Week Ahead – Five central banks: who will hike, who will not cut?
XM Group | Mar 15, 2024 10:12AM ET
- Fed meets on Wednesday with focus on new dot plot
- Will the Bank of Japan finally end negative rates on Tuesday?
- BoE and RBA to stick with patience, SNB might be in more of a rush to cut
- Flash PMIs plus inflation data in the UK, Japan and Canada will also be crucial
Fed decision: hoping for the best
The upcoming week will undoubtedly be one of the busiest, not to mention the most important, of the year for investors with five major central bank decisions on the way, along with a plethora of economic data. The highlight, however, looks set to be the Federal Reserve’s decision on Wednesday, as expectations of looser monetary policy in the world’s largest economy have been fuelling the incredible stock market rally of late.
Rate cut bets have swung sharply this year amid some mixed signals on the strength of the Fed’s two mandates: employment and price stability. If the overall picture could be summed up, it is that both the labour market and inflation are cooling down, but only gradually. The latest nonfarm payrolls report and CPI figures only underscored this trend.
For the Fed, although it has so far avoided the trap of pre-committing to a rate cut, the easing tendency is evident. Chair Powell told lawmakers last week that they’re “not far” from being confident that inflation is moving sustainably towards 2%. Powell’s readiness to cut is likely the reason why markets react more to soft data than upbeat ones.
However, the Fed’s projected rate cuts are based on the expectation that inflation remains in a downward trajectory despite the slowdown in the disinflation process. That trend has now started to look questionable as the latest CPI and PPI releases suggest that inflation may be flatlining before reaching the Fed’s 2% goal. This turns the spotlight on the updated FOMC dot plot, which will be the focal point of the March meeting.
After flirting with the $1.09 level during the past week, the euro could rise further if the PMIs impress. Ahead of the PMI survey, the final CPI readings are due on Monday, while German business gauges, the ZEW and Ifo indices on Tuesday and Friday, respectively, will shed some more light on the bloc’s largest but currently the weakest economy.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.