How will central banks react?

Inflation and interest rates have been at the forefront of investors’ concerns so far this year and that is unlikely to change for some time. Earnings season has provided a welcome and timely distraction and allowed markets to find some stability, but as we saw towards the end of last week, inflation continues to dominate.

While many expect inflation to peak over the next two months, for various reasons, and then fall fairly quickly, there isn’t huge confidence that everything will go as planned. And there’s plenty of evidence over the past few months that inflation has taken central banks and the rest of us by surprise.

Next week will see plenty of economic data from around the world and, unsurprisingly, it is the inflation indicators that will get the most attention. So will the comments of the various policy makers who need to speak, with some slowly accepting that a significant policy response is needed and others continuing to push back against market expectations with little success. Whatever happens, it promises to be another fascinating week.

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With Wall Street completely obsessed with inflation, the next set of economic data should confirm that the peak is approaching and that US consumption is still strong. Tuesday’s release is expected to show that suppliers are still charging businesses higher prices, while the is expected to return to positive territory.

Wednesday is expected to rebound as the December drop was driven by Omicron’s impact on demand and supply disruptions. Also in the middle of the week, we expect a rebound. Thursday is a busy day that includes , , and .

The Fed speech will include speeches from , and Thursday. Evans of the Fed and will participate in a panel that will discuss the Fed’s new policy strategy.

EU

A relatively calm week economically, with the bulk of next week’s notable data coming on Tuesday. and the data for the eurozone will be notable but not game changing, the same can be said for the surveys, although they will contain some clues as to how the economy is likely to perform amid inflation levels higher.

Once again it’s the ECB speech that will be the highlight, but we can probably expect more pullback from market expectations ahead of next month’s meeting when we’re likely to see a change in policy. significant.

Olaf Scholz is due to travel to Russia to meet Vladimir Putin on Tuesday in a bid to ease tensions between NATO and Russia over Ukraine.

UK

Next week we will have the UK data dump and, unsurprisingly, all the focus will be on the data and the seriousness of the situation. We don’t seem to have too many good surprises at the moment and the markets are already anticipating four or five more increases this year, including two more consecutive increases in March and May. The BoE seems to agree with the latter but indicated that market expectations for the year are excessive. Maybe next week they’ll change their minds.

Boris Johnson continues to hang on as we await the outcome of the police investigation into numerous lockdown parties.

Russia

The CBR of 100 basis points on Friday at 9.5%, in line with expectations. This, however, left the door open for further increases, despite the belief that it will soon return to target and peak.

Next week’s highlight will be the meeting between Putin and Scholz, with the data of some interest.

South Africa

data will be critical next week as it is currently just at the upper end of its target range and the SARB has done so for the past two meetings while signaling that others may follow.

Turkey

The first test of the year for the CBRT will come next week as it meets to decide whether or not to continue cutting interest rates. reached 48.7% according to official data, after the dismissal of the head of the agency. We could see a tighter central bank over the next year, as Erdogan won’t want to go to the elections next year with soaring inflation, which could explain the relentless cutting exercise last year. Whether that bet pays off or not is another matter, but we should find out more next week.

China

China publishes for January on Wednesday. Inflation is expected to slow to 1.0% from 1.5% in December. Lower food prices likely offset higher energy and gasoline prices.

India

On Monday, India publishes for January. Inflation stood at 5.6% in December and is expected to rise to 6%, the upper limit of the central bank’s target of 2% to 6%. The expected rise in inflation is the result of rising food and telecom prices as well as supply chain issues.

India, the world’s largest democracy, will hold elections in five states, including Goa and Uttarakhand. Some 180 million people are eligible to vote, and the results could determine the political future of Prime Minister Narendra Modi and his Bharatiya Janata Party (BJP).

Australia

Australia releases the January report on Thursday. Job growth shone through in December (64,800), but is expected to stall in January, with a consensus of a negligible 2,500 new jobs. This is the result of the Omicron outbreak in January, which significantly dampened job growth.

The is expected to have fallen slightly to 4.1% from 4.2% in December.

New Zealand

Most level two and three data will be released over the next week.

Japan

Japan releases fourth quarter on Monday. The economy is expected to have rebounded in the fourth quarter as the government lifted health restrictions due to the Omicron wave in late September. The consensus for Q4 GDP is 6.0%, following a 3.6% contraction in Q3.

On Friday, Japan releases its national CPI for January. should have posted a slight gain of 0.3%, compared to 0.5% in December. The drop in inflation can be attributed to the renewal of health restrictions in most of Japan, which has hurt .

Economic calendar

Sunday February 13

Informal meeting of EU trade ministers in Marseille, France

Monday February 14

Economic data/events

• Australian RBA Minutes
• ECB President Lagarde participates in the European Parliament debate on the ECB’s 2020 Annual Report
• Assembly elections for Indian Uttarakhand, Goa will be held
• German Scholz travels to Ukraine for talks with President Zelensky
• Informal meeting of EU Ministers in Bordeaux, France
• Czech CPI
• India CPI
• wholesale prices in india
• New Zealand food prices

Tuesday February 15

Economic data/events

• American cross-border investment, PPI, empire manufacturing
• German Scholz travels to Moscow for talks with President Putin.
• Expectations from the ZEW survey in Germany
• Eurozone GDP
• GDP of Japan
• GDP of Hungary
• Poland GDP, CPI
• India Trade
• Norway Trade
• Housing starts in Canada, sales of existing homes
• Industrial production in Japan
• Mexico’s international reserves
• New Zealand house sales
• Remittances to the Philippines Abroad
• Claims for unemployment insurance in the UK, unemployment
• Turkish central government fiscal balance
• Denmark PPI, GDP indicator
• Norwegian consumer confidence

Wednesday February 16

• NATO defense ministers meet in Brussels. Until February 17
• North Korea is marking its Shining Star Day holiday to mark what would have been former leader Kim Jong Il’s 80th birthday, with satellite images pointing to a possible military parade to mark the occasion.

Economic data/events

• Fed Minutes
• U.S. retail sales, trade inventories, industrial production
• IPC Canada
• IPC South Africa
• CPI Russia
• GDP of Norway
• Retail sales in South Africa
• CPI China, PPI
• Euro area industrial production
• Japan Tertiary Index
• UK property prices, PPI, CPI
• EIA Crude Oil Inventory Report

Thursday February 17

• G20 Finance Ministers and Central Bank Governors meet
• Fed’s Bullard speaks at SGH Macro Advisors and Columbia University Fireside Chat
• EU-African Union summit in Brussels
• The ECB publishes its economic bulletin
• ECB Chief Economist Philip Lane participates in an INM webcast
• Annual speech by the Governor of Norges Bank in Norway

Economic data/events

• US housing starts, first jobless claims
• G20 Finance Ministers and Central Bank Governors meet
• Fed’s Mester speaks at an NYU Stern School of Business event
• Fed’s Bullard speaks at SGH Macro Advisors and Columbia University Fireside Chat
• EU-African Union summit in Brussels
• The ECB publishes its economic bulletin
• ECB Chief Economist Lane takes part in an INM webcast
• Annual speech by the Governor of Norges Bank in Norway
• Trade Italy
• Japan Trade
• Singapore Trade
• Turkey Tariff Decision
• Unemployment in Australia
• Registrations of new cars in the euro zone
• Singapore GDP
• Gold and foreign exchange reserves of Russia

Friday February 18

Economic data/events

• Panetta from the ECB and Evans from the Fed; Waller and Brainard will speak at the US Monetary Policy Forum.
• US Existing Home Sales, US Conference Board Leading Index
• UK retail sales
• CPI Japan
• CPI France
• CPI Sweden
• Russia GDP, money supply
• Retail sales in Canada
• Eurozone consumer confidence
• Consumer confidence in Turkey
• Unemployment France
• Sales of houses in Turkey

Sovereign Ratings Updates

• Denmark (Fitch)
• France (Fitch)
• Poland (Fitch)
• France (S&P)

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