Week Ahead – Rate cut bets to be tested by inflation data
XM Group | Feb 23, 2024 08:41AM ET
- US core PCE and Eurozone flash CPIs to keep inflation worries in the foreground
- Japanese and Australian inflation numbers also coming up
- RBNZ might strike a hawkish tone
- Manufacturing PMIs also in the spotlight
PCE inflation to headline busy US data week
The Fed is in no rush to ease policy and markets are finally starting to come round to the prospect of no rate cuts before the summer. Yet, stock markets have remained bullish, suggesting that the fact alone that interest rates will start to fall this year is enough to spur optimism.
For the US dollar, however, any further delay could be crucial for its year-to-date uptrend, hence, next week’s releases will form one of the last pieces of the puzzle before the March FOMC meeting. Specifically, all eyes will be on the personal income and outlays report for January that includes the all-important core PCE price index, which is the Fed's inflation indicator of choice.
After both the CPI and PPI figures surprised to the upside, another hot inflation print could cast doubt on even a June rate cut. It’s possible though that January’s PCE inflation readings due Thursday will not sway rate cut odds in either direction.
The yen could come under pressure from weaker-than-expected figures, although the BoJ’s primary focus right now is the spring wage negotiations, so any reaction would probably be modest.
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