From interest rate decisions at the Federal Reserve, European Central Bank, and the People’s Bank of China, to inflation and retail sales. I’m Jeff Kleintop and here’s what you need to know for the week ahead.
Monetary policy is at the top of the list of potentially market-moving events this week. We expect different outcomes – A hold, hike, and a cut. We expect the Fed to hold rates steady at Wednesday’s meeting. The updated dot plot, as well as Fed chair Powell’s remarks at the press conference, are likely to signal a bias towards one more hike at the July meeting.
Tuesday’s May CPI print is expected to come in at 4.1%, down from last month’s 4.9, but an upward surprise on inflation could prompt a Fed hike this week, as we saw with the surprise hikes from the Bank of Canada and Reserve Bank of Australia last week, after they had paused their hikes in prior meetings.
The ECB will almost certainly hike rates by 25 basis points on Thursday. That comes despite last week’s revised first quarter data revealing the eurozone is in a recession with back-to-back quarters of negative GDP growth in Q4 and Q1. Though it’s the mildest recession on record; something close to a contraction of just -0.2%. The news of an official recession in Europe cements expectations that the hiking cycle doesn’t have much more to go.
China’s central bank is likely to cut its one year medium-term lending facility rate by ten basis points on Thursday, the first reduction in nearly a year with the post-zero COVID recovery losing some steam. The economy needs some support and low inflation in China allows for a cut.
We also get US May retail sales on Thursday, which are expected to decline as consumers are becoming more discerning in their spending as what I’m calling a “cardboard box recession” continues.