Key events for the week ahead – FOMC, BoE, ECB, and SNB policy meetings, US CPI and retail sales, Euro area and UK CPI, prelim PMIs Dec
Recap from last week
The week started with a WSJ article titled “Fed to weigh higher interest rates next year while slowing rises this month” – aiming to clarify any misinterpretations from the Brookings speech and ahead of the FOMC meeting this week.
Last week, the RBA raised rates by 25bps to 3.10%. The Board reiterated its priority to return inflation to the 2-3% band and expects to increase rates in the period ahead – but is not on a pre-set course. The Minutes next week may reveal the level of debate around the pace of hikes.
The BoC increased rates by 50bps to 4.25%. There was a notable change in the statement with the Governing Council to consider “whether the policy interest rate needs to rise further”. This was a shift from prior statements where the Governing Council expected “that the policy interest rate would need to increase”. BoC Governor Macklem speaks early this week.
Growth momentum slowed further according to the global PMIs for Nov. The global manufacturing and services PMIs registered slight contractions as global output and orders contracted. Activity across the G7 slowed. Japan was the only G7 country where services didn’t contract (although services momentum slowed the most in Japan). Manufacturing activity contracted across all G7 countries. The manufacturing contraction eased in the Eurozone, Germany, UK, and Canada.
The trend in US initial claims (especially the NSA series) after the Thanksgiving holiday week and continuing claims (both SA & NSA) continues to rise.
News later in the week confirmed that China is to step back from its zero-Covid policy.
Outlook for the week ahead
Amid a backdrop of slowing growth momentum and elevated inflation, the major central banks are expected to continue tightening policy this week.
The FOMC is expected to increase rates by 50bps to 4.25-4.5%. The latest SEP and ‘dot plot’ will be released, providing important insight into current thinking by the Committee on ‘higher rates for longer’. US CPI for Nov will be released the day prior and is expected to moderate to +7.3% in Nov from +7.7% in Oct. Core inflation is expected to moderate to +6.1% in Nov from +6.3% in Oct.
US output and consumption data will be in focus; US retail sales are expected to fall slightly in Nov by -0.2% after a +1.3% increase in Oct. US industrial production for Oct, the prelim US S&P PMIs for Dec, and the first regional manufacturing surveys for Dec will also be released. Initial claims are expected to remain at +230k (SA).
The ECB is expected to increase rates by a further 50bps to 2% and to preview QT intentions for 2023. Euro Area inflation for Nov is expected to be confirmed at +10%, with monthly inflation falling by -0.1%.
The BoE is expected to increase rates by 50bps to 3.50%. UK CPI for Nov is out the day before the meeting and is expected to ‘moderate’ to +10.9% in Nov from 11.1% in Oct. Core CPI is expected to remain at +6.5%.
The SNB is also expected to increase rates by 50bps to 1.0%.
The prelim S&P PMI readings for Dec will be released this week (US, UK, Aus, Japan, & Europe).
This week, the US Treasury will auction and settle approx. $312bn in ST Bills, Notes, and Bonds, raising approx. $45bn in new money.
Approx $12.6bn in ST Bills will mature on the Fed balance sheet this week and will be reinvested.
Approx $13.3bn in ST Bills, Notes, and Bonds will mature on the Fed balance sheet this week and will be redeemed/roll-off the Fed balance sheet.
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
