(Bloomberg) — U.S. inflation likely continued to decline in June, but a key measure of underlying price pressures continues to operate at an uncomfortable pace that is keeping the Federal Reserve tilted toward resuming increases. interest rate this month.
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A government report released on Wednesday is expected to show the consumer price index rose 3.1% from a year ago, the smallest gain since March 2021, largely due to lower prices. price at the gas pump. Such a result would leave the headline CPI measure down almost 2 percentage points in just two months.
However, once volatile energy and food costs are removed, core CPI is expected to rise 5% from a year ago. Although this is the lowest annual increase since the end of 2021, it is still more than double the Fed’s target, based on a different measure of inflation.
The June inflation reading follows a number of recent reports that point to a resilient economy, despite 5 percentage points of interest rate hikes over the past year. Friday’s jobs report showed a healthy, albeit weaker-than-expected, increase in payrolls as well as firmer wage growth.
Fed officials scheduled to speak in the coming week include Neel Kashkari, Christopher Waller, Loretta Mester and Mary Daly. Investors will scan their comments for clues about their appetite for a resumption of rate hikes. The Fed’s Beige Book will also be released on Wednesday.
What Bloomberg Economics says:
“Fed speakers telegraphed their intention to hike rates another 25 basis points at their July meeting, so attention should be focused on how the balance of risk is changing and what that will mean. for the Fed going forward.”
—Stuart Paul, Eliza Winger and Jonathan Church, economists. For a full analysis, click here
Other US economic reports in the week ahead include the June Producer Price Index and the July Preliminary Consumer Sentiment Index from the University of Michigan.
Turning north, the Bank of Canada sets rates and unveils new economic forecasts on Wednesday. Governor Tiff Macklem has plenty of reason to hike again, after shocking markets with a 25 basis point increase last month. Growth is stronger than expected, inflation is proving to be tenacious and the housing market is rebounding, in part due to Macklem’s rate pause.
Elsewhere, Chinese data will reveal whether inflation has remained positive there, UK wage data will show how inflationary wage pressures are, and among several central bank decisions, officials in New Zealand and South Korea could keep rates unchanged. A group of 20 finance chiefs will fly to India for meetings this weekend.
Click here to see what happened last week and below is our summary of what is happening in the global economy.
Asia
China’s inflation reading due out Monday is expected to hold steady at 0.2%, although deflationary risks continue to rise.
The world’s second-largest economy will also report June trade data on Thursday, with investors expecting exports to have fallen further as worries about the path to recovery grow.
The Reserve Bank of New Zealand is expected to maintain its policy on Wednesday, after ending its bullish cycle, while Reserve Bank of Australia Governor Philip Lowe will speak after the recent decision to maintain the policy unchanged there.
The Bank of Korea is also expected to keep rates unchanged on Thursday, while warning that price growth remains above its 2% target.
The Philippines will release trade figures on the same day. The first data on Singapore’s gross domestic product in the second quarter is expected to show an improvement from the anemic figures for the first three months of the year.
Indian trade figures are due out on Friday, following inflation data earlier in the week.
The spotlight will remain on India this weekend as the group of 20 finance ministers and central bank governors meet in Gandhinagar, where they are likely to discuss the state of the global economy and debt relief. debt amid division over Russian invasion of Ukraine.
Europe, Middle East, Africa
The UK will take center stage at a time when Bank of England interest rate betting has risen to its highest level in a quarter century.
The full financial stability implications of such speculation could figure in the central bank’s latest assessment of system risks and stress tests, to be released on Wednesday, along with a press conference by Governor Andrew Bailey. The governor will also deliver a speech on Monday.
Data showing strength in wages and the labor market on Tuesday will also guide investors in assessing UK inflation. The May GDP figures will be released a few days later.
In the euro zone, the European Central Bank will release a report of the deliberations that led to its June 15 decision on Thursday, perhaps shedding more light on policymakers’ views on inflation risks and the rate outlook. Public remarks by officials will also draw attention, including chief economist Philip Lane on Wednesday.
It’s not a great week for data in the region, although monthly industrial production figures for the Eurozone may help indicate whether the economy has emerged from its recent recession.
The Nordics, where central banks remain fully committed to tightening, will see plenty of economic news. Sweden’s Riksbank will release the minutes of its June 29 decision to raise rates again and signal more action, and national housing data will be released the same day.
Meanwhile, inflation data will be released in Norway and Denmark on Monday and Sweden on Friday, which will inform officials how alarmed they should be about consumer prices.
Russian data on Tuesday will likely show whether the current account surplus narrowed further in the second quarter after an earlier fall of more than $51 billion from a year earlier, driven by international sanctions.
Among the pricing decisions in the Greater Region:
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The Bank of Israel is expected to keep its key rate at 4.75% on Monday as inflation has slowed this year, although Morgan Stanley is forecasting a hike.
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Two days later, the National Bank of Serbia’s move could come with a tough call as policymakers debate whether to match the tightening elsewhere after already announcing a surprise rate hike in the month last.
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On Friday, rate-setting authorities in Angola could raise borrowing costs to contain inflation, which is expected to be kept high by the government’s decision to stop defending the kwanza and cut subsidies to the essence.
Around the African continent, consumer price data will be a focus. Inflation in Egypt, expected on Monday, likely accelerated to 35% last month from 32.7% in May.
Later in the week, Nigeria’s measure is expected to have jumped to around 30% from 22.4%, fueled by the recent removal of fuel subsidies and the sharp depreciation of the naira.
Latin America
Well-watched central bank surveys of economists and traders in Brazil and Chile open the week.
Consumer price data from Colombia is expected to show inflation slowing for a third month in June, although the pace of disinflation has so far been modest and core readings are yet to come. peaked until May.
Analysts polled by Bloomberg see consumer price increases falling to 9.5% by the end of the year as the Banco de la República begins to cut interest rates in the fourth quarter.
In Argentina, the June consumer price report could show moderate margin pressures, with the monthly figure slowing from May’s 7.8% result to leave the annual figure below 120%. The readings could persuade the central bank to keep the key interest rate at 97% this week.
Disinflation in Peru is accelerating but the central bank is unlikely to start lowering the policy rate from the current 7.75% in the coming week.
In Brazil, the June consumer price print is expected to fall below the central bank’s 3.25% target.
If the data comes in as expected, the Banco Central do Brasil, led by Roberto Campos Neto, will enter its August 1-2 meeting with some leeway while facing considerable political pressure to go big.
–With the help of Monique Vanek, Robert Jameson, Stephen Wicary and Paul Jackson.
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