Three days to reveal global inflation alert level

The Reserve Bank of Australia will be the first, in a decision on Tuesday that “is set to be a potentially evolutionary decision in the market,” according to James McIntyre of Bloomberg Economics. Officials are facing a surprisingly strong recovery in basic consumer prices, although economists expect them to avoid raising interest rates again for now.

The much-anticipated Fed meeting on Wednesday will likely kick off a decrease in asset purchases, the start of a gradual reduction in pandemic bond purchases reported by President Jerome Powell. Economists and market participants will be watching when the reduction begins and how long it will take.

The central bank currently buys around $ 120 billion in assets per month and is committed to maintaining that pace until “further substantial progress” is made on both jobs and inflation.

Fed officials broadly agree that this latest test was met – prices rose 4.4% in September from a year ago, according to their preferred gauge. They are more divided in the labor market, and perhaps Friday’s US wage report can provide a clearer picture on this.

Attention on Thursday turns to the Bank of England, whose decision has become a cliffhanger after recent remarks from some officials suggesting sudden concern over price pressures. Investors are betting on a hike, while economists narrowly predict no change.

What Bloomberg Economics Says:

“There is a fierce debate raging in the Monetary Policy Committee over whether to raise interest rates next week. Financial markets believe it’s done, thanks to a series of hawkish interventions by Governor Andrew Bailey. We are less sure. “

–Dan Hanson and Jamie Rush. For a full analysis, click here

These meetings are just the most important of a post-Halloween week where the fear of global inflation will focus on other central banks as well. Monetary officials in Poland and the Czech Republic are expected to raise interest rates, while those in Norway are expected to signal an increase in their decision in December.

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In addition to the Fed’s decision, investors will also be watching key data revealing the latest state of the economy’s recovery after the pandemic.

The October non-farm payroll report due Friday is expected to show a rebound in hiring after two disappointing months of job growth. While the leisure and hospitality sector may post gains amid declining Covid-19 cases, job growth is still largely constrained by a limited supply of workers and high quit rates.

The wage bill rose 450,000 last month, more than twice as much as in September, according to the median projection of a Bloomberg survey of economists. The unemployment rate is expected to have fallen to 4.7% from 4.8%.

Other US data this week includes figures for October manufacturing activity and durable goods orders.

Asia

Newly installed Prime Minister Fumio Kishida is expected to win Japan’s general election this weekend. Once the vote is over, investors and economists will closely monitor specific measures the government plans to take to support the economy.

South Korea’s export figures on Monday will provide the latest insight into the strength of global trade, especially the tech sector, as supply issues continue to complicate shipping flows.

The RBA is meeting on Tuesday to decide on policy after inflation accelerates within the central bank’s target range. The unexpected move has further fueled speculation that Governor Philip Lowe’s timeline for possible rate hikes is far too long, although he is seen sticking to his line for now. A more detailed policy statement later in the week could provide more clarity on the current thinking of the RBA.

China publishes its PMI reports for October Sunday, the current electricity crisis is expected to remain a drag on the industrial sector. Factory gauges across the region will follow on Monday.

Malaysia sets interest rates on Wednesday and Indonesia reports third quarter GDP on Friday.

Europe, Middle East, Africa

While the main focus will be on the BOE and its counterparts in the region, from Norway to Eastern Europe, appearances by European Central Bank President Christine Lagarde and her colleagues could also draw l attention of investors.

The ECB failed last week to convince financial markets that it will not hike interest rates next year, bets that escalated after eurozone inflation data on Friday accelerated above 4% for only the second time. Officials could use speaking engagements in the coming days to counter such expectations.

Among expected reports from the eurozone, German factory orders and industrial production will reveal the impact of global supply bottlenecks on the region’s largest economy in September.

Elsewhere, Turkey will release October inflation figures on Wednesday, days after raising its year-end forecast to 18.4%. Pushed by the president, the central bank lowered its benchmark interest rate by 300 basis points in consecutive cuts, the pressure on prices being “transient”.

Zambia’s finance ministry will provide an update on discussions with the International Monetary Fund on Tuesday. Africa’s first sovereign default in the era of the pandemic is seeking an economic agenda that will anchor debt restructuring talks with creditors, including the holders of its $ 3 billion in foreign currency bonds.

Data from Mauritius on Friday will likely show that inflation slowed for a third consecutive month in October after peaking at 6.5% in July, giving the central bank the option of keeping the key interest rate in its wake. last meeting of the year in December.

And in Russia, inflation expected on Wednesday will show how price growth continues to exceed the central bank’s target, potentially signaling further rate hikes in the months to come after the unexpected October 22 hike.

Latin America

A report released on Monday could show prices in Peru’s capital Lima fell in October for the first time since April.

On Tuesday, Colombia’s central bank released the minutes of its October 29 meeting in which policymakers raised the policy rate by half a percentage point to 2.5%.

Indirect GDP figures for Chile, which have beaten expectations since February, released on Tuesday, likely saw double-digit growth for a sixth month in September.

Brazil’s central bank on Wednesday released the minutes of last week’s meeting in which it made its biggest interest rate hike in nearly two decades to push the Selic to 7.75%.

Inflation is over 600 basis points above target and President Jair Bolsonaro has big spending plans ahead of next year’s election. The central bank said investors should expect a second straight increase of 150 basis points on December 8.

Data released Thursday could show Brazil’s industrial production fell for a fourth month in September due to supply chain disruptions and rising electricity prices.

Colombia reports October inflation figures on Friday. Analysts see it ending 2021 at 4.9% and 3.5% next year.

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