Investors Poised for US CPI Inflation Report
The US CPI inflation report is the Valentine’s Day present that investors and traders have been waiting for. The report will determine whether the US Federal Reserve (Fed) opts for further monetary policy tightening. In the UK, the FTSE 100 index has hit a new record high, as it continues to rally in 2023.
US CPI inflation report: Will there be surprises?
The US January CPI inflation report will dominate the news today. Data published by the Bureau of Labour Statistics (BLS) is expected to show headline and core CPI inflation to rise 0.4% for the month. This might force Fed chair Jerome Powell and the central bank’s governing board to look for more interest rate hikes ahead as the battle against inflation could get complex.
A report released by the OCBC Bank noted that “if disinflation trend in US shows signs of slowing, then risk sentiment could come under pressure and the USD may find further support. However, if disinflation trend proves entrenched instead of bumpy (i.e. CPI comes in softer than expected), then a resumption of USD softness could return.”
UK CPI inflation report due on Wednesday
January’s headline and core CPI inflation data published by the Office for National Statistics (ONS) will be the focus of investors and traders on Wednesday morning. Economists suggest that numbers are expected to show a headline inflation slowdown to 10.1%, on an annualised basis.
Some market participants believe that, with wage growth trending higher, the Bank of England (BoE) may well need to stay the course a little longer than it would like if inflation does not drop under 10% in the next few months.
BoJ’s new governor to change policy?
Citing a document submitted to the Japanese parliament, a Reuters report suggested that Haruhiko Kuroda’s successor will be Kazuo Ueda, an economist and former BoJ's policy board member. Media reports in the past few days stressed that Deputy Gov. Masayoshi Amamiya was the primary candidate, but his denial led the government to choose Ueda.
Commenting on the BoJ’s monetary policy on Friday, Ueda noted that “the Bank of Japan's current policy is appropriate. Monetary easing must continue. I think it is important that our decision-making be logical and that our explanations are easy to understand.”
Japanese GDP growth slows to 1.1% in 2022
According to preliminary data published by the Japanese government, the country’s GDP expanded by 1.1% in 2022 over 2021, but the pace slowed from 2.1% in 2021. While exports of goods and services surged by 4.9%, imports in the same category soared by 7.9%.
European Commission has published its GDP forecast
The European Commission (EC) released its new winter forecasts on Monday. The EC hiked its forecasts for growth in 2023 as it no longer expects a recession in 2023.
Instead, forecasts now expect the euro bloc’s GDP to rise by 0.9% during 2023, up from the 0.3% predicted three months ago.
IMF says monetary tightening likely to end in 2024
Speaking at the World Government Summit in the United Arab Emirates (UAE), the International Monetary Fund’s (IMF) head, Kristalina Georgieva, suggested that global markets have a good reason to be upbeat.
More specifically, Georgieva said: “we have markets that are in love with good news, and they do not keep their ears open for the more neutral nuanced message they’re getting from the Fed, from the European Central Bank. Markets hear the first part of the sentence, they don’t [hear] the second.”
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