Week Ahead – US core PCE and Eurozone flash CPIs eyed after rate pause signals
XM Group | Sep 22, 2023 09:03AM ET
- PCE inflation to grab attention on Friday as Fed signals higher for longer
- But markets might be more worried about a government shutdown
- Eurozone flash CPIs will also be the in the spotlight on Friday
- Chinese PMIs to be watched for recovery signs Will core PCE add to second inflation wave worries?
The latest spike in oil prices is causing some headaches for policymakers as energy costs are on the rise again just as they’ve started to see the result of their hard-fought battle to get inflation down. In the United States, higher gasoline prices have already started to push headline inflation back up. But as long as the oil surge turns out to be temporary, the trend in underlying price metrics should remain downwards.
The Bank of Japan has yet to be convinced that high inflation is here to stay and that the country isn’t about to fall back into deflation. A sustained rise in wages is a key criterion for policymakers, but even if this isn’t achieved anytime soon, the longer that CPI stays above the 2% target, the more difficult it will be for the Bank of Japan to justify maintaining ultra-loose monetary policy.
Thus, there could be some modest gains for the yen if the data is slightly stronger-than-expected. Also on the agenda in Japan are retail sales and preliminary industrial production figures for August, both on Friday.
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