RBNZ Keeps Rates On Hold, US GDP, Eurozone HICP In The Spotlight

The US GDP and eurozone’s Harmonized Index of Consumer Prices (HICP) preliminary data will be the focus of investors and traders in the next days. In other news, the Reserve Bank of New Zealand (RBNZ) decided to leave its interest rates on hold and toned down its “hawkish” stance in its post-meeting statement.

In the US, the Fed Kansas bank president Jeffrey Schmid said that the US central bank is in no rush to cut interest rates. In his remarks, the Fed’s board policymaker noted that “Fed should be patient, wait for convincing evidence that inflation fight has been won. We are not out of the woods yet on 'too high' inflation. Returning inflation to 2% will likely require restoring balance in labor markets, moderating wage growth.”

RBNZ Rates On Hold, New Zealand Dollar Drops

The RBNZ kept borrowing costs unchanged after its last board meeting. RBNZ Governor Adrian Orr said there was strong consensus among policymakers that rates were sufficient. In his post-meeting remarks, Orr noted that the board is still concerned about the underlying inflation and added that the country’s economy faces a soft landing scenario.

The RBNZ’s change of stance regarding the outlook of tight monetary policy implementation made the New Zealand dollar slide against the US dollar, losing 1% in value on Wednesday morning.

US GDP Q4 2023 (Prelim.)

Later today, the US Bureau of Economic Analysis (BEA) will publish preliminary data regarding the country’s GDP in the last quarter of 2023. Analysts forecast that the US economy grew by 3.3% on an annualised basis, matching the third quarter’s GDP growth figure.

The National Association for Business Economics (NABE) forecasts that the US GDP will expand at a 2.2% annual pace in 2024, higher from a prior forecast of 1.3%. Market analysts at Swiss Re Institute wrote in a report that “our significant upward revision to US real GDP growth to 2.2% for 2024 is largely driven by above-average carry-over effects due to upside surprises to end-2023 US economic activity,” but they added that “the US economic outlook is less robust than the headline forecast suggests. We still see a slowdown with four quarters of below-trend growth ahead.”

Canada GDP Q4 2023

Statistics Canada will release its GDP report on Thursday. Economists predict that the Canadian economy grew by 0.2% on a monthly basis in December, keeping the November momentum going. The same analysts, however, forecast a 0.8% GDP rise in the fourth quarter on an annualised basis, reversing a part of the 1.1% drop recorded in the third quarter of 2023.

A report published by RBC Economics said: “We expect Q4 GDP growth to remain in positive territory with a small, annualized increase of 0.5%. That will prevent the economy from seeing two consecutive quarters of contraction, which is often used as the definition of a “technical” recession. But when measured against the country’s rapid population growth, it’s the sixth straight quarterly decline on a per-capita basis, alongside a rising unemployment rate.”

Eurozone HICP February 2024 (Prelim.)

Eurostat will publish preliminary data regarding the Harmonised Index of Consumer Prices (HICP) in February. Economists forecast that the HICP will come in at 2.5% on an annualised basis while core HICP is expected to come in at 2.9%, significantly lower than the 3.3% figure recorded in January.

European Central Bank (ECB) President Christine Lagarde told European Parliament on Monday that “the current disinflationary process is expected to continue, but the governing council needs to be confident that it will lead us sustainably to our 2% target. We expect inflation to continue slowing down, as the impact of past upward shocks fades and tight financing conditions help to push down inflation.”

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