(Bloomberg) — Inflation gauges in the U.S. and euro zone are on track for their smallest annual rise since early-to-mid 2021, increasing expectations that interest rates will not be raised again.
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The Fed’s priorities, announced Thursday, are expected to push the personal consumption expenditures price index up 3.1% in October from a year ago. The core index, which excludes food and fuel, is considered a better measure of underlying inflation and is expected to rise 3.5%.
November euro area statistics, also released on Thursday, will likely put inflation at 2.7%, the lowest level since July 2021. The underlying index is expected to slow to 3.9%.
Despite the development of disinflation, officials on both sides of the Atlantic say they want to see more evidence to be confident that consumer prices are permanently under control. “We are certainly not declaring victory,” European Central Bank President Christine Lagarde said on Friday.
Fed officials are united around a strategy of being cautious about their policy path. Minutes from the previous meeting showed that they were mindful of how rising interest rates were beginning to put pressure on households and businesses.
On Wednesday, the Federal Reserve will release its Beige Book, a compilation of economic developments and anecdotes from around the country.
The U.S. Personal Income and Expenditure Report also shows that consumer spending is expected to increase only slightly after adjusting for inflation. The downturn in demand in October helps explain predictions that the economy will slow after strong growth in the third quarter.
Bloomberg Economics says:
“Inflationary impulses slowed in October, allowing the Fed to keep policy on hold through the end of the year.”
—Anna Wong, Stuart Paul, Eliza Winger, Estelle Wu, economists.Click here for complete analysis
The government released its first revised third-quarter gross domestic product (GDP) on Wednesday, with the median forecast in a Bloomberg survey predicting growth of 5%. Initial forecasts for corporate profits are also predicted.
Other U.S. data to be released next week includes new home sales for October, consumer confidence for November, weekly jobless claims and a major manufacturing survey.
Further north, Canada is set to release third-quarter GDP data that will reveal whether it has entered a recession, although economists expect at least minimal growth. November’s employment data will be the last major indicator before the Bank of Canada’s Dec. 6 interest rate decision.
Elsewhere, the Paris-based OECD will issue a series of new forecasts, Ms Lagarde will speak to European lawmakers and central banks from New Zealand to South Korea are expected to keep interest rates on hold.
Click here to find out what happened last week. Below is a summary of what will happen next in the global economy.
Asia
Central bank governors are scheduled to meet early in the week as part of the Hong Kong Monetary Authority’s World Financial Summit and Bank for International Settlements conference.
China’s Purchasing Managers Index is due to begin being released over the weekend, with investors watching the data closely for signs of recovery in the world’s second-largest economy.
The Bank of Korea is expected to keep interest rates on hold on Thursday, but continues to face a difficult policy environment with inflation remaining weak, economic growth weak and household debt rising.
South Korea is also scheduled to release trade data on Friday, which will be one of the earliest surveys of how global demand held up in November.
The Reserve Bank of New Zealand and the Bank of Thailand are expected to make their latest interest rate decisions on Wednesday, while India is scheduled to release its third-quarter GDP on the same day.
A wide range of Asian countries, from India to Vietnam to Indonesia, are scheduled to release manufacturing PMI data on Friday, giving a broader view of how the region’s economies are holding up.
Bank of Japan board members will meet with business leaders and hold a press conference on Wednesday and Thursday as speculation continues over the timing of policy normalization.
Data on industrial production and retail sales will be released on Thursday, followed by labor and business spending data on Friday, after figures showed Japan’s economy contracted in the third quarter.
Europe, Middle East, Africa
Lagarde’s testimony before the European Parliament on Monday will give investors a trading chip ahead of the inflation data.
The figures, which will be released after a series of national reports starting on Wednesday, are expected to mainly show a simultaneous decline across major economies, albeit at different levels.
Inflation in Spain has likely accelerated, while in France inflation has fallen to 4.1% and Germany’s inflation is also expected to be 2.7%. Italy’s inflation rate is below the ECB’s target of 1.1% and is expected to slow further.
Several reports from rating agencies are likely to be released on Friday. Of these, S&P Global Ratings is expected to issue a view on France, and Scope Ratings may also issue a similar view on Italy.
In the UK, several Bank of England policymakers, including Governor Andrew Bailey, are expected to attend, but this will be a quiet week for the statistics.
Wednesday’s third-quarter GDP could reveal a recession after the Riksbank surprised investors by suspending interest rate hikes on Thursday. Gov. Eric Sedine has not ruled out further rate hikes, but economic weakness was one reason economists argued that borrowing costs should remain unchanged.
Meanwhile, Swiss figures released on Friday could show the economy has returned to marginal growth over the same period after stalling for the past three months.
Looking east, Poland has announced an inflation rate expected to remain at 6.6%, more than double that of its eurozone neighbour. Czech Republic’s GDP statistics may indicate a recession.
In Israel, analysts expect the benchmark interest rate to remain at 4.75% on Monday as the central bank continues to support the currency. The shekel has recouped all its losses since the Israeli-Hamas war began in early October, but authorities may hold off on cutting rates until next year.
On the same day, Ghana, the world’s second largest cocoa producer, plans to keep its borrowing costs unchanged.
Mauritius is also set to keep interest rates unchanged on Tuesday after inflation fell below the central bank’s target range of 2-5% sooner than expected. And as inflation picks up again, gas-rich Mozambique is also likely to leave its borrowing costs unchanged on Wednesday.
latin america
Next week’s economic calendar for Latin America will be light, with highlights including Brazil’s mid-month consumer price index and Mexico’s central bank’s inflation report.
Brazil’s mid-November inflation rate, released on Tuesday, is expected to slow further from a year ago, justifying the central bank’s promise to cut interest rates by at least two more half-percentage points.
Mexico releases its inflation report the next day. The document typically results in revisions to growth forecasts and could clarify the timing of a long-awaited monetary easing cycle.
The central bank has signaled a rate cut is imminent, but the latest economic activity data, including third-quarter gross domestic product data released on Friday, show Latin America’s second-largest economy is growing faster than economists expected. It was shown that
Read more: Mexico’s central bank warns of inflation risks amid strong demand
Chile has released a number of activity and production reports since Thursday, the most important being Friday’s Imasek Economic Activity Index for October. The index, which is considered a proxy for GDP, recorded its biggest increase in eight months in September, surprising economists.
Also on Friday, Brazil will release industrial production for October, and Mexico will release remittance data for the month.
–With assistance from Monique Vanek, Piotr Skolimowski, Yuko Takeo, Molly Smith, and Laura Dhillon Ken.
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