since the peak of the pandemic in 2020. The ECB met monthly from its inception but has been lengthening the time between meetings since 2015.
Elsewhere, investors will be watching for reports that could show slowing economic growth in China, a decline in U.S. retail sales, slowing inflation in the U.K. and Canada, and interest rate decisions in Indonesia, Egypt and South Africa. Investors will also be keeping an eye on new global economic forecasts from the International Monetary Fund, due on Tuesday.
Click here to read about last week’s events, and below for our outlook for the global economy.
United States and Canada
Federal Reserve Chairman Jerome Powell will be giving an interview at the Economic Club of Washington on Monday following data pointing to a welcome easing in inflation. Investors will be watching for clues as to whether the U.S. central bank feels confident enough about a sustained slowdown in price pressures to cut interest rates.
Powell’s event kicks off a week that will feature appearances from other prominent Fed officials, including Fed Governors Adriana Kugler and Christopher Waller and New York Fed President John Williams.
Retail sales are the highlight of the U.S. economic data calendar, and economists are predicting they will fall in June due to a cyberattack that disrupted auto dealerships and a drop in sales at gas stations.
Sales of the so-called control group, which excludes autos, gasoline, food services and building materials, are expected to fall. The measure used to calculate gross domestic product is seen as an indication of the extent to which budget-conscious consumers are limiting discretionary purchases.
A day after retail data is released on Tuesday, the government is expected to report that new housing starts rose slightly in June from a four-year low. Homebuilders are benefiting from low inventory in the second-hand home market even as high borrowing costs have curbed demand.
Also on Wednesday, the Fed is scheduled to release its June industrial production report and its Beige Book anecdotal report of economic conditions in each of the central bank’s 12 districts.
Meanwhile, in Canada, June inflation will be crucial in influencing the Bank of Canada’s interest rate decision scheduled for July 24, especially since inflation unexpectedly rose in May. The Bank of Canada is also due to release its second-quarter consumer and business survey, along with May retail sales data and preliminary June figures.
Asia
The health of China’s economy will be at the top of the agenda in Asia as analysts, investors and policymakers scrutinize the latest quarterly growth figures and a slew of monthly data.
China, the world’s second-largest economy, is expected to see growth fall 5.1 percent in the fourth quarter from a year earlier but remains on track to meet Beijing’s 2024 growth target.
Forecasts show monthly factory production is set to slow for the second consecutive year from robust levels, while retail sales are also expected to soften.
Despite investor expectations that China would consider further stimulus measures to stimulate the economy, none of the figures seem to indicate there is an urgent need to do so.
The release of the data coincides with a four-day meeting of China’s top leaders, held twice a decade, that is likely to focus on efforts to reinvigorate growth.
Elsewhere in the region, Indonesia’s central bank is expected to keep its policy rate unchanged on Wednesday, New Zealand will publish its latest inflation figures and Singapore will release export data the same day.
Malaysia, Japan and India are also due to release trade data this week, while Kuala Lumpur is due to release its GDP figures at the weekend.
Australia’s employment growth figures are due out on Thursday, with new job creation expected to halve.
Data released on Friday is expected to show Japan’s overall inflation rate strengthening to 2.7% for June, a result that could spur expectations that the Bank of Japan will consider a combination of reducing its bond purchases and raising interest rates when it meets later this month.
Europe, Middle East, and Africa
The UK is likely to be the most notable data release in the region.
The latest consumer price index released on Wednesday may show services inflation slowed for a fifth straight month in June to 5.6%, but still well above policymakers’ 2% target. The country’s latest wages data is due to be released on Thursday, with figures for the quarter ending May expected to show regular wage growth falling below 6% for the first time in 20 months.
Meanwhile, retail sales figures for June, due on Friday, and other data released the same day, will likely be the first look at the public finances that Finance Minister Rachel Reeves will see since taking office.
The figures released this week will be the last major data before the Bank of England decides on August 1 whether to cut interest rates for the first time since the start of the pandemic.
On the continent, Nigerian data due on Monday is expected to show inflation hovering around 34% in June, supported by a stable naira, though analysts expect inflation may start to slow from this month onwards, due in part to a high base effect.
There are three scheduled interest rate decisions by the central bank.
latin america
Latin America’s four largest economies will release indicators of economic activity for May, with central banks closely watching the key GDP figure amid ongoing concerns about growth and inflation.
Brazil and Peru, where policymakers recently paused their easing cycles, are due to release data on Monday. Brazilian President Luiz Inacio Lula da Silva has renewed his criticism in recent weeks of high borrowing costs, viewing them as a threat to the region’s largest economy. Peru, meanwhile, posted its fastest growth in more than two years, helping prompt the central bank’s decision to keep interest rates unchanged for a second straight session.
In Colombia, which releases data on Thursday, weaker-than-expected first-quarter growth prompted President Gustavo Petro to call for faster rate cuts, but policymakers rejected the call in late June.
Argentina follows suit on Thursday afternoon. South America’s second-largest economy slid into recession earlier this year and is expected to shrink 2.6% from the fourth quarter of 2023 as President Javier Milley’s strict spending cuts weigh on consumption and economic activity.
With assistance from Vince Golle, Paul Jackson, Andrew Langley, Matthew Malinowski, Tom Rees, Monique Vanek, and Paul Wallace.
This article has been generated from an automated news agency feed without any modifications to the text.
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