Plethora Of Central Banks

This week is a busy one for central bank meetings and data releases.  There are key policy meetings in the US (Wed), followed by Indonesia, Norway, Switzerland, Turkey, Brazil (all on Thu) and Japan (Fri).  None are expected to change policy settings except the BCB in Brazil, with the consensus expecting a 75bp hike there.

There will however, be lot of attention on the language of the statements for any hawkish tinges.  The US Federal Reserve FOMC for instance is likely to continue to highlight that inflation pressures are transitory but could state they have started to discuss some form of progress-dependent tapering plan even as the Fed remains far from actual tapering. 

While markets may be buying the “transitory” inflation story, consumer expectations remain elevated.  The New York Fed survey showed that consumer inflation expectations 3 years out rose to an 8 year high of 3.6% in May while 1-year expectations rose to a record 4%.  However, markets may find some solace from the drop in lumber prices, which have dropped by around 40% since early May though the CRB commodities index remains near multi-year highs.   

Norway’s Norges Bank may start preparing markets for a third quarter rate hike.  In contrast, in Turkey, attention will be on any clues to when the central bank will ease policy amid calls for a cut from President Erdogan. The Bank of Japan is likely to extend COVID aid for businesses while Bank Indonesia is likely to focus on transmission of past easing rather than cut again. 

Key data this week includes US May retail sales (today) for which a monthly decline in headline sales is likely though spending is still likely to have grown strongly over the quarter.  China’s May data dump (Wed) will also garner attention, with healthy gains in both retail sales and industrial production likely, even taking account of base effects. 

Australia’s May jobs report (Thu) is forecast to show an increase though there are downside risks emanating from JobkKeeper’s expiry in May.  Reserve Bank of Australia June minutes (today) and speech by governor Lowe (Thu) will also be scrutinized for thinking on whether RBA will extend the YCC bond to the Nov 24s and quantitative easing commitment. 

There are also several other central bank speeches of importance this week including two speeches by Bank of England governor Bailey, and several European Central Bank speakers. 

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