A year when inflation subsided enough for monetary policy easing to start in most advanced economies is about to conclude with a 24-hour flurry of decisions led by the Federal Reserve.The US announcement will take center stage on Wednesday, followed by peers in Japan, the Nordics and the UK over the following day — amounting to half of the world’s 10 most-traded currency jurisdictions.
Those events will draw most attention among investors bracing for the last big week for monetary policy in 2024. By close of play on Friday, at least 22 central banks accounting for two-fifths of the global economy will have set borrowing costs.
The upshot is likely to underscore how momentum for easing now looks increasingly uneven as policymakers weigh up differing risks in the coming year.
While the Fed itself is poised to deliver a quarter-point rate cut, the dawn of 2025 and the prospect of inflationary import tariffs threatened by the incoming administration of Donald Trump may give officials pause about the pace of further moves.
What Bloomberg Economics Says:
“Trump has promised a whirlwind of actions that will affect inflation and economic activity, complicating the FOMC’s job. Because monetary policy works with a lag, policymakers aim to set policy at each meeting based on their best understanding of the economic circumstances that will prevail a year or two ahead. In setting the federal funds rate at the next few meetings, policymakers will assess the odds that Trump’s various proposals will be implemented, and balance their risks,” said David Wilcox, director of U.S. economic research.
The Bank of England, mindful both of the growth shock his trade policies could cause but also of lingering price pressures, is reducing borrowing costs only cautiously and is widely expected to keep them on hold on Thursday.
The Bank of Japan meanwhile, having finally exited negative rates this year, will probably wait until 2025 before raising again.
Decisions in the Nordics will highlight divergence even across a smaller region. Sweden’s Riksbank is almost certain to cut for the fifth time, and its Norwegian counterpart is likely to confirm that its first reduction of the cycle won’t come until next year.
Elsewhere, key data on the health of China’s economy, a likely pickup in UK inflation and business surveys from the euro zone may be among highlights.
US and Canada
While the Fed’s preferred gauge of underlying inflation will be released at the end of the week, after Wednesday’s rate decision, officials can take probably take some comfort in projections that price pressures are cooling.The November personal consumption expenditures price index, excluding food and energy, will probably rise 0.2% — the smallest advance in three months — economists forecast Friday’s report to show. The report is also seen showing solid consumer spending and income growth, suggesting a resilient economy.
Retail sales figures on Tuesday will likely illustrate similar strength. Other reports this coming week include industrial production, housing starts and existing-home sales for November.
In Canada, Finance Minister Chrystia Freeland will release a long-delayed budget update amid widespread speculation she has broken her promise to keep the deficit at or below C$40.1 billion.
The document may contain new border-security spending to guard against Trump’s tariff threats, as well as affordability measures aimed at winning back voters ahead of an election next year.
In a year-end speech, Bank of Canada Governor Tiff Macklem will reflect on an extraordinary pace of of rate cuts and look ahead to a possible trade war.
Headline inflation for November is expected to fall below the 2% target again after it briefly ticked back up to that threshold in October. Statistics Canada will also release population estimates for the third quarter.
Asia
The week will begin with a slew of data from China that will be closely monitored for signs that the world’s second largest economy is being lifted by government stimulus efforts. Industrial production and retail sales data will be key to watch.
PMI numbers from Australia, India and Japan are also scheduled for release on Monday, to give another feel for growth in the wider region.
The BOJ’s decision comes Thursday, with economists and markets expecting a hold after mixed communication from officials nudged their views to a later move.
Elsewhere in central banking, Pakistan is expected to start off the week with a rate cut after inflation eased, and on Wednesday the Bank of Thailand is projected to keep its benchmark rate unchanged at 2.25%.
Indonesia and the Philippines are both expected to cut borrowing costs by 25 basis points.
Meanwhile, South Korea’s central bank vowed to stabilize financial markets and highlighted the importance of “uninterrupted implementation” of key fiscal and economic measures, in its first statement since lawmakers voted to impeach President Yoon Suk Yeol.
New Zealand is set to report data showing their economy is back in recession after shrinking in the third quarter on Thursday.
Throughout the week, trade figures are due from Indonesia, Japan, Malaysia and New Zealand, reflecting the latest state of Asia’s trade appetite.
Europe, Middle East, Africa
The BOE will almost certainly keep rates unchanged at its final decision of the year, sticking with its wary approach to easing. Data on both jobs and inflation before then will inform officials further to last week’s report that showed a second straight month of contraction in October.
The labor report is expected to show a pickup in annual pay growth that shouldn’t overly concern policymakers, while the inflation numbers may reveal an acceleration both in the headline and underlying gauges, adding to the case to stay cautious.
Here’s a quick look at other decisions in the region:
- On Tuesday, Hungary will probably keep borrowing costs on hold after inflation accelerated and the forint remains near a two-year low.
- Two days later, the Czech central bank is also expected to confirm an unchanged rate, as policymakers consider calling a halt to easing.
- Swedish officials are anticipated by most economists to lower its benchmark by a quarter point, a more gradual pace after last month’s half-point cut. Core inflation at a six-month high is unlikely to deter the Riksbank, which may take heart from recent data showing a return to growth in the third quarter.
- In neighboring Norway, policymakers are expected to keep its rate at 4.5%. Core inflation snapped a year-long deceleration streak last month, mainly driven by domestic goods, while a key survey by the central bank showed a somewhat stronger outlook for the energy-rich nation’s businesses.
- And on Friday, the Bank of Russia may hike its rate as much as 200 basis points to a record 23%, after data showed consumers price pressures persisting at more than twice the 4% target.
- Governing Council member Martins Kazaks told Bloomberg in an interview published Sunday that the ECB should lower rates further but probably won’t need to take them to levels that would stimulate economic expansion.Turning south, data from Israel on Sunday will likely show inflation accelerated to 3.6% in November from 3.5% a month earlier as the war in Gaza strains the economy and the government’s spending soars. That may see its central bank leave rates on hold until the second half of 2025.Nigerian data on Monday may reveal inflation quickening to 34.6% in November from 33.9% a month earlier, driven by higher gasoline prices and floods earlier this year that destroyed crops. Nigeria’s central bank Governor Olayemi Cardoso said earlier this month that he expects a downward trend next year.Two days later Nigerian President Bola Tinubu is set to deliver his annual budget speech. The nation has set ambitious plans to increase revenues next year, including raising its value-added tax rate to 10% from 7.5%, and significantly reducing its budget deficit. If achieved, Fitch Ratings says that could put it in line for an upgrade.
In the euro area, survey indicators may focus investors looking at how fallout from political turmoil in France and Germany is impacting businesses.
The latest purchasing manager indexes for the region will be released on Monday, followed the next day by the Munich-based Ifo institute’s index of company expectations and the ZEW gauge of investor confidence, both looking at Germany. French business confidence will be published on Thursday.
Several policymakers are scheduled to speak in the wake of the European Central Bank’s quarter-point rate cut last week, including President Christine Lagarde, Vice President Luis de Guindos, Executive Board member Isabel Schnabel and Chief Economist Philip Lane.
