Week Ahead: Fed, ECB, and BoJ Meet After U.S. Inflation Report
XM Group | Jun 09, 2023 09:02AM ET
Split Fed decision?
It will be a difficult decision for Fed officials on Wednesday. By most indications, the US economy is in good shape. The labor market is firing on all cylinders, economic growth is on track to hit 2% this quarter, the housing sector has staged a recovery, and the resilience in demand means that core inflation continues to burn hot.
Hence, the economic data pulse argues for another rate increase next week, although some Fed officials have expressed caution. Led by Chairman Powell, there is a large group within the FOMC that favors “skipping” a rate increase this month, effectively postponing the decision until July.
One of the main elements behind this ‘take it slow’ approach is that the Fed has already raised rates by 5% since last year. The full impact of all this tightening hasn’t been felt yet, and unleashing even more could inflict unnecessary damage on the US economy. Hence, several Fed officials would like some extra time to examine incoming data.
Amid signs that the Chinese economy is losing steam as the manufacturing downturn deepens, these figures will be closely watched and could impact commodity-linked currencies like the Australian and New Zealand dollars.
Those economies will also be on the receiving end of crucial data, with Australia’s monthly jobs report and New Zealand’s quarterly GDP numbers both hitting the markets on Thursday as well.
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