- Bank of England rate call in focus
- FOMC monetary policy decision also due
- Inflation to remain dominant theme with UK and EZ wage growth data expected
Monday sees the release of US Consumer Inflation Expectations for February. This number is forecast to come in just below the 6% mark, and whilst that may provide some solace for policymakers, it also suggests that the general public perhaps aren’t properly braced for the incoming economic shock that’s likely given soaring soft commodity and energy prices. The risk here is that the market starts to get twitchy over the fact this number looks a little on the conservative side.
On to Tuesday and the latest UK Employment data is due for release. As always this covers multiple points, but the February Claimant Count is expected to drop again, whilst January’s Average Salary Data will also be under scrutiny. There’s concern here that wage inflation is going to be looking very sluggish when put against the soaring prices which are being seen here. Expectations are for annualised growth to be around the 4% mark, against price inflation of 5.5% and those imminent tax rises, too. Any shortfall here could call into question the BoE’s ability to deliver that next rate hike.
Also on Tuesday, we have the ZEW Economic Sentiment indicator for March from Germany. Uncertainty over the developing situation in Russia is set to rattle this figure, which could come in around 10, well below the 54.3 seen last month and one of the worst readings since the early days of the COVID pandemic. Markets have however already been shaken by geopolitical events, so again this number, whilst a useful barometer, in isolation seems unlikely to generate much new direction.
US PPI for February is also slated for publication. This could hit the psychologically significant 10% level on an annualised basis, something which would underline the cost of living squeeze which is taking a toll globally. Even the core figure, so excluding food and fuel, is expected to come in well over 8%. The Fed’s ambitions to keep hiking interest rates are likely to be called into question as a result, although consensus still seems to be that a quarter point rise will be made this week.
Wednesday’s US Retail Sales figure for February will be worth watching as this is expected to run significantly higher than inflation and could come in at 15%. That in turn would signal underlying economic confidence in the economy even though price rises are accounting for much of this upside, offering hawks at the Fed a little more wiggle rooms and likely bolstering the dollar as a result.
The main event on Wednesday will however be the FOMC Rate Call and Press Conference. A quarter point hike here is seen as nailed on, but more critically it will be clues as to where the Federal Reserve thinks it can go next. There’s a weight of opinion suggesting that a 50 basis point jump could be delivered in early May, but given those soaring input prices and general global uncertainty, hints of a more measured approach here could give US stocks a modest boost.
On Thursday it’s the turn of The Bank of England to declare its hand in terms of monetary policy. Whilst there’s concern that another rate hike here could damage economic prospects, GDP data released on Friday showed stronger than expected growth for the UK. It seems likely that the rate profile envisaged a few months ago for 2022 as a whole won’t now be achieved, but could the MPC surprise markets here, either by making a very small adjustment higher, or by telegraphing more over their plans for the rest of the year?
Again on that inflation theme, Friday sees EurozoneQ4 Wage Growth data being published. On an annualised basis this is expected to come in just over 3.3%, meaningfully higher than the 2.3% posted in Q3 but still a cause for concern at the ECB. There’s a mounting economic cost that needs to be addressed as a consequence of Russia’s aggression, so a weak print here will underline the need for the ECB to keep working to stimulate the economy, pushing back even further the idea of a rate hike and undermining the Euro, too.
Article by Tony Cross
of Monk Communications