The Macro Outlook for w/c 13 December 2021

by Mars Capital Partners | Dec 13, 2021

Key themes for the week ahead – central bank policy decisions, inflation, and output

This will be a big week of data and final central bank meetings for the year. The focus for the week will be the FOMC meeting/decision on 15 Dec.

Central Banks – Part Two

The FOMC will meet and announce details of its policy decision this week. Expectations are for an acceleration of QE tapering. The SEP will be important with updates on inflation, growth, labour market, and the expected shift in timing for rates lift-off.

The ECB, BoE, SNB, and BoJ all meet this week also. There are no changes expected to policy settings.  

Last week, the RBA kept policy unchanged but suggested that the Board will consider its QE program in Feb ‘22 – especially as it waits to see what other CB’s do. RBA Governor Lowe will also speak this week – his speeches should provide a gauge on the pushback on earlier rates increases. Markets are still forecasting an earlier rates lift-off than RBA guidance. The BoC kept policy unchanged but changed the wording around inflation (removing temporary reference, and watching for more embedded inflation expectations). With higher inflation and a recovering labour market, expectations are that hikes will commence earlier next year. The PBoC cut the RRR last week to further support the economy.

Inflation

Last week US CPI growth in higher than expected at +6.88% for Nov. Most areas of expenditure contributed to the acceleration in inflation from Oct. Inflation numbers out this week for Canada (exp +4.8%), the UK (exp +4.7%), and the Euro area (final est +4.9%). Euro area CPI (especially) has been tracking higher due mostly to energy prices.

Growth momentum

This week the prelim PMI’s for Dec will be released providing insight into private sector growth momentum into the final month of Q4.

Improvement in industrial production for Germany and Japan in Oct highlighted a rebound in auto output. This week, US industrial production data for Nov will be released – expecting a monthly gain of +0.7% (versus +1.6% in Oct). US retail sales data will also be released with expected monthly growth of +0.8% for Nov compared to +1.7% in Oct. Monthly US CPI for Nov was +0.8%.

This week, the US Treasury will auction and settle approx. $290bn in ST Bills, Notes, and Bonds. There will be a net paydown though of $118bn which includes three recent CMBs maturing on 15 Dec ($120bn). Approx. $32bn in ST Bills and Notes & Bonds will mature on the Fed balance sheet this week and will be rolled over.

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