Week in review
- ECB leaves cash rate at 4.5%
- European and U.S composite PMI
- U.S. economy expands by 3.3% q/q saar in 4Q 2023
Week ahead
- U.S. Federal Reserve meeting
- Australia retail sales
- Australia CPI inflation for 4Q 2023
Thought of the week
This week the U.S. Federal Reserve (Fed) will meet, as will the Bank of England. Both are likely to provide a similar narrative to the European Central Bank (ECB) from last week and rebuff market expectations for early rate cuts until there is more convincing evidence that inflation is sustainably returning to target. Globally inflation pressures continue to ease, but labour markets are only slowly loosening and unemployment rates remain low. Meanwhile, the recent shipping disruptions could add to the potentially more challenging ‘last mile’ in the fight on inflation. However, outside of energy the shipping disruption inflationary impact should be muted. Rate cuts are coming, so what difference does a few months make? A lot. Market pricing of earlier cuts suggest a faster pace of disinflation along with stable growth. Later cuts could mean stubborn inflation and a weaker growth outlook or even recession creating a very different market dynamic.
Expectations for interest rates in 2024
Market data