Key U.S. inflation gauge set to hit new four-decade high
Washington: Federal Reserve Chairman Jerome Powell and his colleagues can expect their leading inflation indicator to accelerate to a new four-decade high, last seen when Paul Volcker led the bank Central American.
The personal consumption expenditure price index, which the Fed uses for its inflation target, likely jumped 6% in January from a year earlier, according to the median of a Bloomberg survey of economists. . The basic measure, which excludes food and fuel, is expected to climb 5.2%.
Less than a month before the Fed’s next policy meeting, a stronger-than-expected rise in the price gauge could mount pressure for a half-point hike in the benchmark interest rate. January’s consumer price index rose more than expected, with large increases in the cost of goods and services.
Investors will gauge central bankers‘ appetite for a half-point move after speeches by Governors Christopher Waller and Michelle Bowman and regional Fed chairs Loretta Mester of Cleveland, 2022 FOMC voter Raphael Bostic of Atlanta and Thomas Barkin of Richmond.
Inflation in the early stages of the production process also remains high, with fears of a possible Russian military invasion of Ukraine contributing to rising costs for oil and other commodities.
Friday’s Commerce Department report will also show how consumer spending and income fared in January, before and after adjusting for inflation. Other reports on the calendar include new home sales, consumer confidence and durable goods orders.
February readings from IHS Markit’s manufacturing and services earlier in the holiday-shortened week will illuminate the rebound in the US economy from omicron-linked weakness a month earlier. Economists are calling for a modest acceleration in the pace of activity.
“An escalation of the Russian-Ukrainian conflict could lead to an unfavorable combination of even higher energy prices, tighter financial conditions and an adverse confidence shock – all relevant to the Fed’s thinking about the appropriate pace of tightening,” said Bloomberg economists Anna Wong, Yelena. Shulyatyeva, Andrew Husby and Eliza Winger.
Central bank actions
Elsewhere, central banks from Hungary to New Zealand could raise rates again, the Governor of the Bank of England will testify in Parliament and South Africa will announce its budget.
Click here to see what happened last week and below is our summary of what is happening in the global economy.
The main leaders of the Asia-Pacific rate hike are both meeting this week, with the Reserve Bank of New Zealand expecting the Reserve Bank of New Zealand to push rates up again. interest on Wednesday as inflation continues to soar.
The Bank of Korea appears to be holding steady at Lee Ju-Yeol’s last meeting as governor, having already hiked borrowing costs three times since the summer.
Preliminary trade figures from South Korea, due earlier this week, will give the final pulse check on global trade.
The Reserve Bank of Australia will take a close look at wage growth data on Wednesday amid continued speculation that higher rates will arrive sooner rather than later. Thursday’s capital spending figures could also fuel rate hike talks Down Under if they show strength above expectations.
February inflation figures for Tokyo at the end of the week are likely to show price growth still at a subdued level against the rest of the world despite accelerating energy bills which are antagonizing Japanese voters ahead of the summer elections.
Surveys of purchasing managers in the euro region and the UK will reveal the health of manufacturing and services just as coronavirus restrictions thaw. Economists predict that all gauges will show improvement in February. This is also the case for the Ifo Business Confidence Index in Germany and an equivalent measure in France.
The data will inform policymakers at the European Central Bank as the balance of opinion hardens in favor of raising rates this year to curb inflation. At least six ECB officials will make public remarks in the coming week, including Vice President Luis de Guindos and Executive Board member Isabel Schnabel.
BOE officials are generally expected to raise rates again in March. For clues about the scale of the move, investors will examine testimony from Governor Andrew Bailey and his colleagues on Wednesday, as well as other planned speeches.