This week, when the Group of Seven (G7) finance ministers and central bank governors meeting is scheduled, a series of economic indicators, including inflation, which could impact the monetary policy decisions of these central banks, will be released. Following the United States, which earlier announced a lower-than-expected Consumer Price Index (CPI) and spread expectations of interest rate cuts, the United Kingdom, Canada, and Japan will release their indicators. The Eurozone wage report, closely watched by the European Central Bank (ECB), and the minutes of the May Federal Open Market Committee (FOMC) meeting of the U.S. Federal Reserve (Fed) will also be published this week.
According to Bloomberg News on the 19th (local time), the inflation indicators to be released this week from the United Kingdom, Canada, and Japan are expected to show a slowdown. On the 21st, Canada will release its April data. Recently, with strong employment figures, the probability of a rate cut in June has fallen below 50%. However, the news agency assessed that if inflation continues to slow for the fourth consecutive month, the possibility of a rate cut remains.
On the 22nd, the United Kingdom will announce its April CPI. Following the monthly CPI growth rate slowing from 4.0% in January to 3.4% in February and 3.2% in March, attention is focused on whether it can become the first major country to achieve the inflation target of the 2% range. The market currently expects the Bank of England (BOE), the UK central bank, to cut the current annual interest rate of 5.25% at the June Monetary Policy Committee meeting. Since the number of members advocating for a rate cut increased at the last meeting, and BOE Governor Andrew Bailey’s remarks were generally dovish (favoring monetary easing), the inflation data released before the June meeting is expected to be crucial.
Japan will also release its April CPI on the 24th. The growth rate excluding fresh food is estimated to ease from 2.6% in March to 2.2%. The core CPI growth rate, excluding energy prices and fresh food, is expected to slow further to around 2.5%, following the collapse of the 3% range in March. Additionally, Singapore, Hong Kong, and Malaysia will also release inflation data during the week.
Furthermore, first-quarter wage negotiation data, which could influence the ECB’s monetary policy, will be released this week. With expectations mounting that the ECB will begin cutting rates at its June 6 meeting, market attention is focused on wage growth rates. Wage growth is an indicator closely monitored by central banks worldwide because it can fuel inflationary pressures. However, the news agency added that the wage growth rate to be released this time is not expected to have slowed significantly.
David Powell, Chief Eurozone Economist at Bloomberg Economics, said, "The wage negotiation data for the first three months of 2024 already released for Germany, France, Italy, and Spain show that wages in the Eurozone rose by 4.3% compared to a year ago. This is only slightly slower than the 4.5% in the fourth quarter of last year," adding, "While this is unlikely to derail the ECB’s first rate cut in June, it will raise concerns about further easing."
Notably, this week also marks the timing of the G7 finance ministers and central bank governors meeting held in Stresa, a northern Italian resort town. In addition to the G7, countries such as South Korea, India, and Indonesia will also participate. At this meeting, officials are expected to discuss global economic issues and also review each country’s monetary policies. While rate cut possibilities are being raised in Europe and Canada, the U.S. is expected to maintain its current high interest rates for the time being.
The minutes of the May FOMC meeting, where rates were held steady for the sixth consecutive time, will also be released on the 22nd. Earlier, Fed Chair Jerome Powell had indicated that if inflation slowdown does not progress, the high interest rate stance would be prolonged, while dismissing the possibility of rate hikes, which was considered more dovish than expected. Attention is focused on what assessments the FOMC members made regarding inflation and the economic situation. Mohamed El-Erian, advisor to Allianz Group, emphasized on his X (formerly Twitter) account shortly after the FOMC meeting that while Powell’s remarks were dovish, "we need to see the minutes to determine whether they accurately reflect the discussions of the FOMC members or just Powell’s personal views."
In addition, attention will be on the remarks of Fed officials at the financial market conference hosted by the Federal Reserve Bank of Atlanta through the 22nd. Public speeches are scheduled this week by Fed Vice Chair Philip Jefferson, Fed Governor Christopher Waller, Fed Vice Chair for Supervision Michael Barr, Atlanta Fed President Raphael Bostic, and New York Fed President John Williams.
Other indicators to be released during the week include the May manufacturing Purchasing Managers’ Index (PMI) for the U.S., Eurozone, and Japan, the final May University of Michigan Consumer Sentiment Index for the U.S., and Canada’s March retail sales.
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