Central bank meetings – led by the Reserve Bank of Australia – and then US inflation, as well as the continuing concerns about Covid Omicron – give the week ahead a familiar look, one that we have seen time and time again since the start of 2020.
The Reserve Bank of Australia’s monetary policy announcement will be the highlight on the economic calendar in Australia for the week.
The RBA is forecast to keep the cash rate at the record low 0.1% and maintain its bond purchases at $A4 billion a week until mid-February
Inflation pressures including higher fuel and raw material prices and supply – chain disruptions are a problem, but nowhere near the concern we are seeing in the US, Europe, Japan and China (especially producer prices in the case of the latter).
What the RBA and governor Philip Lowe will emphasise in the post-meeting statement is that the central bank will continue to prioritise the spending and labour market recovery over inflation pressures.
AMP Chief Economist, Shane Oliver says In Australia, the RBA is expected to leave rates on hold and reiterate its dovish guidance on rates.
“It only removed the 0.1% yield target at its last meeting and since then economic news has been mixed – with stronger than expected September quarter GDP and data showing a strong reopening driven rebound in growth but continuing low wages growth and a new risk to the outlook from the Omicron variant.
“So the RBA is likely to simply reiterate its dovish guidance that it will not raise the cash rate until inflation is sustainably within the target range and that this will require the labour market to be tighter and wages growth to be materially higher,” Dr Oliver wrote in his weekly note.
On the data front in Australia, ABS house price data for the September quarter tomorrow show a rise consistent with private sector data already released.
Metcash, the third supermarkets chain and hardware and liquor giant, releases its interim sales and earnings figures later on Monday.
There’s also a few AGMs – Bank of Queensland, Pendal, Washington H Soul Pattinson.
Apart from the RBA, the Reserve Bank of India meets tomorrow and the Bank of Canada midweek. The RBI is expected to keep its key rate steady at 4% and the Bank of Canada to edge closer to tightening its policy stance ahead of next week’s two-day Fed meeting (The Bank of Canada has to keep as close to lockstep with the Fed as possible without falling behind).
Chinese trade data is out tomorrow with another solid set of figures expected, but the reality will be that the external side of the Chinese economy is not a problem, it is the domestic weakness, especially given the still too high producer inflation rate, although that could show a small rise in the November data to be published on Wednesday, along with the consumer price figures for last month which are expected to show a small rise as well.
China’s inflation figures will be joined by America’s Consumer Price Index release on Friday. Economists from Moody’s say they “expect the November CPI will post another strong see as energy prices rose and supply- constraints continued to put upward pressure on goods prices.”
“Another hot print on the CPI will likely seal the deal for the Fed to accelerate its tapering process at the December meeting of the Federal Open Market Committee,” Moody’s predicted.
Economists reckon the CPI could hit an annual rate of 6.7% and the core reading, 4.9%.
Elsewhere, revisions to non-farm productivity and unit labor costs will be released this week.
Moody’s economists wrote at the weekend that the October trade deficit will have an impact on the strength of 4th quarter GDP.
There’s the weekly release of initial claims for unemployment insurance benefits for the week as well as the preliminary University of Michigan consumer sentiment index for December which “will help assess whether news of the Omicron variant of the COVID- 19 virus is weighing on confidence.”
The US sees more corporate earnings reports from the likes of Oracle, Costco, chipmakers, Broadcom, liquor
In Europe, there’s the Eurozone’s third-quarter GDP data due for release. Moody’s economists are looking for a quarter on quarter rise of 2.2% after the 2.1% rise in the June quarter.
Eurozone industrial production will also be released and a mixed result, especially with the likes of Germany, the Netherlands and Australia feeling the whack of Covid Delta before the appearance of the new variant at the end of November.
