Week Ahead Economic Preview: Fed FOMC, BoE, BoJ meetings, U.S. and China May data

 | Jun 10, 2022 08:13

Central bank meetings will be in focus in the coming week with the US Fed, the Bank of England, and the Bank of Japan all due to update their monetary policy decisions in the coming week. In the data docket, US retail sales, industrial production, and PPI data will be watched midway into the second quarter. Likewise in China, where retail sales and industrial output figures will be released. In the UK, April GDP data and the monthly labour market report will be eagerly awaited.

Following the US CPI data release this week, the Fed's FOMC meeting will be the highlight in the coming week. Market sentiment remains weak at present amid concerns over stubborn inflation and the impact of high prices on growth, with recent US PMI data pointing to slowing business activity amid rising prices and softer demand. While a 50 basis point hike appears to be the foregone conclusion at this point according to the CME FedWatch tool, the Fed's rhetoric and projection will be eagerly followed for indications on the path forward and the resultant impact that will play into growth forecasts.

Meanwhile, the UK, faced with slowing growth according to the S&P Global / CIPS UK PMI, may see the Bank of England take a more cautious 25 basis point hike amid fears of tipping the economy into recession. For the Bank of Japan, despite USD/JPY hitting a two-decade high, driven by yield differentials, any lifting of interest rates is not expected. Japan had also only recently seen growth catching up with other developed world economies , after virus restrictions were gradually eased.

A busy week of economic releases also brings retail sales and industrial production data from the US and China, two countries running at differing speeds in May. While some slowdown in the US may be the case amid cost pressures, a slower deterioration of conditions had been seen for mainland China in May's PMI surveys which, if supported by the official data, could see inventor focus shift more positively towards China, and also anticipate some easing of global supply constraints.

h2 BoE and Fed policy meetings in focus/h2

Policy announcements are due in the coming week from the US FOMC and the Bank of England. A 50 basis point hike is penciled in for the FOMC as policymakers seek to rein in inflation at a time of still-robust business activity growth. In the UK, the policy decision is less clear-cut. While inflation is likewise at a multi-decade high, UK growth is faltering, meaning there's a greater risk that tighter policy could spark a recession in the UK compared to the US.