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Week Ahead: Economic Data to Solidify a Fed Rate Hike in May?

Published 04/24/2023, 09:33 AM
Updated 03/05/2019, 07:15 AM

The economic data in the week ahead should solidify rate hike expectations for the May 3rd FOMC meeting, but it could also raise the bar for further tightening for the June 14th meeting. Investors will closely monitor the first look at Q1 GDP, the Fed’s preferred wage and inflation gauges.

The first look at Q1 GDP is expected to soften from 2.6% to 2.0%. The first quarter employment cost index is expected to rise from 1.0% to 1.1%. Traders will pay close attention to see if we get any hot surprises from the Fed’s preferred measure of inflation these days, the so-called “super core” inflation that excludes gas, electricity, and housing.

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Two things stand out next week which will offer some insight into where things stand on the cost and benefit of the fight against inflation. HICP data from Germany, France, and Spain will provide firm insight into the success of the ECBs tightening so far – albeit while taking into consideration that monetary policy operates with a lag and the recent banking turmoil could have a role to play going forward – while GDP figures for the bloc will tell us how the economy has fared in the first quarter in light of what’s been done so far. The second quarter data may prove more pivotal for the bloc but for now, this will dictate how the central bank operates over the coming meetings.


Very little of note next week barring a few tier-three economic releases. Markets are pricing in two or three rate hikes this year after a hawkish selection of data this past week including double-digit inflation, high wage growth, and an increasingly bullish (less pessimistic arguably more accurate) consumer. That may change over the coming months as inflation starts to fall sharply but recent readings have been far from ideal.


The CBR is expected to leave interest rates unchanged at 7.5% next week despite inflation falling sharply to 3.51% last month. This was driven primarily by favorable base effects, coming a year after the invasion of Ukraine and the financial market turmoil that followed. Governor Elvira Nabiullina hinted at leaving rates unchanged this past week, claiming inflationary risks must recede in order to create room for further cuts.

South Africa

A quiet week with PPI inflation among very few data releases on Wednesday. It remains a major concern for the SARB, as was evident last month when it pivoted back to a 50 basis point rate hike.


As always, it’s anyone’s guess what the CBRT will do next week but the consensus view appears to be that it will stay on hold at 8.5%. With an election on the horizon, the only outcome that is highly unlikely is a rate hike and President Erdogan further reinforced that view on Friday claiming that interest rates will “fall as long as I am in power”.


There are a couple of economic releases due next week but SNB Chair Thomas Jordan’s appearance on Friday will be the highlight. The central bank has continued to raise interest rates as inflation remains above target and despite its banks being at the center of the European element of the mini-banking crisis, it’s expected to hike again in June by another 25 or 50 basis points. Of course, its tightening was not responsible for what happened in March, and at 1.5%, the policy rate still remains extremely low.


A rather quiet calendar week in terms of key economic data releases with only Industrial Profits (year-to-date) for March to be released on Thursday, 27 April; it will be interesting to see whether there will be an improvement from the slump of -22.9% y/y growth recorded in the combined first two months of 2023 as last week’s Q1 23 GDP and Industrial Production (Mar) has started to indicate signs of recovery ex post-Covid lockdown.

The action comes on Sunday, 30 April for the release of the official NBS Manufacturing and Non-Manufacturing PMI for April. Forecasts are expecting a continuation of manufacturing growth to 52 from 51.9 printed in March; likewise, for the non-manufacturing activities where it is expected to increase to 58.3 in April from 58.2 in March, and if it turns out as expected, it will be the fourth consecutive month of expansion. Hence, China’s central bank, PBoC is likely to adopt a wait-and-see approach before implementing further stimulus measures.


Key data to note will be AU’s inflationary data for Q1 as RBA has halted its interest rate hike cycle in its previous monetary policy meeting. The inflation rate is expected to come in softer at 6.9% y/y from 7.8% y/y recorded in Q4 2022, its highest print since Q1 1990.

New Zealand

The focus will be on March trade data where last month’s exports dipped to NZ$5.23 billion from NZ$5.47 billion but increased by 0.8% y/y. Imports for February dipped to NZ$ 5.95 billion from NZ$7.42 billion in January while it increased by 0.7% y/y.


New BoJ Governor Ueda will be at the helm for the first time for this week’s monetary policy decision outcome as well as the release of BoJ’s latest economic data projections for its quarterly outlook report on the same day. The latest guidance from Ueda has indicated that BoJ is in no rush to alter its current ultra-easy monetary policy stance.

A point to note is that in the recent inflation data for March that was released last week; core inflation rate (excluding fresh food & energy) continued to increase to 3.8% y/y in March from 3.5% in February, ten consecutive months of expansion despite a dip in the headline inflation to 3.2% y/y from January’s 3.3%. Also, Tokyo will release its CPI data for April on Friday before BoJ together with Japan’s industrial production and retail sales for March.


A slew of data to focus on and digest; inflation for March where the consensus forecast is expected to show a slowdown in both the headline and core rates to 5.6% y/y (6.3% y/y Feb) and 5.1% y/y (5.5% y/y Feb) respectively. Up next will be Industrial Production, it is expected to fare slightly better in March with consensus forecast on its contraction to narrow to -6.1% y/y from -8.9% y/y printed in February. Also, unemployment and home prices will be released at the end of the week.

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