The pressure is mounting on the Federal Reserve – but what, if any, action will take they on Wednesday?
US
Last week’s inflation data has pushed the central bank closer to the precipice of a shift in monetary policy.
The standard reading for May came in at 0.6% month-on-month, while hitting 5.0% year-on-year – the highest level since 2008. The core figures were just as alarming, with a month-on-month reading of 0.7%, and a yearly reading of 3.8%, a level last seen in 1992.
Countering these eyebrow-raising CPI figures, however, is an underperforming labour market. Though the jobless claims reading is now regularly hitting pandemic-lows, the headline nonfarm number has repeatedly failed to match estimates across the last few months. This is important, as one of the requirements for Jerome Powell to consider tapering the Fed’s current stimulus programme is a ‘string’ of strong jobs reports.
The inflation situation is likely going to outweigh the labour landscape and may prompt a shift in language on Wednesday evening. It all depends on whether the Fed is going to stick by its believe that this spike in inflation is transitory and is a tolerable by-product of the reopening economy.
The rate vote and Fed statement is also going to be accompanied by the latest economic projections for the US, further complicating the latter half of the week.
Before the Fed get-together there’s a good whack of data on Tuesday, with the retail sales, PPI, Empire State manufacturing index and industrial production figures.
The other side of the Fed, meanwhile, there is the Philly Fed manufacturing index and usual jobless claims number on Thursday.
UK
While not as high-profile as the goings on in the States, the UK markets have their own gauntlet to run this week.
Hopes will be for a further reduction in the unemployment rate, and another negative claimant count change reading on Tuesday.
Wednesday then has the UK’s own inflation reading, following the 1.5% posted the month prior.
Finally, Friday wraps the week up with the retail sales data for May, following the unexpected 9.2% increase in April.
Eurozone
Over in the Eurozone you’ve got region-wide industrial production on Monday, German and French inflation on Tuesday, region-wide inflation on Thursday, and the current account number on Friday.
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