Key themes for the week ahead – inflation & central bank speeches
It’s been a huge two weeks of central bank policy decisions. Central Banks acknowledged that inflation has not been as transitory as they had initially expected – due to persistent demand/supply imbalances affecting supply chains. While inflation is above targets, policy makers signaled that they would effectively ‘look through’ this current inflation impulse and expect that inflation will ease through H1 next year as supply chains recover. The case for rate increases was not made because labour market goals have yet to be met. The exception is the BoE – still with market expectations of an increase in the bank rate by the end of the year.
The US FOMC announced a flexible approach to its taper schedule. It noted that it can be patient on rate hikes for the moment but still emphasized data dependence, flexibility, and a willingness to move either way (including with taper).
We don’t think it’s time yet to raise interest rates. There is still ground to cover to reach maximum employment both in terms of employment and in terms of participation. US Fed Chair Powell
There will be several central bank speeches this week – with Powell, Lagarde, Maklem, and Bailey all speaking. We’ll be looking for any follow-up commentary.
A decision on the US Fed Chair should also be imminent.
US labour market data was stronger than expected for Oct with upward revisions for the prior two months. The US services ISM reported a broader expansion in activity in Oct – reaching a new series high. Manufacturing momentum is still constant at this higher level. Pricing pressures and longer lead-times appeared to reassert this month across several surveys.
This week, the key economic release will be US CPI for Oct. Annual growth in the headline index is expected to accelerate from 5.4% in Sep to 5.8% in Oct. US PPI, JOLTS, and the Uni of Michigan consumer sentiment data will also be released. Veterans Day falls on Thursday this week. US initial claims will be reported on Wednesday.
Chinese CPI and PPI data is also out this week. Chinese CPI is expected to increase from 0.7% in Sep to 1.4% in Oct. The monthly rate is also expected to accelerate from +0.1% in Sep to +0.6% in Oct.
The Aus labour market and employment survey for Oct will start to pick up the reopening of the two largest states. Employment is expected to increase by +50k persons (after falling by -138k in Sep) and participation is expected to increase from 64.5% to 64.8%.
This week, the US Treasury will settle approx. $177bn in ST Bills, with a net paydown of -$6bn. The US Treasury will also auction the 3yr and 10yr Notes and the 30yr Bond this week – all will settle next week.
More detail (including a calendar of key data releases) is provided in the briefing document – download the pdf below:
Comments and feedback are welcome. Please email me at kim.mofardin@marscapitalpartners.net
