An upbeat payrolls report has already seen investors scale back expectations for a March cut by the Fed, though May remains priced at a 76 per cent chance
Asian shares dropped on Monday ahead of a week packed with a quintet of central bank meetings and data on U.S. inflation that could make or break market hopes for an early round of rate cuts next year.
An upbeat payrolls report has already seen investors scale back expectations for a March cut by the Fed, though May remains priced at a 76 per cent chance.
The Federal Reserve is considered certain to hold rates at 5.25-5.50 per cent this week, putting the focus on the so-called dot plots for rates and Chair Jerome Powell’s press conference.
The consumer price report for November on Tuesday will also influence the outlook with analysts forecasting an unchanged headline rate and a 0.3 per cent increase in the core.
We look for another Fed-friendly CPI (Consumer Price Index) report but, barring surprises, anticipate the policy statement to signal that economic conditions have not changed enough for officials to drop their tightening bias just yet, said John Briggs, global head of strategy at NatWest Markets.
We think Powell will leave the option of a possible hike on the table, but the hurdle seems quite high for the Fed to follow through, Briggs said. We also expect the European Central Bank to cut early while the Bank of England will continue to push-back against market pricing of cuts in the first half of 2024.
The ECB, BoE, Norges Bank and the Swiss National Bank all meet on Thursday, with Norway the only one considered a possible hiker. There is also a risk the SNB may toy with renewed intervention to weaken the franc.
With so much riding on the outcomes, investors were understandably cautious and MSCI’s broadest index of Asia-Pacific shares outside Japan declined 0.7 per cent.
Japan’s Nikkei rose 1.6 per cent after dropping 3.4 per cent last week amid speculation of an end to super-easy monetary policy.
Chinese blue chips slid 0.6 per cent after data showed consumer prices dropped 0.5 per cent in November, the steepest decline since late 2020.
