BOJ Keeps Yen Watchers on Edge for Rate-Hike Clues

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—Taro Kimura, senior economist. For full analysis, click here

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Elsewhere, gross domestic product and price data in the US, purchasing manager indexes from around the world, UK inflation and a raft of Chinese numbers will be among the highlights. A packed week will also feature the World Economic Forum’s annual meetings in the Swiss mountain resort of Davos. 

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Click here for what happened in the past week, and below is our wrap of what’s coming up in the global economy.

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US and Canada

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The highlight of the upcoming holiday-shortened US trading week will be Thursday’s report on personal income and spending, which also contains the Federal Reserve’s preferred inflation metric. 

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The personal consumption expenditures price index, excluding food and energy, probably rose 0.2% in November from a month earlier, economists forecast. To fill in for data points missing from October data due to the record-long government shutdown, the Bureau of Economic Analysis said it will use the average of September and November data from the consumer price index.

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The so-called core PCE price gauge is seen rising 2.8% from November of the previous year, still above the Fed’s 2% goal. That reinforces the views of most US central bankers that the Fed should pause after three straight rate cuts.

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Signs the fragile job market is stabilizing against a backdrop of steady economic growth are also factoring into expectations that the Fed has scope to wait and assess more data. Personal spending in November likely remained healthy, economists project.

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Fed officials are on a break from public speaking ahead of their Jan. 27-28 policy meeting. Other data in the coming week include the last estimate of third-quarter gross domestic product, and the University of Michigan’s final January consumer sentiment index. 

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Canadian inflation may have edged up in December from November’s 2.2% because of a base-year effect from last year’s goods and services tax holiday. Still, falling gasoline prices and easing rents should keep the result only modestly above the Bank of Canada’s 2% target, and the release is unlikely to shift expectations of a policy rate holding steady at 2.25% for most of the year. 

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The central bank’s business and consumer surveys will shed light on sentiment around inflation and jobs as a review of the North American trade deal approaches. November retail sales and a flash estimate for December will offer insight into household demand as US tariffs weigh on the economy. 

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Asia

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Central banks take center stage in Asia, with the BOJ the marquee event and policy settings scheduled elsewhere in the region too. 

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Chinese banks are expected to hold loan prime rates steady on Tuesday. Indonesia’s central bank meets on Wednesday, with rates widely expected to be kept at 4.75%.

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Malaysia sets borrowing costs on Thursday, with the overnight policy rate also expected to be maintained, keeping the focus on guidance and how policymakers frame the external environment heading into the new year.

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New economic data will fill in the contours of the growth picture once the policy dust settles. In China, in the wake of Thursday’s signal that there’s room for further easing, Monday’s data dump — including fourth-quarter GDP, retail sales, industrial production and property indicators — will anchor the week. Taiwan publishes export orders on Tuesday, offering another read on the global electronics cycle.

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Japan has trade figures on Thursday followed by CPI on Friday, ahead of the BOJ. In Australia, Thursday’s jobs report is the key domestic input as investors gauge whether employment conditions are cooling cleanly or remain tight. Also on Thursday, South Korea publishes fourth-quarter GDP.