Central banks cagey about joining the global interest-rate cutting cycle may reveal themselves this week with a quartet of decisions in advanced economies.
Days after the Federal Reserve pared back projections for US monetary easing this year, policymakers from the UK to Australia are likely to signal that they’re still not convinced enough about disinflation to start lowering borrowing costs themselves.
Such outcomes would reaffirm how June, originally penciled in as a month-long opening ceremony to a series of global rate cuts, may increasingly turn out to be a widespread display of hesitancy.
While Canada did deliver the first such move of the Group of Seven on June 5, the European Central Bank’s reduction in borrowing costs a day later, accompanied by a higher inflation projection, showed limited enthusiasm for further easing.
At the Bank of England on Thursday, a looming election and some lingering price pressures are adding to the case to wait at least until August before cutting rates.
Peers in Australia and Norway, also meeting this week, are in no rush to do so either, while half of economists surveyed reckon the Swiss National Bank (SNB) may avoid a second reduction for now following its bold move in March to ease before its neighbors.
Decisions elsewhere may showcase the different stages of global monetary cycles, with Brazil and Paraguay expected to keep borrowing costs on hold, and Chile anticipated to slow rate cuts.
What Bloomberg Economics Says: “Major central banks look set to keep interest rates on hold, having looked more likely to cut only a few weeks ago. The BOE is almost certain to keep policy unchanged in June ahead of the UK election. It’s a closer call for the SNB.” Elsewhere, US retail sales, a raft of Chinese data, and inflation numbers from the UK and Japan will be among highlights for investors this week.
US, Canada
A week after a series of reports showed moderating US inflationary pressures, investors will get a look at fresh figures. Fed officials also return to the public-speaking circuit after penciling in just one rate cut for 2024.
Speaking on Sunday, Minneapolis Fed President Neel Kashkari said the central bank is in a good position to take its time and watch incoming data before starting to cut rates.
Looking north, the Bank of Canada will release a summary of the deliberations that led it to cut rates this month, providing further insight into how policymakers reached the decision and the conditions for a rate cut at their next meeting July 24.
Asia
The week in Asia kicks off with China’s monthly deluge of data on Monday. A day later, the Reserve Bank of Australia is expected to hold its cash rate target at 4.35%, with focus falling on how authorities view the inflation trajectory after consumer price growth unexpectedly picked up in April.
The slowing pace of disinflation could potentially delay a pivot to rate cuts or spur another hike, according to Bloomberg Economics.
Japan’s key price gauge is expected to show consumer inflation accelerated to 2.6% in May, keeping the Bank of Japan on track for a rate hike as early as next month.
Singapore, Malaysia, South Korea and Indonesia also get trade statistics. The week concludes with a blast of PMI figures for Australia, Japan and India.
Europe, Africa
In the UK, consumer-price numbers on the eve of Thursday’s BOE decision may draw the focus on investors. That report could show inflation reaching the 2% target for the first time in almost three years.
Turning east, Hungary is preparing wrap up its more than year-long monetary easing cycle, though the slide in the forint may narrow or eliminate the central bank’s room to deliver one last cut in the European Union’s highest key rate. That’s on Tuesday.
Further afield in the region: in South Africa on Wednesday, inflation is forecast to have remained steady at 5.2% in May. Meanwhile neighboring Namibia is set to maintain its rate at 7.75% amid quickening consumer price growth and to safeguard its currency peg with the rand.
