Week Ahead Economic Preview: Week Of 14 March 2022

 | Mar 11, 2022 05:48

h2 Fed FOMC, BoE, BoJ, BI, CBC meetings, US and China production data

The week ahead will see an abundance of central bank meetings across the US, UK, Japan, Indonesia and Taiwan. Retail sales and industrial production data will also be due from the US and China. The UK meanwhile releases employment data for February while Japan and the eurozone issue inflation figures.

Central bankers will be making their moves to tackle inflation in the coming week starting with the US Fed, which is expected to kickstart its rate hike cycle. While a 25-basis point hike had been well-telegraphed, the path forward remains less certain amid Russia's invasion of Ukraine. The latest IHS Markit Investment Manager Index revealed that US equity investor risk appetite had slumped on the back of geopolitical and macroeconomic concerns, while many retained the view that more tightening than currently signalled may be on the way due to a protracted supply chain crisis. As such, the Fed's projections and stance will be closely studied in the coming week.

Meanwhile the BoE and CBC are expected to join the Fed in lifting policy rates in the coming week. A rate hike in March will mark the third consecutive meeting in which the UK central bank raises rates, a move to tackle inflation with January consumer price inflation now at the highest in 30 years. Taiwan CBC is likewise set to commence hiking of rates but could keep it gradual amid external uncertainties. In all cases, however, policymaker reaction to the Ukraine war remains a key element of uncertainty.

Over in the data docket, the US and China both release retail sales and industrial production data for February. Japan, Canada and final eurozone inflation data will also be closely watched for the pre-Ukraine crisis picture on prices. Eurozone industrial production and UK labour market data are also key diary events.

h2 Central banks meet amid high uncertainty/h2

Economic forecasts of growth and inflation have been largely made redundant by the invasion of Ukraine, posing downside risks to growth while adding to inflationary pressures. Growth is invariably being affected by sanctions as well as the likely hit to business confidence from the war.

However, European supply chains are also again being disrupted adding to downside growth risks but also exacerbating inflationary pressures, the latter already hit by soaring energy prices. PMI data showed that, although some supply chain disruptions were starting to ease in February, rising energy and staff costs had pushed prices higher at a rate approaching prior record highs. Envy not, therefore, the central banks that meet in the coming week to determine the correct path for monetary policy in this environment.

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Global PMI prices and inflation