China | Emerging Markets | Europe | US
Key Events: Will CPI Upset the Fed?
- By Macro Hive
Key Events
G10
In the US, the key data is twofold:
- CPI – Wednesday. Consensus expectations, 0.2% MoM for core, align with recent ranges. Together with Tuesday’s PPI, CPI will provide the December core PCE estimate, which is a key driver of Fed policymaking.
- Retail Sales – Thursday. Consensus for the control group (key input to consumption estimate in GDP data) is 0.3% MoM or about flat if deflated by the CPI. This would okay number, though the trend has been strong.
In the Eurozone and UK, the main events will be:
- December UK CPI – Wednesday. We expect a beat in headline at +2.7% YoY (consensus: +2.6%, BoE: +2.5%), agree with consensus on core at +3.4% (BoE: +3.3%) and expect a stronger beat in services at +5.1% (consensus +4.8%, BoE: +4.7%). This will likely increase UK rates bearishness but not materially affect BoE policy.
- Final December EZ CPI – Friday. Expect conformation of the 2.4% YoY headline and 2.7% core preliminary rates. Further confirmation that 2023 seasonalities in core and services persisted into the December 2024 data would suggest Q1 2025 may be a strong one. Non-core goods prices remain key to the disinflation story. If they continue to fade, as we expect, the ECB will face a much trickier situation.
Elsewhere in G10:
- MI inflation gauge – Monday. The trimmed mean gauge has seen MoM increases accelerate for four consecutive months, though the last was the first to worry about. We watch for signs that this was a one-off.
- NZIER Business Opinion Survey – Monday. We monitor signs that wider survey optimism is passing through to the NZIER survey.
- Australia Labour Force Survey – Thursday. The Australian labour market has tightened over the past four months with November presenting a new seasonality. We are watching for signs of an unwind in December.
EM
- India inflation – Monday. Continued disinflation should open the door for a first rate cut at the RBI’s February policy meeting.
- Czechia inflation – Monday. Unhelpful base effects will see CPI climb above 3%, pushing it above the CNB’s tolerance band.
- Hungary inflation – Wednesday. Inflation is set to accelerate on forint weakness and an unhelpful base.
- China loans and aggregate financing – Monday-Wednesday. Government bond issuance and short-term loans support the financing data, but effective Loan demand remains weak.
- China trading – Monday. Improving export PMI indicates a continuation of export front-loading
- China housing – Friday. New home sales continue to improve, which will help the housing prices to stabilize
- China retails sales, IP, FAI. Cash-for-clunkers program supports car sales, capacity utilisation data indicates a weakening IP, and strong construction PMI suggests improving infrastructure spending.
- China GDP – Friday. Speeches of high-level officers indicate the achievement of 2024’s 5% growth target, with Q4 GDP around 5.3%. Pay attention to potential downward adjustment of the housing service sector due to the new calculation.
Central Banks in Action
- Fed speakers. We focus on Williams (voter, dove) on Tuesday and Friday, on Schmid (non-voter, hawk) on Tuesday and Goolsbee (non-voter, dove). The pre-meeting blackout starts at the end of the week.
- BOK rate decision – Wednesday. Slowing growth and below-target inflation points to a third consecutive rate cut.
- NBP rate decision – Thursday. Elevated inflation and political considerations ahead of the May presidential election will keep the NBP firmly on hold.
Markets to Watch
- GBP could see support from inflation this week, which Henry expects to rise in H1. However, we think the BoE could look through this and turn short GBP/JPY.
- SFIZ5 could suffer if UK inflation comes out higher than expected. We do not expect near-term inflation beats will materially affect the BoE’s policy path, and would fade SFIZ5 weakness and position for gilt steepening instead.
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