(Bloomberg) — Underlying price pressures in the United States are growing at a pace that deepens Federal Reserve officials’ apprehension about green-lighting their inflation-fighting efforts.
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The consumer price index excluding food and fuel, a measure favored by economists as the best indicator of underlying inflation, is expected to rise 0.3% for a third month.
Compared to October last year, the core CPI is expected to increase by 4.1%. That would match September’s annual advance and end a six-month period of slowing price growth.
Although considerable progress has been made since hitting a multi-decade high a year ago, the pace of inflation remains high and above the Fed’s target. After suspending the tightening in back-to-back meetings, leaving the benchmark rate at its highest level in 22 years, policymakers are proceeding deliberately – and not ruling out further increases.
“If it becomes appropriate to tighten policy further, we will not hesitate to do so,” Chairman Jerome Powell said Thursday. “We will, however, continue to act cautiously, allowing us to address both the risk of being misled by a few good months of data and the risk of over-tightening.”
Read more: Powell says Fed must be cautious and won’t hesitate to hike if necessary
Among the central bankers expected to speak next week are Chicago Fed President Austan Goolsbee and Fed Governor Philip Jefferson.
Tuesday’s CPI report is the first in a long list of U.S. indicators that will provide insight into how the economy is performing as the fourth quarter begins. Retail sales data released Wednesday are expected to show consumers cut spending in October after a series of strong monthly advances.
Reports released later in the week are expected to show a decline in industrial production and housing starts.
Looking north, the Canadian will release home sales data for October after prices fell in September for the first time in six months, weighed down by higher rates.
What Bloomberg Economics says:
“In our view, Fed officials will most likely maintain a tightening trend until monthly core CPI remains at a steady pace of 0.2% to 0.3% for at least six months. The lower end of this range only occurred for one summer, and the underlying CPI has since slipped toward the upper end, which is more consistent with a 3% annual inflation rate. only 2%.
— Anna Wong, Stuart Paul, Eliza Winger and Estelle Ou, economists. For a full analysis, click here
Elsewhere, Chinese economic reports, data possibly showing a contraction in Japan, slowing inflation in the UK and new regional forecasts from Europe will be among the highlights.
Click here to find out what happened last week and below you’ll find our summary of what’s happening in the global economy.
Asia
APEC meetings are taking place all week, with US President Joe Biden and Chinese leader Xi Jinping set to meet in San Francisco in an event likely to be closely watched by investors around the world.
China is expected to keep the rate on its one-year medium-term loan facility at 2.5% on Wednesday and release a range of data from industrial production to retail sales, giving the latest snapshot of the state of the second largest economy in the world.
The same day, Japan’s third-quarter gross domestic product data is expected to show the economy fell back into contraction after a stronger-than-expected second quarter, and on Thursday the country will release its trade report.
Marion Kohler, acting deputy governor of Australia’s central bank, will speak on Monday, and Tuesday’s data is expected to show business confidence is holding up better than Australian household confidence amid higher interest rates.
Across the Tasman Sea, Reserve Bank of New Zealand deputy governor Karen Silk is expected to speak on the bank’s performance on Tuesday.
Elsewhere in the region, Sri Lanka is expected to raise taxes in its budget on Monday to meet the conditions of the International Monetary Fund’s $3 billion bailout package, while India’s pace of inflation in October is expected to slow further to move closer to the central bank’s target range.
The Philippines’ central bank will release its latest policy decision on Thursday, while Malaysia will release its final third-quarter GDP data on Friday.
Europe, Middle East, Africa
The UK data will be a highlight. Wages figures on Tuesday could indicate a slowdown, while inflation the next day is expected to slow to a two-year low, from a level that stands out as the fastest among the Group of Seven countries.
Both results would support Bank of England chief economist Huw Pill’s view that further rate hikes are not necessary. Gov. Andrew Bailey pushed back against the prospect of an early rate cut Wednesday, days before data showed the economy stalled in the third quarter while avoiding a recession.
In Brussels, new European Union forecasts released Wednesday will show a revised outlook at a time when the region could well prolong its contraction. The communiqué will also include budgetary projections, which will take on increased importance given the reinstatement of the bloc’s 3% deficit rule in 2024.
Italy, in particular, is worrying officials, particularly after its government unveiled a looser fiscal policy. The country has a negative outlook at the lowest investment grade level according to Moody’s Investors Service, which forecast a possible update to that view on Friday.
Revised eurozone GDP and inflation figures will also be released, along with industrial production for September.
Among a series of speakers from the European Central Bank, President Christine Lagarde will attract attention with remarks at a conference on Friday.
Looking north, inflation in Sweden will attract investors’ attention on Tuesday. Riksbank officials could be unaware of a likely acceleration of the CPIF measure they are targeting.
In the East, the third quarter GDP publications will be a highlight. It is unclear whether Prime Minister Viktor Orban’s Hungarian economy will emerge from a year-long recession, while Poland will also release figures.
Russian data released on Wednesday is expected to show that the economy continued to rebound despite international sanctions following the invasion of Ukraine, and may have grown by more than 5% – the fastest pace since the start of the war.
Also on Wednesday, investors will receive a first indication of the impact of the war with Hamas on prices in Israel. Analysts polled by Bloomberg forecast a further decline in last month’s inflation rate, to 3.7%.
Read more: War budget leaves Netanyahu stuck between markets and politics
In Africa, Ghanaian Finance Minister Ken Ofori-Atta will present his 2024 budget on Wednesday, which plans to bring debt under control and increase revenue as part of the conditions of a $3 billion IMF bailout plan . Data released the same day is expected to show inflation slowed for a third straight month in October, to 36%.
In Nigeria, the continued fall of the naira will likely cause annual inflation to rise to over 27% in October, from 26.7% a month earlier.
Latin America
In the last economic statement before the election of a new president in Argentina, government data will likely show that annual inflation exceeded 145% last month. Economists surveyed by the central bank forecast a further increase in November and December to end the year at 181%.
Chile’s central bank on Tuesday published the minutes of its October 26 decision to slow the pace of its easing measures. The board cited deteriorating financial conditions globally and rising global geopolitical uncertainty that is undermining the peso.
Peru’s GDP proxy data released on Wednesday is expected to confirm that the economy contracted for a third straight quarter in the three months through September, as domestic demand remains weak and China’s woes weigh on exports.
Brazil’s GDP proxy data for September could show that growth has run out of steam amid a surprising 2023. As consumers in Latin America’s largest economy feel the shock of double-digit rates, government spending, federal aid to low-income households and a tight labor market are contributing. to support demand.
In Colombia, the focus will be on third quarter production. Analysts see a rebound from the previous three months, avoiding a technical recession, and predict that only Brazil and Mexico among the region’s major economies will grow faster in 2023.
–With help from Laura Dhillon Kane, Piotr Skolimowski, Monique Vanek, Paul Wallace, Robert Jameson, Yuko Takeo and Tony Halpin.
(Updates with Israel in EMEA section)
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