Another U.S. Inflation Gauge Is Heading Even Higher
Less than a month before the Fed’s next policy meeting, a sharper-than-projected advance in the price gauge could turn up the heat for a half-point increase in the benchmark interest rate. January’s consumer-price index rose more than forecast, with broad advances in the costs of goods and services.
Investors will gauge central bankers’ appetite for a half-point move after speeches by Governors Christopher Waller and Michelle Bowman and regional Fed presidents Loretta Mester of Cleveland, an FOMC voter in 2022, Raphael Bostic of Atlanta, and Thomas Barkin of Richmond.
JPMorgan Chase & Co. economists said in a report over the weekend that the Fed is likely to raise interest rates by 25 basis points at nine consecutive meetings, through March 2023, in a bid to tamp down inflation.
The inflation rate at earlier stages in the oil production process is also high. There are fears about a Russian military invasion of Ukraine, which could lead to higher prices for other commodities.
- For more, read Bloomberg Economics’ full Week Ahead for the U.S.
The Commerce Department’s report on Friday will also indicate how consumer spending and incomes fared in January, before and after adjusting for inflation. The schedule also includes reports about new home sales, consumer confidence, and orders for durable goods.
February readings of manufacturing and services from IHS Markit earlier in the holiday-shortened week will shed some light on the U.S. economy’s rebound from omicron-related softness a month earlier. Economists call for an increase in activity.
“An escalation of the Russia-Ukraine conflict may result in an unfavorable mix of even higher energy prices, tighter financial conditions and an adverse confidence shock — all relevant to Fed thinking on the appropriate pace of tightening.”
–Anna Wong, Yelena Shulyatyeva, Andrew Husby and Eliza Winger. You can view the full analysis by clicking here
Aside from that, New Zealand and Hungary’s central banks may increase rates, as the Bank of England governor testifies in Parliament. South Africa will also be announcing its budget.
Click here for what happened last week and below is our wrap of what’s coming up in the global economy.
Asia-Pacific’s leading rate hikers both meet this week, with the Reserve Bank of New Zealand widely expected to push up interest rates again on Wednesday as inflation continues to soar.
The Bank of Korea is seen holding steady at Lee Ju-Yeol’s final meeting as governor, having already raised borrowing costs three times since the summer.
The latest pulse on global trade will be provided by preliminary South Korean trade figures, which are due to start the week.
On Wednesday, the Reserve Bank of Australia will be closely monitoring wage growth data amid speculations that higher rates may soon come. Capital spending figures on Thursday may also fuel rate-hike chatter Down Under if they show greater-than-expected strength.
Tokyo will see price growth in February at an average rate of 0.2% compared to other parts of the world at the close of this week, despite rising energy prices that are causing concern among Japanese voters prior to the next summer election.
China’s MLF rate has remained unchanged. This means that China will probably keep its loan prime rates steady on Monday. Hong Kong is currently struggling to contain the coronavirus virus wave and will release its budget Wednesday.
Europe, Middle East, Africa
The health of services and manufacturing will be revealed by surveys of purchasing managers in the U.K. and the Euro region. According to economists, all gauges should improve in February. That’s also the case for Germany’s Ifo business confidence index and an equivalent measure in France.
This data will help European Central Bank policymakers in the event that the consensus shifts towards raising rates for inflation this year. In the next week at least six ECB officers will speak publicly, including vice president Luis de Guindos as well as Isabel Schnabel (Executive Board member).
It is widely believed that the BOE will raise interest rates once again in March. Investors can look at testimony of Governor Andrew Bailey, his coworkers, and other speeches on Wednesday to get an idea about the magnitude of the move.
Minutes of the meeting in Sweden where Riksbank Governor Stefan Ingves used this month’s vote to defeat an attempt to eliminate stimulus will be made public on Monday
In eastern Europe, Hungary’s central bank is expected to raise two interest rates at separate monthly and weekly meetings, while Polish Governor Adam Glapinski’s second term in office may be put to a vote in Parliament.
Israel’s key rate is likely to remain at 0.1%, a new record. But it could shift towards a more aggressive tone after the inflation reached 3%. Many economists predict that there will be multiple rate increases this year. They could start as early as April or even May.
Data on Tuesday is likely to show South Africa’s official unemployment rate reached a record 35% in the final quarter of last year, when its economic recovery stalled following the discovery of the omicron coronavirus variant.
Finance Minister Enoch Godongwana presents the nation’s budget on Wednesday, with the focus on reining in debt, reducing loan-service costs, and narrowing the deficit. A better-than-expected collection of taxes may result in improvements to key metrics.
Godongwana’s update will include projections from the government and information on how to fund a year-long extension of the monthly grant for jobless.
- For more, read Bloomberg Economics’ full Week Ahead for EMEA
Better-than-expected data since the Jan. 31 posting of Mexico’s flash fourth-quarter output report raises the possibility of a slight upward revision when the final reading is published in the coming week.
Brazil publishes its broadest measure, which is the mid-month reading for consumer prices. In Argentina, reports are released on the December economy activity and trade.
Peru has one indicator, but this should not be forgotten: after a contraction of 11.1% in 2020, the GDP for 2021 could have increased more than 13% with some estimates reaching as high as 15%.
On the monetary policy front, Paraguay’s central bank meets to consider a seventh straight rate hike.
Mexico’s mid-month consumer price report will be closely watched as central bank forecasts call for the economy to be past the worst of last year’s inflation surge.
Look for the minutes of Banxico’s Feb. 10 meeting –- where it raised the key rate to 6% — to address key issues such as elevated core inflation readings and looming Fed policy shifts.
–With assistance from Benjamin Harvey, Robert Jameson and Malcolm Scott.