(Bloomberg) — Jerome Powell’s remarks next week will be scrutinized by investors for clues about how long the Federal Reserve is willing to wait before cutting interest rates.
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The last time the US central bank chairman spoke, he signaled that policymakers were likely to keep borrowing costs high for longer than expected, underscoring the lack of further progress in reducing inflation and the lasting strength of the labor market.
The latest price data, which showed stubborn underlying inflation, as well as expectations for a strong jobs report on Friday, are unlikely to cause the Fed chief to change his mind.
Powell will speak to reporters after the Fed’s rate decision on Wednesday, with the central bank expected to keep borrowing costs at a more than two-decade high. Expectations for rate cuts have been pushed back to 2024, and investors are now betting on up to two cuts by the end of the year.
The week will be capped by the monthly jobs report, offering a new look at the state of the U.S. labor market. Economists expect nonfarm payroll growth to slow to a still-high pace in April amid stable, low unemployment.
What Bloomberg Economics says:
“We expect Powell to take a hawkish turn. At a minimum, it will likely indicate that the median FOMC participant now expects “fewer” cuts this year. In a more hawkish direction, he could hint at the possibility of no cuts – or even suggest that an increase could be considered, even if it is not the current baseline.”
—Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou, economists. For a full analysis, click here
We will also receive updates on a closely watched, quarterly measure of employment costs, as well as monthly figures on job openings and the manufacturing sector.
Looking north, Canada’s gross domestic product data for February could show a slight boost to the economy, giving the Bank of Canada options as it considers when to adopt more policy flexible.
Elsewhere, euro zone data could show that inflation has stopped slowing and the economy has started to grow again, while Chinese surveys will highlight the strength of the expansion there. Central banks from Norway to Colombia will set rates, while the Paris-based OECD will release new global forecasts on Thursday.
Click here to find out what happened last week and below you’ll find our summary of what’s happening in the global economy.
Asia
China highlights prospects for first-quarter economic expansion with the release of official Purchasing Managers’ Index data on Tuesday. The report will show whether manufacturing activity increased for a second month in April.
There may be some seasonal slowdown resulting from fewer business days, but the overall direction will likely point to a continued recovery, according to Bloomberg Economics. The same day the Caixin gauge is expected, which has been oscillating above the threshold of 50 which separates expansion and contraction for five months.
Global trade will be in the spotlight as Australia, South Korea, Thailand, Sri Lanka and Vietnam all release their trade figures during the week.
Japan receives a blast of data on Tuesday that is expected to show industrial production rebounded in March, with retail sales and the unemployment rate also expected.
And South Korea’s consumer inflation data released Thursday is expected to show a slight slowdown in price growth while remaining above the Bank of Korea’s target, further prompting the central bank to postpone any policy changes.
Meanwhile, Thai Prime Minister Srettha Thavisin has named capital markets veteran Pichai Chunhavajira as the country’s new finance minister, an appointment that could ease tensions between the prime minister and the central bank over monetary policy .
Europe, Middle East, Africa
In the euro zone, data could show that the slowdown in inflation stopped in April for the first time this year. Consumer prices are likely to have increased by 2.4% from a year earlier, matching the March result, amid rising energy costs.
The underlying measure that strips out these volatile elements can reassure officials that the trend is still downward, even though national numbers will likely reveal some discrepancies. Germany and Spain, which are due to release data on Monday, may have experienced faster inflation.
The Eurozone report will be published on Tuesday with the latest GDP figures. Economists estimate that the region probably returned to growth of a minimum of 0.1% in the first quarter after the slight recession it suffered at the end of 2023.
As with inflation, the figures released Tuesday could mask uneven results across the region. To get a taste of this, investors will likely be closely watching Irish growth data on Monday, which has a history of volatility.
Overall, these reports could echo European Central Bank President Christine Lagarde’s observation this month that the economy is weak and faces “bumps in the road” to the evolution of inflation.
Switzerland will release consumer price data on Thursday, which could show inflation remains well below the 2% cap targeted by the central bank.
And the next day, in Turkey, investors will monitor progress in slowing consumer price growth.
Most of the market believes that Turkey’s inflation rate will continue to accelerate from 68.5% in March to around 75% in the coming months, despite nearly a year of aggressive rate hikes. Until the price rise slows, bond investors are unlikely to rush back into the lira debt market, a key focus of the Turkish government.
Three monetary decisions are being made across the region:
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On Tuesday, Malawi officials could be persuaded to raise the policy rate again to curb inflation which is expected to remain high due to damage to crops caused by unfavorable weather conditions.
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The Czech central bank is expected to reveal its latest decision on Thursday, with policymakers expected to cut borrowing costs by 50 basis points.
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The next day, Norges Bank may keep the deposit rate unchanged after the Norwegian economy grew better than expected, although inflation slowed faster than expected. Investors will be watching for clues as to whether policymakers will be more cautious about reducing borrowing costs in the fall.
Latin America
Mexico’s flash production data for the first quarter will likely show the economy suffered a slight contraction in the three months through December. Analysts’ consensus forecasts a slowdown in growth for a third year in 2023, to around 2.4% compared to 3.2% in 2023.
Brazil will release a number of reports, including the broadest measure of inflation, the central bank expectations survey, the current account, industrial production and the national unemployment rate.
Since last June, the unemployment rate in Latin America’s largest economy has been below 8 percent, which many Brazilian observers consider an unemployment rate that is not accelerating.
Chile releases a series of March indicators, including retail sales, unemployment, industrial production, manufacturing, copper production and GDP proxy figures. Stronger-than-expected growth and a pick-up in inflation prompted the central bank to slow the pace of its easing measures earlier this month.
In Peru, the April inflation report for Lima, the country’s megacity capital, may show that prices have finally returned to the 1-3% tolerance range, while remaining above the target by 2%.
It is widely believed that the Colombian central bank is extending its easing cycle with a second consecutive half-point cut that would lower the policy rate to 11.75% amid continued disinflation. BanRep will also release its quarterly inflation report, updating its growth and inflation forecasts, as well as its revised monetary policy outlook.
–With assistance from Ott Ummelas, Robert Jameson, Laura Dhillon Kane, Vince Golle, Patrick Donahue, Brian Fowler, Monique Vanek and Paul Wallace.
(Updates with Thailand’s new finance minister in Asia section)
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