Ahead of Thursday’s decision, Governor Andrew Bailey has distanced Britain from resurgent consumer price pressures in the US, pointing to “strong evidence” of UK inflation receding.
The UK central bank is widely expected by economists to keep rates at a 16-year high of 5.25%, and investors will watch closely for clues on whether policymakers see June or August as an opportunity to begin cutting borrowing costs.
Stronger-than-expected inflation data on both sides of the Atlantic have prompted traders to push back wagers on a UK rate reduction until September, with only one move fully priced this year.
However, a dovish shift in tone by Bailey and Deputy Governor Dave Ramsden in April caused some economists to reckon that the timing of BOE cuts may be closer to the European Central Bank — which is widely expected to act in June — than to the Federal Reserve, whose chief, Jerome Powell, has avoided offering a timeline for US easing.
Bailey expects UK inflation to fall close to his 2% target in upcoming data for April, though some on the nine-member Monetary Policy Committee are still concerned over underlying price pressures.The central bank decision will be followed on Friday by gross domestic product data predicted to show the UK economy exited a shallow recession in the first quarter. Economists expect the figures to show output growing 0.4% after two consecutive quarterly drops last year.
BloombergElsewhere, a cliffhanger decision in Sweden, a likely hawkish hold in Australia and rate cuts in Brazil and Peru are among the central bank announcements due.
US and Canada
The US economic data calendar is light. On Friday, the University of Michigan will issue its preliminary survey of consumer sentiment for May. Confidence is expected to be little changed as Americans assess elevated prices, high interest rates and a moderating job market.
BloombergA day earlier, the government will issue weekly jobless claims figures. Applications for unemployment benefits remain near historically low levels.
In the week after the Fed held rates unchanged, several central bank officials are scheduled to speak. They include New York Fed President John Williams and the Richmond Fed’s Thomas Barkin on Monday, followed by Neel Kashkari of Minneapolis on Tuesday. Later in the week, investors will also hear from Chicago Fed President Austan Goolsbee and Fed Governor Michelle Bowman.
The Bank of Canada on Thursday will publish its annual financial system review, assessing stability risks to the country’s banking sector. Officials previously flagged concerns about homeowners’ ability to manage debt in a high rate environment.
On Friday, economists expect Canada’s April labor force survey to show job gains remain well below the pace of population growth, bolstering an argument for policymakers to pivot to rate cuts as early as June.
Asia
The Reserve Bank of Australia may amplify its hawkish tone when it meets on Tuesday in the wake of hotter-than-expected inflation gauges for the first quarter, as well as robust jobs stats.
The board will consider revised growth, inflation and labor-market projections, with any revisions probably signaling no policy pivot any time soon. Overnight Index Swaps are now pricing more chance of an Aussie rate hike than a cut this year.
BloombergOn Thursday, Malaysia’s central bank sets its benchmark rate and the Bank of Japan releases a summary of opinions from last month’s meeting, when Governor Kazuo Ueda’s seemingly sanguine stance on the yen helped usher in more losses for the beleaguered currency.
In data, Indonesia first-quarter economic growth is seen staying around 5% year on year, while it may contract a tad versus the prior quarter. The Philippines also releases GDP data.
Consumer inflation figures are due in the Philippines, Thailand and Taiwan, while China, the Philippines and Taiwan all get trade data.
Japan’s wage stats on Thursday will probably look a little glum as the outsized pay increases pledged by companies after negotiations with unions won’t fully kick in for a few more months.
Europe, Middle East, Africa
On Wednesday, Sweden’s Riksbank could become the second major developed-world central bank – after the Swiss National Bank – to lower rates in what looks likely to be a cliffhanger decision.
After their meeting in March, Governor Erik Thedeen said he and colleagues expect to make their first easing move in May or June.
Domestically, there are now very few obstacles to them acting sooner rather than later. Inflation has slowed and looks set to fall below the central bank’s 2% target, the economy remains sluggish, and companies appear to have concluded that they won’t be able to raise prices to the extent they have in the past couple of years.
BloombergHowever, the krona still concerns policymakers, who’ve watched the currency weaken almost 5% against the euro this year. If they decide they can’t risk further deterioration, that could be a reason to delay a first cut, much as Norway did on Friday.
On the other hand, there’s scope to argue that whatever the Swedish central bank does, the currency’s destiny is determined by other factors, including risk aversion and US bond yields. If that view wins the day, the Riksbank could well cut.
Three other monetary decisions are expected around the wider region:
On Tuesday, sticky inflation may persuade Madagascar’s central bank to keep its rate at 11% for a third time in a row.
Two days later, Poland’s central bank will likely also leave borrowing costs unchanged, even after April inflation stayed within its target range. Governor Adam Glapinski, who holds his briefing the following day, has repeatedly quashed expectations for rate cuts this year.
And the National Bank of Serbia on Friday is likely to keep its rate at 6.5% for a 10th month, cautious to avoid premature easing while watching to see how long peers in bigger economies wait before cutting.
Among other central bank events in the coming week, a Bank for International Settlements conference in Basel will feature monetary chiefs from Germany to Singapore.
Scheduled ECB appearances include the Belgian governor Pierre Wunsch and Executive Board members Luis de Guindos and Piero Cipollone. An account of the central bank’s April 11 decision will be published on Friday.
With public holidays on various days in economies from the UK to France, the flow of data releases will be limited.
BloombergWithin the euro zone, industrial numbers from Germany, Spain and Italy may offer insights into whether manufacturing weakness lasted through to the end of the first quarter, as it did in France. French wage data could also draw interest at a time when officials are trying to gauge the strength of pay pressures.
Elsewhere, consumer-price numbers will focus financial markets on Friday, when Norway release statistics for April.
Egypt’s CPI release comes Thursday. Inflation there is likely to have started to slow from about 33% following a devaluation and rate hike in March, as well as multi-billion-dollar bailouts from the UAE, International Monetary Fund and others. Those have helped ease Egypt’s foreign-currency shortages, a key driver of surging prices over the past year.
Latin America
Three central bank rate decisions take the spotlight in the region in the coming week.
Banco Central do Brasil may well deliver a scaled-down, quarter-point cut to 10.5% as upside risks to the inflation outlook proliferate, while April’s monthly deflation print greenlights Banco Central de Reserva del Peru for a quarter-point cut to 5.75% at the least.
BloombergOn the other hand, Banxico is far from convinced that Mexican inflation has been licked, and so is quite ready to pause on Thursday at 11% and reassess the landscape at its June 27 meeting.
Colombia’s central bank will publish minutes of its April 30 meeting, at which it trimmed the key rate by another half-point to 11.75%, down from 13.25% in November.
For all their caution, some of the region’s central bankers can at least look forward to another month of disinflation — albeit none too dramatic.
Brazil’s benchmark IPCA consumer price index is forecast to slow for a seventh month, below the target range ceiling but still above the 3% target. Colombian inflation likely slowed for a 13th straight month, though isn’t seen breaking below 7% from the current 7.36%.
BloombergIn Mexico, inflation’s expected incremental move lower from 4.42% is certain to leave Banxico unmoved, while Chile’s year-on-year reading likely rose from 3.7%.