The pulse of US inflation likely continued to slow at the start of the year, helping to feed expectations that the Federal Reserve will find interest-rate cuts more palatable in the coming months.
The core consumer price index, a measure that excludes food and fuel for a better picture of underlying inflation, is seen increasing 3.7 percent in January from a year earlier.
That would mark the smallest year-over-year advance since April 2021, and underscore the inroads Fed Chair Jerome Powell and his colleagues have made in beating back inflation. The overall CPI probably rose less than 3 percent for the first time in nearly two years, economists forecast Tuesday’s report to show.
While acknowledging that progress, policymakers have been cool to the idea that rates may be reduced as soon as next month.
Their patience has roots in an economy that’s flashing green lights, the biggest of which is the labor market. Durable employment growth has kept consumers spending. A separate report on Thursday is projected to reveal another increase in retail sales, excluding motor vehicles and gasoline.
The cooling of inflation, along with expectations that borrowing costs will head lower this year, explains the recent improvement in consumer confidence. A University of Michigan survey scheduled for release on Friday is forecast to show an index of sentiment holding near the highest level since July 2021.
Investors will also monitor Fed officials speaking in the days following the CPI data, to gauge the timing of any future rate cut. Among those on the schedule are regional bank presidents Raphael Bostic of Atlanta and Mary Daly of San Francisco, who both vote on policy this year.
“In deciding when to start cutting rates, the Fed will have to reconcile the data they have in hand – which show inflation on a fast track to the 2 percent target—with risks that inflation could flare up again or the labor market could weaken more sharply. Data in the coming week will factor into that decision—but won’t provide a definitive answer,” said Bloomberg economists Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou.
Turning north, Canadian home sales will reveal whether the market continues to heat up ahead of expected mid-year rate cuts. Housing starts and manufacturing data will also be released. Among global highlights this week, Japanese gross domestic product, UK inflation and wages, and testimony by the euro-zone central bank chief will feature.
Here’s our wrap of what’s coming up in the global economy:
Japan’s economy is expected to rebound from its dismal performance over the summer, providing another signal for the Bank of Japan as it prepares to end its negative rate policy.
Figures out Thursday are also set to confirm that Japan has slipped to the fourth-largest economy in the world, behind the US, China and Germany.
China’s markets will be closed for Lunar New Year celebrations, and no major releases are scheduled.
Reserve Bank of India Governor Shaktikanta Das, who kept a hawkish stance at Thursday’s rate meeting, may see some progress in his inflation fight at the start of the week with consumer prices expected to have grown at a slower pace in January. That probably won’t be slow enough to prompt talk of a pivot, however.
The Philippine central bank is seen holding rates steady on Thursday after prices continued to weaken there too. Australian jobs figures earlier in the day are seen showing a return to growth after the losses in December.
Singapore will revise its gross domestic product figures ahead of trade data the following day.
RBNZ Governor Adrian Orr sets out his latest position on policy and 2% inflation in a speech Friday morning, with Malaysian GDP numbers closing out the week.
Europe, Middle East, Africa
UK data will take the limelight. On Tuesday, wage numbers may show the weakest pay pressures since 2022, cheering Bank of England officials who—like global peers—are pivoting toward rate cuts.
Policymakers will also scrutinize an anticipated blip higher in inflation on the headline gauge, and the core measure that strips out volatile elements such as energy, in data due Wednesday.
The next day, GDP will point to how BOE tightening is hitting growth. Economists reckon the UK stagnated in the fourth quarter, narrowly avoiding a recession for now.
A series of fourth-quarter GDP numbers are also scheduled, with growth in Eastern European economies and Norway as well likely to have stayed subdued.
Euro-zone industrial production on Thursday is a highlight in the currency region, with a fourth monthly drop in December predicted by economists amid falling factory output in economies including Germany.
Policymaker appearances will draw attention. European Central Bank President Christine Lagarde testifies to lawmakers on Thursday, while multiple events featuring her colleagues are also scheduled.
In Norway, Governor Ida Wolden Bache will make her annual address to Norges Bank’s supervisory council.
The Carnival holiday makes for a quiet start to the week, but Argentina returns on Wednesday to post its January inflation report.
Consumer prices likely rose 21.9 percent last month, according to economists surveyed by the central bank, down from 25 percent in December. That forecast implies an annual rate of over 250 percent, up from 211 percent at year-end 2023.
Inflation has surged in the wake of President Javier Milei’s 54 percent peso devaluation and elimination of price controls on hundreds of everyday consumer products.
Colombia publishes a raft of data, underscoring the precipitous slowdown in what had been one of Latin America’s post-pandemic bright lights.
Industrial output, manufacturing and retail sales have all been negative since March, while fourth-quarter output probably shrank from the previous three months. Full-year GDP growth may only just top 1 percent, well off the 2021 and 2022 readings of 11 percent and 7.5 percent.
Brazil posts December GDP-proxy figures ahead of the quarterly and full-year report due March 1, while Peru publishes December economic activity data along with January unemployment for Lima, the capital and largest city.
Lastly, Chile’s central bank serves up the minutes of its January decision to deliver a 100 basis-point cut, to 7.25 percent. Economists surveyed by the central bank see that hitting 4.75 percent by year-end with inflation back at 3 percent. With assistance from Piotr Skolimowski, Robert Jameson, Monique Vanek, Brian Fowler, Abeer Abu Omar, Tony Halpin and Laura Dhillon Kane/Bloomberg