(Bloomberg) — The intensifying U.S. price pressures are escalating at a rate that reinforces concerns among Federal Reserve officials about bringing clarity to their efforts to combat inflation.Thank you for reading this post, don't forget to subscribe!
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The core Consumer Price Index, which excludes food and fuel and is considered a more reliable gauge of underlying inflation by economists, is expected to climb by 0.3% for the third consecutive month.
Compared to the previous year’s October figures, the core CPI is projected to have surged by 4.1%. This would mirror the annual increase in September and would conclude six months of sluggish price hikes.
Despite significant progress made since reaching a multi-decade high a year ago, the pace of inflation remains high and exceeds the Federal Reserve’s target. After abstaining from tightening measures in consecutive meetings and maintaining the benchmark rate at a 22-year peak, policymakers are taking deliberate steps forward – and not ruling out further increases.
“If it becomes necessary to further tighten the policy, we will not hesitate to do so,” stated Chairman Jerome Powell on Thursday. “However, we will continue to proceed cautiously, allowing us to address both the risk of being misled by a few favorable months of data and the risk of excessive strictness.”
For more information, see: Powell warns the Federal Reserve to be cautious, ready to elevate if required
The upcoming week will see central bankers including Austin Goolsbee, President of the Chicago Fed, and Philip Jefferson, the Fed Governor, making statements.
The CPI report on Tuesday marks the beginning of a series of U.S. indicators that will offer insight into the economy’s performance at the commencement of the fourth quarter. Data on retail sales released on Wednesday indicated a decline in consumer spending in October following a series of strong monthly advances.
Reports scheduled for later in the week are expected to illustrate decreases in industrial production and housing construction.
Looming northward, Canada is set to disclose home sales figures for October after a drop in prices in September, the first in six months, owing to higher rates.
Insights from Bloomberg Economics:
“In our opinion, Federal Reserve officials will retain a cautious stance until the monthly core CPI maintains a pace of 0.2%-0.3% for a minimum of six consecutive months. The lower end of this range only occurred during the summer, and since then the core CPI has shifted towards the upper end, aligning more with an annual inflation rate of 3% as opposed to 2%.
– Economists Anna Wong, Stuart Paul, Eliza Winger, and Estelle Ou. For detailed analysis, click here
Elsewhere, noteworthy occurrences include Chinese economic reports, data possibly indicating contraction in Japan, deceleration of inflation in the UK, and updated regional projections from Europe.
Get more details about last week’s developments and below for an overview of global economic trends.
The APEC meetings will take place throughout the week, with US President Joe Biden and Chinese leader Xi Jinping scheduled to convene in San Francisco, an event being closely monitored by global investors.
China is expected to maintain its one-year medium-term lending facility rate at 2.5% on Wednesday and release data covering various aspects from industrial output to retail sales, offering the latest glimpse into the condition of the world’s second-largest economy.
On the same day, the third-quarter gross domestic product data for Japan is anticipated to reveal that the economy has regressed into a contraction after a stronger-than-expected performance in the second quarter, and trade data for the country is scheduled for release on Thursday.
On Monday, Marion Kohler, the acting assistant governor of Australia’s central bank, will deliver a speech, and on Tuesday, business sentiment data in Australia is projected to indicate greater positivity compared to household sentiment, given the higher interest rates.
In New Zealand, Reserve Bank assistant governor Karen Silk is expected to discuss the bank’s balance sheet on Tuesday.
Elsewhere in the region, Sri Lanka is likely to implement tax hikes in its budget on Monday to comply with the stipulations of a $3 billion IMF bailout program, while India’s October inflation is forecasted to decelerate toward the central bank’s target range.
On Thursday, the Philippines’ central bank will announce its latest policy decision, while Malaysia is set to disclose the final third-quarter gross domestic product data on Friday.
Europe, Middle East, Africa
Data from the UK will be significant. Wage figures on Tuesday could indicate moderation, while the subsequent day’s inflation data is anticipated to show a decline from being the fastest among the Group of Seven nations to a two-year low.
Both sets of results would support Bank of England chief economist Hugh Pill’s opinion that no further interest rate hikes are necessary. Governor Andrew Bailey refuted the possibility of an initial rate cut on Wednesday, just days after data revealed that the economy had stagnated in the third quarter, although a recession was averted.
In Brussels, the new EU forecasts on Wednesday will present a revised outlook on the potential expansion of contractions in the sector. The release will also include fiscal projections, which will gain prominence due to the reinstatement of the bloc’s 3% deficit rule in 2024.
Italy, in particular, is causing concern among authorities, particularly after the government revealed a lenient fiscal stance. The country remains under negative outlook, the lowest investment grade, at Moody’s Investors Service, which may update that perspective on Friday.
Revised data on industrial production, as well as euro-zone GDP and inflation for September, will also be published.
European Central Bank President Christine Lagarde’s remarks at a conference on Friday, along with speeches from numerous European Central Bank speakers, will attract considerable attention.
In Sweden, investor focus will be on inflation data on Tuesday. Riksbank officials may overlook the possible increase in the CPIF figure, which they target.
In terms of GDP, the release of third-quarter figures will be significant. The performance of Hungary’s economy under Prime Minister Viktor Orban, emerging from a year-long recession, remains uncertain. In addition, Poland will also release data.
Wednesday’s Russian data is expected to indicate ongoing economic recovery despite international sanctions following its invasion of Ukraine, with the economy likely expanding by more than 5% – the fastest since the commencement of the war.
Also on Wednesday, investors will gain the first insights into the impact of the conflict with Hamas on prices in Israel. Analysts surveyed by Bloomberg anticipate a further decrease in the inflation rate to 3.7% last month.
Find out more: Netanyau caught between markets and politics due to war budget
In Africa, Ghana’s Finance Minister Ken Ofori-Atta will present the 2024 budget on Wednesday, outlining plans to rein in debt and augment revenues as per the terms of a $3 billion IMF bailout. Inflation in October is expected to decelerate for the third successive month to 36%, according to data from the same day.
In Nigeria, the continued devaluation of the naira is set to push annual inflation to over 27% in October, up from 26.7% in the prior month.
In the final release of economic data before the election of a new president in Argentina, government data is likely to reveal that annual inflation surged by over 145% last month. According to economists surveyed by the central bank, it is anticipated to culminate at 181% by the end of the year, following further increases in both November and December.
The minutes of the October 26 decision of Chile’s central bank to slow down easing will be published on Tuesday. The board cited worsening global financial conditions and heightened global geopolitical instability as factors contributing to the weakening of the peso.
The GDP-proxy data for Peru on Wednesday should confirm a contraction in the economy for the third consecutive quarter in the three months through September as domestic demand remains feeble and China’s challenges weigh on exports.
The GDP-proxy data for Brazil in September could reveal an unexpected decline in growth through 2023. While consumers in Latin America’s largest economy are feeling the impact of double-digit rates, government spending, federal aid to low-income families, and a tight labor market are providing support for demand.
In Colombia, attention will be on the third-quarter output. Analysts anticipate an improvement in the past three months to evade a technical recession and expect that only Brazil and Mexico, among the major economies in the region, will experience faster expansion in 2023.
–With assistance from Laura Dhillon Kane, Piotr Skolimowski, Monique Vanek, Paul Wallace, Robert Jameson, Yuko Takeo, and Tony Halpin.
(Updated with Israel in EMEA section)
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