Economic Data and Bank of England Rate Hikes: What to Watch for this Week
By The Senior Loan Officer Opinion Survey (SLOOS) has revealed a decline in economic activity during the last few quarters.[0] The latest survey revealed widespread demand deterioration and tighter credit standards across all loan types in the last three months of 2022.[1] A decrease in credit availability serves as an indication of the wider repercussions of a restrictive monetary policy beginning to manifest.[1] I forecast that the consumer price index (CPI) rose 0.5% in January, with the related year-ago rate easing from 6.5% in December to 6.4%.[0]
Disney (DIS) announced 7,000 jobs being cut, and $5.5 billion in cost cutting.[2] The shift at Disney has also caused activist investor Nelson Peltz to withdraw from his proxy battle in solidarity with CEO Bob Iger and his decisions, netting a cool $150 million paper profit for the investor.[2]
The Bank of England has considered the possibility that the 50bp interest rate increase in February might have been the final one.[3] We anticipate that the Federal Reserve will implement one more 25 basis points rate hike in March; however, the data to be released next week will be significant.[3] With the Fed minded to keep hiking to ensure inflation comes down, it makes the likelihood of a May rate hike in addition to a March hike look more plausible.[3]
Jobs and wages have shown little-to-no sign of easing, at least in the official numbers.[3] Inflation of “core goods” is dropping quickly as demand weakens and supply lines become better organized – basically the opposite of what caused inflation to increase during the pandemic.[3] It is predicted that the Consumer Price Index (CPI) will decrease slightly due to a nearly 4% decrease in the prices of petrol and diesel[3] Core inflation is likely to decrease as well, though not as substantially.[3] But the Bank of England will be watching ‘core services’ inflation most closely, given that it’s less volatile and tends to experience more persistent trends than goods categories.[3]
Retail sales have fallen in 12 out of the last 14 months, and we don’t think January was an exception.[3] This would suggest a slight decrease in GDP during the initial quarter.[3] Federal Reserve Chair Jerome Powell’s recent remarks at the Economic Club of Washington were pretty like what he said after last Wednesday’s FOMC meeting: disinflation has begun, it has a long way to go, and further interest rate increases are likely needed.[0]
This week should have some excitement as well.[4]
0. “US weekly prospects” FXStreet, 13 Feb. 2023, https://www.fxstreet.com/analysis/us-weekly-prospects-202302130500
1. “Weekly Economic & Financial Commentary: International Central Banks Deliver Another Round of Rate Hikes” Action Forex, 11 Feb. 2023, https://www.actionforex.com/contributors/fundamental-analysis/485872-weekly-economic-financial-commentary-international-central-banks-deliver-another-round-of-rate-hikes/
2. “Week Ahead: Inflation Data, Interest Rates, and Time to Buy Shopify Breakout?” Yahoo! Voices, 13 Feb. 2023, https://www.yahoo.com/now/week-ahead-inflation-data-interest-204008296.html
3. “Key Events In Developed Markets Next Week” MENAFN.COM, 10 Feb. 2023, https://menafn.com/1105556757/Key-Events-In-Developed-Markets-Next-Week
4. “Massive CPI Report And Other Key Themes To Watch This Week” Barchart, 12 Feb. 2023, https://www.barchart.com/story/news/14129804/massive-cpi-report-and-other-key-themes-to-watch-this-week
