(Bloomberg) — Perhaps the Fed’s preferred measure of underlying rate pressures remained elevated in February, keeping officials in a precarious place as they seek to balance an anti-inflationary solution with stress on the banking system.
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The US personal consumption expenditures price index, excluding food and fuel, is expected to have increased 0.4% from the previous month, according to a Bloomberg survey average. That would be followed by the biggest advance since June.
Compared to February 2022, the core measure of inflation is expected to have increased by 4.7%, while the general measure is expected to advance by 5.1% – both more than double the Fed’s target.
Policymakers on Wednesday raised the benchmark interest rate for the ninth consecutive meeting, to the highest level since 2007, while stressing that their attempt to curb inflation is not expected to deepen the nascent banking crisis. However, higher borrowing costs risk increasing pressures on the financial system that could tip the economy into recession.
Government data on Friday is also expected to show inflation-adjusted personal spending eased in February after rising the previous month.
What Bloomberg Economics says:
Fed Chairman Jerome Powell’s favorite ‘super’ inflation indicator – core PCE services excluding housing – is likely to show the flat component of inflation running steadily at 4%-5% over the past few months, not an encouraging sign of progress in the fight against inflation.
—Anna Wong, Stuart Ball, Eliza Winger and Jonathan Church, economists. For the full analysis, click here
The Income and Spending report tops the bills in a quiet week for US economic releases that include readings on Consumer Confidence, Home Prices and Contract Signings for Pre-Owned Homes.
Investors are likely to pay closer attention to Fed officials this coming week in hopes of gauging the appetite for further rate hikes. Fed Governor Philip Jefferson will discuss monetary policy at Monday’s event, followed later in the week by speeches from Boston Fed Chair Susan Collins, Richmond Fed President Tom Barkin, and Governors Christopher Waller and Lisa Cook.
Minneapolis Federal Reserve Bank President Neel Kashkari said Sunday during an interview on CBS’ “Face the Nation” that recent banking turmoil has increased the risk of a recession in the United States, but that it is too early to judge what that means for the economy. and monetary policy.
Fed Vice Chair of Supervision Michael Barr is scheduled to testify at separate hearings of the Senate Banking Committee and the House Financial Services Committee on recent bank failures.
Also in North America, Canadian Finance Minister Chrystia Freeland unveiled a federal budget, promising caution even as the Trudeau government faces pressure to increase spending on clean-tech stimulus to stay in competition with the Biden administration’s generous new industrial policy in the US.
Elsewhere, inflation data in the eurozone is expected to reveal mixed signals about price growth, purchasing managers’ indices in China will show strong factory activity there, and central bank decisions to raise interest rates from South Africa to Mexico may include.
Click here for what happened last week and below is our summary of what is going to happen in the global economy.
Asia
The strength of China’s purchasing managers’ indices will be a major focus for investors and policymakers trying to gauge the pulse of recovery in the world’s second-largest economy in the wake of the lifting of pandemic restrictions.
The PMIs came amid a slew of regional data on Friday, including industrial output from South Korea, hiring factory production and Tokyo inflation figures from Japan for March, which followed promising national data for the previous month.
The lower-than-expected price growth figures the previous day will help shape views on the RBA’s interest rate decision in early April.
Meanwhile, the Bank of Thailand is expected to raise borrowing costs again on Thursday.
Europe, Middle East and Africa
The highlight of the data in the Eurozone will be inflation on Friday, a report that is likely to provide ammunition for both hawks and doves at the European Central Bank on the next rate move.
On the other hand, headline price growth is likely to decline significantly – with all but one economist forecasting, the most optimistic forecast predicting a drop of about two percentage points. This dynamic may reflect a similar slowdown in inflation in each of the region’s largest economies.
But the core measure of the eurozone that excludes volatile items such as energy and food may go the other way, accelerating further to reach a new record in the euro era.
“Headline inflation will decline very quickly over the next six to seven months as the underlying effects play in favor of a rapid decline in inflation,” said ECB Vice President Luis de Guindos in an interview published on Sunday. What we want to see is a consistent and clear convergence towards the 2% target. In this regard, core inflation will be key. It is very difficult to achieve the 2% target in a sustainable way without a clear drop in core inflation.”
Inflation prospects at a time of renewed banking turmoil may concern ECB officials in many ways. Speeches by Bundesbank President Joachim Nagel on Monday and Tuesday may attract attention amid investor speculation swirling around Deutsche Bank AG.
European Central Bank President Christine Lagarde will deliver remarks on Tuesday in Frankfurt, and then appear in Florence on Friday.
Meanwhile, Germany’s ruling coalition meets on Sunday in Berlin to try to bridge differences over issues including next year’s budget.
In the UK, Bank of England Governor Andrew Bailey gave a speech at the London School of Economics on Monday, and will testify the next day to bailing out the local arm of Silicon Valley Bank in California.
Andrea Micheler of the Swiss National Bank, whose foundation raised interest rates after overseeing the forced takeover of Credit Suisse Group AG, speaks in Zurich on Thursday.
Elsewhere in the region, Turkey’s trade deficit is expected to widen further in February, with data due on Friday showing the impact of higher energy bills.
And in Russia, data on consumer and industrial production on Wednesday will give a fresh read on whether the slow recovery after a year of war continues.
Multiple rate decisions due. Here is a quick summary of Eastern Europe:
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In Hungary on Tuesday, officials may issue new guidance, with all eyes on when they might start lowering the EU’s highest standard borrowing costs.
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On Wednesday, the Czech central bank is likely to keep its interest rate unchanged at the highest level since 1999.
Here’s a look at what central banks across the African continent might be doing:
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On Monday, the Bank of Ghana is expected to do well after raising the interest rate by 14.5 percentage points since November 2021.
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Kenyan policymakers on Wednesday are likely to increase borrowing costs to fight high inflation and protect the local currency from weakening against the dollar.
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Also on Wednesday, Mozambique may remain on hold, even with one of the highest real rates in Africa, as double-digit inflation is expected to linger for months.
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In Egypt, officials may on Thursday offer a huge increase in exchange rates after serious currency devaluations sent food prices to a record high.
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And the same day. The Reserve Bank of South Africa is likely to raise interest rates by 25 basis points to counter inflation risks, including the impact of a weaker currency.
latin america
Amidst a busy week in Brazil – Focus Weekly Analysts Survey, Current Account & Lending and IGP-M Comprehensive Inflation Report – highlights the minutes of the central bank’s March 22 interest rate decision and quarterly inflation report.
Brazil watchers on Tuesday will be keen to see if tough post-decision language carries over into the minutes. Two days later, the same report may take a back seat in the press after the release by Central Bank President Roberto Campos Neto, who belongs directly to President Luiz Inácio Lula da Silva, on Brazil’s key interest rate of 13.75%.
In Argentina, domestic proxy GDP data for January could show the fifth negative reading in a row as drought, triple-digit inflation and tightening currency conditions undermined activity.
Next week Chile records six indicators for February, all of which are likely to confirm the loss of momentum that is widely expected to tip the economy into recession this year.
Heading into the weekend, central banks in Mexico and Colombia are sure to extend their record hiking campaigns in quarter-point increments, even though both are nearing their final interest rates.
Look out for Banxico raising its benchmark rate for the 15th consecutive time to 11.25% and Banco de la República de Colombia rising for the 13th consecutive meeting to 13%.
— With assistance from Robert Jameson, Malcolm Scott, Michael Winfrey, Stephen Wickary, and Gregory L. White.
(Updates with kshkari in eighth paragraph.)
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