(Bloomberg) — US inflation figures in the approaching week will reinforce that long-awaited interest-rate cuts are coming soon, while a reading on consumer spending is seen indicating that the central bank has been successful at keeping the expansion intact.
Most Read from Bloomberg
Economists see the private consumption expenditures price index excluding food and energy — the Fed’s preferred measure of underlying inflation — rising 0.2% in July for a second month. That may pull the three-month annualized rate of so-called core inflation all the way down to 2.1%, a smidgen above the central bank’s 2% goal.
Economists within the Bloomberg survey also expect consumer outlays, unadjusted for price changes, to climb 0.5% — the strongest advance in 4 months — in Friday’s report.
Speaking on the Jackson Hole symposium, Fed Chair Jerome Powell acknowledged recent progress on inflation, saying he’s gained confidence it’s on a path back to 2% and that “the time has come for policy to regulate.”
Friday’s comment marked a key turning point within the Fed’s two-year battle against price pressures and underscored how the main target has shifted toward risks within the labor market — the opposite a part of the central bank’s dual mandate. Employment growth has helped keep consumers spending — a key to making sure expansion of the economy.
On Thursday, the federal government will issue its first revision of second-quarter gross domestic product. Economists’ median projection calls for a 2.8% annualized rate of growth, unchanged from the prior reading.
Other US data in the approaching week include July durable goods orders on Monday and separate indexes of consumer confidence on Tuesday and Friday.
What Bloomberg Economics Says:
“Powell’s very dovish address at Jackson Hole was music to market players’ ears. He pledged the Fed would do ‘every little thing’ it may possibly to support a robust labor market, providing a floor for the economy. We predict a little bit of a reality check is so as.”
— Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou. For full evaluation, click here.
Further north, Canadian second-quarter GDP data might be the ultimate major economic release before the central bank is anticipated to lower rates for a 3rd straight meeting on Sept. 4.
Preliminary data suggested 2.2% annualized quarterly growth — higher than the central bank’s forecast of 1.5% — bolstering its efforts to engineer a soft landing while continuing to lower borrowing costs.
Investors might be also awaiting the newest developments to resolve a Canadian railway dispute that has snarled North American supply chains.
Elsewhere, the euro zone will report inflation for August lower than two weeks before the European Central Bank next decides on monetary policy, while China’s central bank will set the speed on its one-year policy loans. Rate decisions include Hungary and Israel.
Click here for what happened up to now week, and below is our wrap of what’s coming up in the worldwide economy.
Asia
The week starts with a renewed deal with China’s recent monetary framework, because the People’s Bank of China sets the speed on its one-year policy loans. After a surprise cut in July, authorities are expected to carry the speed regular at 2.3%.
Monday’s decision comes after the PBOC signaled this month that it’s de-emphasizing the medium-term lending facility’s role as a policy tool, while elevating the seven-day reverse repurchase rate to greater prominence.
A day later, China gets industrial profit figures that will spur calls for more policy steps to spice up the economy, and Beijing sees official PMI numbers on Saturday.
Elsewhere, prices might be a theme.
Australia’s trimmed mean inflation gauge for July will give its central bank fresh evidence to weigh because it considers whether or to not retain its hawkish rhetoric.
Japan also gets a consumer inflation update for the capital, a number one indicator for national trends. Data on Friday may show India’s year-on-year economic growth slowed a tad within the second quarter, and trade figures are due in the course of the week from Thailand, Sri Lanka and Hong Kong. Kazakhstan’s central bank meets Thursday to come to a decision whether to chop its key rate for a 3rd consecutive meeting.
Europe, Middle East, Africa
Inflation data might be in focus for Europe as well, with August numbers due from the region’s big economies — Germany, France, Italy and Spain — together with a reading for the 20-nation euro zone as an entire.
A slowdown is anticipated for the bloc from July’s 2.6%, paving the best way for the ECB to lower rates of interest for the second time this cycle when it meets in September.
Such expectations have been reinforced by the continent’s economic predicament. While August’s Purchasing Managers’ Index got an unexpected boost from the Paris Olympics, underlying weakness is prone to persist beyond that temporary lift. The beginning of the week will see updates on output and sentiment in Germany — the region’s current weak spot.
Speakers prone to comment on monetary policy and the newest shifts within the economy include ECB Governing Council members Joachim Nagel and Klaas Knot, in addition to Executive Board member Isabel Schnabel.
In Eastern Europe, Hungary is anticipated to maintain rates of interest on hold at 6.75%. It’s an analogous story within the Middle East, where Israel’s central bank is seen keeping benchmark borrowing costs at 4.5%.
In Africa, there’ll be August inflation readings from Kenya and Uganda, together with second-quarter GDP figures from Nigeria.
Latin America
Brazil’s central bank on Monday posts its weekly survey of economists. Bank President Roberto Campos Neto this month said inflation expectations are unmoored and that officials are able to tighten monetary policy if needed.
Brazil’s mid-month inflation data on Tuesday may show a slight easing from July’s 4.45%, still well above the three% goal. Analysts are marking up their interest-rate forecasts while traders are pricing in a hike as soon as next month.
Fiscal slippage has put Brazil’s budget data — the July figures are slated for publication in the approaching week — within the highlight. Economists surveyed by the central bank don’t see an annual nominal or primary budget surplus to the 2027 forecast horizon.
The predominant event in Mexico might be the central bank’s quarterly inflation report. Latest forecasts are unlikely so soon after revisions made within the bank’s Aug. 8 post-decision communique, but policymakers may re-examine GDP estimates.
Chile’s June retail sales figures will likely show a seventh consecutive positive year-on-year print after nearly two years of declines.
–With assistance from Robert Jameson, Laura Dhillon Kane, Zoe Schneeweiss, Paul Richardson and Brian Fowler.
(Updates with Canada rail dispute in tenth paragraph)
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.