As employment data this week suggests that the US economy remains strong, next week we will focus our attention on other major preconceptions in the Federal Reserve. Whether price pressure has been eased.
Data from the January consumer price index is scheduled for Wednesday, and is expected to show a slight decline in price increases, but it is not enough to rush the central bank to another interest rate cut.
A meticulous core inflation measure that removes volatile food and energy prices is expected to come in at 3.1% of the month, 0.3% of the month, compared to the previous year, according to an economist voted by Reuters. . December cent. The heading rate is projected to remain at 2.9%.
Last month, the Fed put on interest rates on hold and showed that it is not in a hurry to easer further unless the data supports such a move.
The futures market means investors are priced 80% of the time when a quarter-point cut at the central bank’s July meeting, meaning they are split into one more chance by the end of the year. Masu.
Wednesday’s data will look at signs of wage inflation seen in this week’s employment figures. Here, monthly wages rose 0.5% compared to the 0.3% forecast. Unemployment also slipped to 4%, implying a more severe labor market that could cause price pressure.
“The Fed clearly doesn’t like what happened with unemployment and wage numbers,” said David Rosenberg of Rosenberg Research. Jennifer Hughes
Has the UK economy returned to growth?
UK economic growth data is scheduled to be released by the National Statistics Bureau on Thursday. It is expected to deal a new blow to Prime Minister Rachel Reeves.
The economists voted by Reuters expect the economy to have signed more than 0.1% in the last quarter of 2024 after a period of growth over the past three months. It is bad news for the government’s mission to promote growth and could increase fear of stags.
The forecast coincides with the Bank of England expectations, saying on Thursday it partially declined in reflecting “a widespread decline in business trust.” The economy has been stagnant since March, warning of employment cuts in recent years after an increase in employer national insurance contributions announced in the October budget.
A greater economic contraction than expected in the last quarter or downward revisions of previous data could strengthen market expectations for interest rate cuts this year. Investors are currently expecting two more interest rate cuts in 2025. This could be a third of the BOE’s decision to cut borrowing costs to 4.5% this week.
BOE currently expects only a small 0.1% growth in the first quarter of this year, a sharp downgrade from the expected 0.4% expansion in November. It also downgraded its overall growth forecast for 2025 to 0.75% from the expected 1.5% in November.
Ellie Henderson, an economist at Investment Bank Investec, also hopes for “slight growth” for most of the first half of the year, but added that “everything hasn’t been lost.”
With wages rising faster than inflation and household savings higher, “consumers have a way to unleash more consumption,” Henderson said. Valentina Romi
Will the Swiss National Bank be able to keep interest rates below zero this year?
Swiss inflation figures scheduled for Thursday could prove to be a key data point that will help the country determine whether it will return to negative interest rate territory this year.
The consumer price index fell 0.1% in December compared to the previous month, with annual inflation at 0.6%. Analysts will look for clues in the January figures as to how far the Swiss National Bank will lower its rate from its current 0.5% level. percent.
The lack of growth pace combined with the background of Switzerland’s “benign” inflation could mean that interest rates “may benign” over the long term until 2022, Rabobank said analysts said.
Switzerland was the first major Western Central Bank to cut its rate in March last year, avoiding the worst inflation that has hit Europe in recent years.
However, in response to weaker than expected inflation and increasing uncertainty about the global economy, it announced a 0.5 percentage point cut in December.
Currently, the market is 80% likely to reduce borrowing costs to 0.25% in March, and about 40% chances of a 40% chance of zero in June.
Thomas Dovolak, an economist at Oxford Economics, expects inflation to hover between 0.3-0.5% throughout the year. This is because the domestically serviced economy and the status of non-EU members could mean that it will escape some of President Donald Trump’s tariffs.
However, the central bank does not have much room to pilot, he added. “To curb demand to push it below zero (interest rate) we need another negative shock. So we have both deflation and negative rates on the table.” Mari Novik
