Next week's list of important economic events and releases will be highlighted by the FOMC rate decision on Wednesday, March 16 at 2 PM ET. Fed's Powell will hold a press conference at 2:30 PM.
The long-awaited Fed hike is expected at that time. The question is "Will the Fed surprise the market with a 50 basis point hike or stick to 25 basis points?".
The expectations are for 25 basis points.
The last time the Fed hiked rates was back in December 2018 when the Fed hiked 25 basis points to a target range of 2.25% -2.50%. By March 16, 2020 the Fed cut rates to a target range of 0% to 0.25%. It has stayed at that level since that time.
With CPI inflation rising to 7.9% to its highest level in 40 years, it is time for the tightening process to begin.
Fed chair Powell has signaled that he prefers 25 basis points when he testified on Capitol Hill near the start of March. However, he commented that he would not be opposed to a 50 basis point hike down the road if inflation did not start to show improvement (see his comments HERE and HERE).
The Fed will also give their latest central tendencies for GDP, unemployment, and PCE inflation. In December they pegged end of the 2022 central tendency expectations at:
- real GDP: 3.6% – 4.5%
- unemployment rate 3.4% – 3.7%
- PCE inflation 2.2% – 3.0%
- PCE core inflation 2.5% – 3.0
I would expect that GDP would be revised down, unemployment rate will remain somewhat steady. PCE inflation will rise as will core PCE.
Meanwhile the dot plot forecast saw the Fed funds rate moving to 0.75 to 1.00% when it was last released in December (three fed tightenings). That will move higher as well with 4 or 5 most likely. Some private economists see as many as seven tightenings in 2022
Other key events in the US next week includes:
- US PPI data will be released on Tuesday at 8:30 AM with the expectations of 0.9% month on month versus 1.0% last month. The final demand year on year is expected to rise to 10.0% from 9.7% last month. Ex food and energy is expected to rise by 0.6% versus 0.8% and top out at 8.7% versus 8.3% last month for the YoY.
- Retail sales on Wednesday at 8:30 AM ET. The expectations are 0.5% versus 3.8% last month. Core retail sales (ex autos) are expected to rise by 1.0% versus 3.3%
- industrial production data out of the US will be released on Thursday with expectations of 0.6% versus 1.4% last month.
- The monthly regional Fed business indices will kickoff with the Empire State manufacturing index on Tuesday at 8:30 AM. The expectations are 6.9 versus 3.1 last month. On Thursday at 8:30 AM, the Philly Fed manufacturing index is expected to come in at 15.1 verse 16.0
Other key events/releases include:
- Bank of England interest rate decision on Thursday at 8 AM ET. The expectations are for another hike of 0.25 basis points from 0.5% to 0.75%. It would be the third hike in a row and the second of 25 basis points after a 50 basis point hike to kickstart the rate hike cycle. The move higher would take the rate back to the level that existed before the pandemic in 2020.. The January CPI inflation in the UK at the highest and 30 years
- The Reserve Bank of Australia will release their monetary policy meeting minutes on Tuesday at 8:30 PM ET (on Monday night). On March 8, the reserve Bank of Australia's Lowe said that it was plausible the cash rate will rise later this year.
- Australia's employment change will be released on Thursday in Australia at 8:30 PM ET (on Wednesday night). The expectations are for a change of 40.3K vs 12.9K last month. The unemployment rate is expected to dip to 4.1% from 4.2%
- Canada will release their CPI data on Wednesday at 8:30 AM ET. The expectations are for a 0.9% month-to-month increase. The common CPI year on year is expected at 2.4%, the median year on year CPI at 3.4%, and the trend CPI at 4.1%
Then there is the geopolitical risk from Ukraine/Russia. The Russian stock market has been closed all week. Nickel futures on the LME as also been closed after they rose to $100,000 earlier this week.
