On Monday, SNB Chairman Thomas Jordan is scheduled to speak at an event hosted by the SNB in Zurich. While these events typically don’t prompt significant market volatility, it’s worth monitoring in case Jordan discusses inflation or potential rate cuts. Following last week’s surprising drop in inflation figures, the market anticipates another rate cut from the SNB in June, before Jordan’s mandate is scheduled to end in September.
Tuesday brings attention to Australia, with releases of the Westpac consumer sentiment and the NAB business confidence indices.
Wednesday sees multiple focal points: the RBNZ will announce its monetary policy decision, while the U.S. will release inflation data and the FOMC meeting minutes. Additionally, Canada will hold its own BoC monetary policy announcement later in the day.
Thursday shifts focus to the ECB monetary policy statement, including discussions on the main refinancing rate and the ECB press conference. In the U.S., attention will be on the Core PPI m/m, PPI m/m, and the unemployment claims figures.
Finally, on Friday, the U.K. will release its GDP m/m data, while the U.S. will unveil the preliminary UoM consumer sentiment and preliminary UoM inflation expectations figures.
Last month the Westpac consumer sentiment declined by 1.8% to 84.4, maintaining a strong pessimistic stance (under 100) despite hints of improvements in previous months. This suggests ongoing consumer apprehension about the economy in the near term. While decreasing inflation could offer a positive boost to sentiment in April, the persistent increase in fuel prices might offset any positive effects. Moreover, the lack of a policy decision from the RBA in April could further contribute to uncertainty surrounding future economic policies and directions, potentially impacting sentiment.
During this week’s meeting, it is anticipated that the RBNZ will maintain its current monetary policy unchanged. Despite recent GDP figures for New Zealand falling short of expectations and uncertainties persisting in the near-term inflation outlook, the RBNZ is expected to stand by its forward outlook communicated in February. While there are market expectations of a potential official cash rate (OCR) cut in August, the Bank has not given indications that support that timeline so far.
Following another robust jobs report, the pressure on the Federal Reserve to reduce interest rates has eased, prompting the market to turn its attention to the possibility of rising inflationary pressures.
The Fed has repeatedly emphasized the need for further evidence that inflation is moving towards its 2% target. This week’s data will provide insight into whether the recent uptick in inflation was merely transitory or indicative of a more sustained trend.
It is anticipated that headline inflation will increase by 0.4%, primarily driven by elevated gasoline prices, while core inflation, excluding food and energy, is expected to rise by 0.3%. Wells Fargo analysts anticipate that core goods went into deflation territory but services inflation remained largely unchanged and will need to cool off more in order to push overall inflation down.
During the upcoming meeting this week, it’s likely that the BoC will maintain its current monetary policy. Recent inflation data printed below expectations, and indications suggest this downward trend may persist in the coming months. Market expectations lean towards a potential interest rate cut in June. Therefore, the focus at this meeting will be on any changes in language regarding inflation, as well as any guidance on monetary policy and updates on economic forecasts. Any adjustments made during this meeting could open the door for the BoC to deliver its first rate cut in June.
The ECB is expected to keep its monetary policy unchanged this week, but after the latest comments from policymakers the market anticipates a first rate cut in June. Inflation data in the eurozone dropped. Economic activity growth was weak during H2 last year, but there have been some signs of improvement this year. If economic activity keeps improving the ECB will not be pressured to cut rates too soon and the current message is that further decreases in prices and wage growth are needed.
The consensus for the U.S. core PPI m/m is 0.2% from 0.3% prior and for PPI 0.3% from 0.6% prior. Stronger energy prices are driving the growth, but any increase in core goods prices will be a risk to CPI. The markets will give particular attention to the PPI components that influence core PCE inflation, which analysts from Citi estimate to see a 0.30% increase in March.
