Recent Blogs

• In the absence of significant market turbulence following US President Trump’s inauguration, we expect the BoJ (on Friday) to raise the policy rate by 25bps to 0.50%. 
• Japanese CPI inflation figures for December (also Friday) will highlight the case for monetary tightening, with the headline rate set to be above the BoJ’s 2% target for a 33^rd successive month. 
• The flash European composite PMIs (Friday) are expected to be broadly consistent with ongoing stagnation at the start of the year.

* December CPI inflation reports are due from the US and UK (Wednesday), along with final estimates of euro area HICP (Friday). 

* The ECB's account from December's Governing Council meeting (Thursday), and speeches from BoJ Deputy Governor Himino (Tuesday) and BoE MPC external member Taylor (Wednesday) will be closely watched. 

* China's Q4 GDP growth (Friday) will likely report the firmest quarterly growth in seven, with a notable boost to net trade. US and UK retail sales figures (Friday) are also due. 

*  The US December labour market report is expected to show non-farm payroll growth moderating to a respectable 160k after the prior month’s rebound, with the unemployment rate remaining low and stable at 4.2%, and pay growth a touch softer after two stronger months

*  In the euro area, the flash estimate of inflation in December is expected to rise for a third successive month to a five-month high around 2½%Y/Y; the increase should be principally due to energy price base effects while the main core rate could well remain steady around 2.7%Y/Y. But today's German data might provide an upside surprise 

*   Inflation will also be in focus in China, with consumer prices expected to remain negligibly higher than a year ago and producer prices still down about 2½%Y/Y; while the authorities fixed the yuan at a stronger level today to dampen depreciation speculation, expect continued attention on the Chinese currency amid uncertainty about President-elect Trump’s tariff policy.

*  In Japan, labour cash earnings growth is expected to pick up in November closer to levels consistent with the BoJ’s inflation target; the Bank’s regional economic report and information from its branch heads meeting will be watched for signals on the likely strength of settlements in the forthcoming spring pay round

• The Fed looks set to cut rates by 25bps on Wednesday to take the FFR target range to 4.25-4.50%; but the FOMC’s updated dot-plot of members’ rate projections for coming years, as well as its policy statement and Chair Powell’s commentary, will be scrutinised for further signs that it will be more cautious in easing policy in 2025 and beyond.
• While this morning’s UK flash PMIs suggested that economic activity continues to flatline, the Bank of England is still widely expected to leave Bank Rate unchanged at 4.75% (Thursday) as the MPC’s concerns about inflation persistence might be maintained by data showing still-elevated wage growth (tomorrow) and a pickup in the headline CPI rate to around 2½%Y/Y (Wednesday) in part due to unfavourable base effects.
• Although recent Japanese economic data, such as last week’s Tankan survey results, appear consistent with a further rate hike, media reports suggest that the BoJ is in no hurry to tighten, and so it is currently expected to leave its policy rate unchanged at 0.25% (Thursday); nevertheless, inflation data (Friday) will likely report a pickup further above the 2.0% target in the headline and core rates alike, maintaining market expectations that monetary policy will be tightened in the New Year.

• After Japanese GDP growth in Q3 was revised up today to a respectable 1.2%Q/Q annualised, the BoJ and investors alike will closely watch its quarterly Tankan business survey results (Friday) for additional signs that business conditions are ripe for another rate hike, either next week or in January.
• After a UK labour market survey today reported the steepest decline in job vacancies since 2020, October’s GDP data (Friday) will likely show only a very modest uptick in economic output to suggest no material improvement in the underlying trend in Q4 after growth slowed to just 0.1%Q/Q in Q3; the GfK confidence survey (also Friday) similarly seems likely to suggest that consumers are lacking festive cheer.
• Data this morning showed that Chinese CPI inflation unexpectedly slowed to just 0.2%Y/Y in November, with producer prices down a marked 2.5%Y/Y, to underscore that deflationary risks remain elevated; in response, in a shift from recent years, China’s Politburo committed to a “moderately loose” monetary policy and “more proactive” fiscal policy in 2025. November goods trade figures (tomorrow) will flag China’s overreliance on exports for driving growth, with soft imports tallying with ongoing domestic demand weakness.