Week Ahead: Risk events aplenty  

It’s a hugely busy week with over a dozen global central bank meetings, including the FOMC, Bank of England and the Bank of Japan. We also get a bunch of major data points with global PMIs, US and UK retail sales, inflation reports from US, UK, Japan and Canada, plus UK jobs and wages figures.  

Another 25bps rate cut is virtually fully priced in by money markets for Wednesday’s Fed meeting. Traders see at least another 75bps of policy easing next year and the FOMC currently also expect to be cutting throughout the year. That said, the risk of lingering tariff-induced inflation from the new President’s trade and fiscal policies could cause a shallower, slower path of easing through 2025, which may add further support to USD. As such, any guidance given by the FOMC through policymakers’ new updated economic projections and dot plots will be closely scrutinised. Three 25bps rate cuts in 2025 rather than the current four is likely to be seen, but this is before any Trump policies are known.  

Another rate hike by the BoJ is a close call, but most economists think the bank will hold rates at 0.25% as it assesses next year’s wage outlook and overseas risks. Policymakers last raised rates in July, which was seen as a hawkish move and prompted the disorderly unwind of the carry trade. The yen’s depreciation has cooled in recent weeks so is likely no longer a justification for a move at this meeting. Recent private consumption data was also revised down in a sign of the economic recovery’s fragile nature.  

The final Bank of England policy meeting of the year could be a non-event as most expect policymakers to keep rates on hold again until February. Rate setters remain laser focused on inflation, and specifically services inflation which continues to remain elevated around 5%. Governor Bailey recently signalled four rate cuts in 2025 if the economy proceeds as expected. The next round of MPC economic forecasts is published in February.  

In Brief: major data releases of the week 

Monday, 16 December 2024 

– China Data: A modest recovery is expected to continue with retail sales printing at 5.0%, industrial production at 5.4% and fixed asset investment at 3.5%. The recent stimulus has not yet delivered a big uplift in activity.   

– Global PMIs: Manufacturing activity is expected to continue languishing in contractionary territory. Services are not far behind in Europe and the UK. US services stand out as firmly in expansion.  

Tuesday, 17 December 2024 

– UK Jobs: There have been longstanding reliability issues with the unemployment rate, which is forecast to hold steady at 4.3%. Wage growth is the key measure for the MPC. This could tick higher due to unfavourable base effects.   

– US Retail Sales: Sales activity is predicted to tick up one-tenth to 0.5% m/m. The US consumer remains happy to spend, with Thanksgiving transactions said to be strong. This momentum is seen continuing into the new year.  

Wednesday, 18 December 2024 

– UK CPI: Expectations are for headline inflation to rise two-tenths to 2.5% due to base effects. Core CPI is seen rising three-tenths to 3.6% and services is seen steady at an elevated 4.9%.  

– FOMC Meeting: The Fed is fully expected to cut rates by 25bps. The labour market is cooling though inflation is proving stickier than hoped. Updated economic projections will be published with inflation and growth likely to be revised upwards.  

Thursday, 19 December 2024 

– Bank of Japan Meeting: Consensus sees the BoJ standing pat on rates. There’s around a 20% chance of a rate hike, though these odds have been fluctuating a lot recently. Higher than expected CPI and upward revisions to GDP are offset by falling private consumption and a recent cooling in yen depreciation.  

– Bank of England Meeting: The MPC will sit on its hands at its final meeting of the year with a likely 8-1 vote split. Growth concerns are increasing but inflation remains relatively sticky. New economic projections are not published until the next meeting in February.    

Friday, 20 December 2024 

– UK Retail Sales: Consensus expects a headline print of 0.5% m/m. Black Friday activity is seen as strong and clawing back some of the weakness seen during the rest of November.  

– US Core PCE: The Fed’s favoured inflation gauge is predicted to print at 0.2% m/m, one-tenth lower than the October reading. Going forward, the disinflation process looks to have stalled with Trump’s tariff-induced inflation looming.