Central Bankers Curb Their Enthusiasm for Rate Hikes: Eco Week




  • In Business
  • 2023-02-04 21:00:00Z
  • By Bloomberg

(Bloomberg) -- Waning global enthusiasm for aggressive interest-rate increases may dominate the dozen or so central-bank decisions due in the coming week.

Most Read from Bloomberg

  • Trump Offers $1 Million Bond to Appeal Clinton Suit Sanctions

  • Thousands Mistake US Research Balloon for Chinese Spy Craft

  • From China to Big Sky: The Balloon That Unnerved the White House

  • What You Need to Know About the Suspected Chinese Spy Balloon Floating Over the US

  • George Santos Produced Ill-Fated Spider-Man Musical. At Least, He Claims He Did

In the wake of the Federal Reserve's quarter-point move - and a market rally driven by investor euphoria that the inflation shock is finally fading - its peers are already well on the way to stopping as well.

Among the highlights this week, both the Reserve Bank of Australia on Tuesday and the Reserve Bank of India the following day will probably deliver quarter-point hikes in borrowing costs that might mark their final salvos for now.

Poland's central bank has already halted rate increases and will probably ratify that view on Thursday, while its Romanian counterpart may decide to do the same.

Even in Latin America, where monetary officials stood out in the past couple of years for their early hawkish reaction to surging prices, rate-hiking cycles are running out of steam, not least because of how far they've already advanced.

Mexico's central bank, while still determined to act against inflation, may deliver only a quarter-point increase - its smallest move since 2021.

Some monetary officials are still keeping up a hawkish demeanor despite the shifting backdrop. Witness the European Central Bank, which hiked by 50 basis points on Thursday and all but promised to do the same in March.

Icelandic policy makers may also increase by the same amount on Wednesday, possibly echoed by Sweden's Riksbank on Thursday.

But as investors have noticed, the hiking fever globally is no longer at its height. And with Russia's central bank meeting on Friday possibly shifting the focus to monetary easing, financial markets are inevitably starting to wonder when the others will follow suit.

Elsewhere, investors finally get a look at the delayed release of German inflation for January, and the Bank of Canada will publish minutes for the first time.

Click here for what happened last week and below is our wrap of what's coming up in the global economy.

US and Canada

There's not much on the US calendar, though still plenty for investors to digest after a week in which Fed Chair Jerome Powell didn't push back against a market rally and then the monthly payrolls report appeared to show a huge increase in hiring.

Among the numbers due, jobless claims on Thursday may again indicate a tight labor market, and the University of Michigan report on Friday will update inflation expectations. About a half-dozen central bankers are due to speak, including New York Fed President John Williams, Atlanta Fed President Raphael Bostic, Minneapolis Fed President Neel Kashkari, and Powell himself.

In Canada, Governor Tiff Macklem will deliver his first speech since raising borrowing costs for an eighth-straight - and potentially final - time. His remarks Tuesday are likely to focus on how the Bank of Canada will interpret the trailing effects of 425 basis points of hikes since March.

The next day, the Ottawa-based central bank will offer the public a glimpse of its discussions before the Jan. 25 decision that saw officials signal their intent to move to the sidelines after raising the benchmark rate to 4.5% - the highest in 15 years.

The Bank of Canada, which unlike the Federal Reserve has never published minutes, announced in September it would accept an International Monetary Fund recommendation and begin releasing summaries of its deliberations.

On Friday, Canada's policy makers will get the first of three major indicators before their March rate decision. Economists expect January's labor force survey to show the job market starting to loosen as output slows toward a potential stall.

  • For more, read Bloomberg Economics' full Week Ahead for the US

Asia

Aside from the rate decisions in Australia and India, the primary focus in the region will be on China. Factory-gate prices due there on Friday may show a fourth month of annual declines, following drops in commodity costs.

CPI data the same day probably accelerated in January because of faster price increases in food and other categories.

Those numbers may garner particular attention from global policy makers worried that China's reopening from Covid lockdowns could fuel another inflation surge around the world.

Elsewhere, in Japan - where the central bank is unconvinced that price growth is high enough - labor cash earnings data will point to the strength of wages.

  • For more, read Bloomberg Economics' full Week Ahead for Asia

Europe, Middle East, Africa

In the wake of the ECB's big rate-hike decision, comments by its officials will be closely monitored. Among those scheduled to speak are Vice President Luis de Guindos, Executive Board member Isabel Schnabel, and central-bank governors from Austria, Italy and Spain.

The European Commission's quarterly forecasts may also be a highlight. Having previously predicted a recession in the euro region, officials may lift their projections after a stronger-than-expected performance in the fourth quarter.

It's a quieter week for euro-region data, with Germany the main focus. In particular, its inflation number - delayed from last week and unavailable to euro-zone statisticians - is due for release on Thursday, with economists predicting a re-acceleration.

Before then, German factory orders on Monday and industrial production the next day will also focus investors.

The key UK data this week will be on Friday, gross domestic product for December, which will give an indication of whether or not the economy succumbed to a recession. Bloomberg Economics reckons it avoided that outcome.

Elsewhere in Europe, Hungary - with the dubious claim of suffering the European Union's highest inflation - will probably report a further acceleration in price growth on Friday.

Central banks in Sweden, Iceland, Poland and Romania are all due to meet. Serbian officials will also deliver a rate decision.

In Russia, slowing inflation is raising pressure on the central bank to ease rates and on the Finance Ministry to spend more, but both are worried that price growth will spike again; the central bank meets on Friday.

Looking south, the Bank of Uganda will likely look beyond a surprise quickening in inflation and leave rates unchanged for a second meeting on Monday. That will allow it to assess whether the uptick in prices is temporary or more sticky, as it allows 350 basis points of hikes last year to flow through the economy.

Egyptian inflation due on Thursday is likely to show another acceleration as the effects of the latest currency devaluation filter through.

  • For more, read Bloomberg Economics' full Week Ahead for EMEA

Latin America

Brazil's central bank on Monday posts its survey of expectations, followed on Tuesday by the minutes of its meeting on Wednesday where policy makers kept the key rate at 13.75%.

Rising inflation expectations and the bank's hawkish tone have analysts looking for a delayed start to what they expect to be only minimal easing this year.

In Mexico, the central bank is all but certain to raise its key rate from 10.5% after its record hiking cycle has secured only minimal disinflation since prices peaked in the third quarter.

Peru, too, will set a new record for tightening. Consumer prices have remained stuck above 8% since May and national unrest is adding to inflationary pressures.

The minutes of Banco Central de Chile's Jan. 26 meeting will underscore policy makers' resolve to keep the key rate at 11.25% until they're certain that prices are really in retreat.

Inflation in Chile may have eased to 12% from 12.8%, while analysts see the results in Brazil and Mexico at a standstill near 5.7% and 7.8%, respectively.

More concerning, perhaps, is the elevated core readings bedeviling the region's economies, offering the prospect of multi-year slogs to get consumer prices back to their targets.

  • For more, read Bloomberg Economics' full Week Ahead for Latin America

--With assistance from Robert Jameson, Andrea Dudik and Stephen Wicary.

Most Read from Bloomberg Businessweek

  • A Billionaire's Son Battles a Turbulent WWE Over the Future of Pro Wrestling

  • When Hackers Hobbled Ireland's Hospitals, They Took Themselves Down, Too

  • ChatGPT Gets an MBA

  • A 3D Printer Isn't Cool. You Know What's Cool? A 3D-Printing Factory

  • A Portuguese Manufacturer Aims to Unseat Asia in $5,000 Bikes

©2023 Bloomberg L.P.

COMMENTS

More Related News

Marketmind: Japan CPI a distraction amid thickening global fog
Marketmind: Japan CPI a distraction amid thickening global fog

Asian markets round off the week with Japanese inflation and PMI data likely to be the main local drivers on Friday, offering direction that is unlikely to...

Banks Are Still Drawing on the Fed for $164 Billion of Emergency Cash
Banks Are Still Drawing on the Fed for $164 Billion of Emergency Cash

(Bloomberg) -- Banks reduced their borrowings only slightly from two Federal Reserve backstop facilities in the most recent week, a sign that institutions...

Short Seller Carson Block Says SVB Depositors Should Have Taken Haircuts
Short Seller Carson Block Says SVB Depositors Should Have Taken Haircuts

(Bloomberg) -- Short seller Carson Block said depositors at Silicon Valley Bank and Signature Bank should have taken haircuts after federal regulators seized...

Fed emergency lending to banks boosted overall Fed holdings in latest week
Fed emergency lending to banks boosted overall Fed holdings in latest week
  • US
  • 2023-03-23 20:49:13Z

NEW YORK (Reuters) -Federal Reserve emergency lending to banks, which hit record levels last week, remained high in the latest week, amid continued large...

Fed
Fed's unwanted ally in bid to tame inflation: Credit crunch
  • US
  • 2023-03-23 18:39:35Z

The Federal Reserve is getting some unwanted help in its drive to slow the U.S. economy and defeat the worst bout of inflation in four decades: A cutback in ...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business