Powell May Be About to Seal Deal on a Half-Point Hike: Eco Week

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Jerome Powell may reinforce bets that the Federal Reserve will raise interest rates by a half point next month when he makes final public remarks before the U.S. central bank’s pre-meeting quiet period.

The Fed chair will speak at an event on Thursday and later that day later take part in a panel hosted by the International Monetary Fund, along with European Central Bank President Christine Lagarde and other policy makers. Blackout starts midnight Friday.

Powell has already said that a 50 basis-point increase is possible at the Fed’s May 3-4 meeting. Comments by colleagues since then have hardened expectations they’ll make that move, as officials extend a hawkish pivot to curb the hottest inflation since 1981.

Minutes of their March meeting showed many favored raising rates by a half point and only opted for the more cautious 25 basis point move because of the uncertainty around Russia’s invasion of Ukraine.

The account showed officials expect to start shrinking their balance sheet by $95 billion a month, or more than $1 trillion a year, and could announce a decision in May. Governor Lael Brainard said April 12 that could mean roll-off as soon as June.

Brainard also said that pricing in financial markets shows investors have gotten the message that officials will move “expeditiously” to lift rates to neutral, or the level that neither speeds up nor slows down the economy. Interest-rate futures imply at least another 200 basis points in tightening of the Fed’s main policy rate from its current 0.25% to 0.5% target range. Officials estimate neutral to lie at about 2.4%.

The U.S. economic data calendar is relatively light in the coming week, with reports on March housing starts and sales of previously owned homes taking top billing. They come as mortgage interest rates are on the rise. Other reports include surveys on manufacturing and services.

What Bloomberg Economics Says:

“We expect the the Fed to hike at every meeting for the rest of 2022, but with only one 50-bps move — likely in May.”

–Anna Wong, Yelena Shulyatyeva, Andrew Husby and Eliza Winger, economists. For full analysis, click here

Elsewhere, economic highlights during a curtailed week in much of the world will include Chinese data pointing to the impact of lockdowns, and the IMF and World Bank meetings in Washington.

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

Asia

China’s first-quarter economic growth report on Monday will show a relatively stable picture, but most eyes will be on March numbers for retail sales, industrial production and investment for a more timely reading on how Covid lockdowns are rippling through the economy.

China Activity Data

China’s banks will likely lower the interest rates they charge their best customers on Wednesday.

Rhee Chang-yong is expected to be confirmed as the Bank of Korea’s next governor after a confirmation hearing on Tuesday. The BOK was among a wave of central banks that raised rates in the last week to tackle inflation, and will be keeping a close eye on input price data out Thursday.

Early export figures will offer clues to the strength of global trade amid war in Ukraine and lockdowns in China.

Minutes from the Reserve Bank of Australia’s most recent meeting will give more details on the thinking behind its hawkish swivel away from a position of patience on inflation.

Japan’s latest consumer prices come out Friday as Bank of Japan Governor Haruhiko Kuroda tries to keep policy change speculation at bay amid market pressure on yields, a weakening yen, and signs that inflation is also picking up there.

Europe, Middle East, Africa

In a week shortened by the public holiday on Monday across Europe, finance ministers and central bankers from around the continent will decamp to the U.S. for the IMF and World Bank gatherings.

Among the European speakers at events in Washington will be Swiss National Bank President Thomas Jordan on Tuesday and Bank of England Governor Andrew Bailey on Thursday, as well as Lagarde’s appearances that day and on Friday, too.

Euro-zone statistics for the week include industrial production for February on Wednesday — anticipated by economists to show a small monthly increase — and a final take on inflation for March, scheduled for Thursday. That would update initial data that saw annual price gains of 7.5%, the fastest in the history of the single currency.

Purchasing-manager surveys in the euro region and the U.K. on Friday will point to the economic fallout from the war in Ukraine. The same day, Britain will release retail-sales data for March, the first full month of the conflict.

Looking south, a report in South Africa on Wednesday is expected to show inflation at the top end of the central bank’s 3%-to-6% target range in March. That’s likely to prompt the Monetary Policy Committee to lift its key rate by a quarter-point on May 19.

On the same day, data from Ghana will probably show economic growth lost momentum in the fourth quarter and grew 3.9%, compared with 6.6% in the prior three months.

Latin America

Chile’s central bank publishes its survey of traders’ inflation and interest rate expectations on Monday.

Next up is Colombia’s February GDP-proxy reading, which may offer a glimpse of the road ahead: the nation is seen surmounting a contentious presidential election to post solid growth in 2022.

Look for March data to show that Argentina posted a 15th straight monthly trade surplus and yet another massive budget deficit.

Colombia reports February imports and trade balance figures on Thursday followed by Argentina’s economic activity data for the same month, which may rebound from January, when the omicron variant sent caseloads surging.

Closing out the week, early forecasts of mid-month readings in Mexico see annual inflation easing along with month-on-month deflation, dovetailing with Banxico’s forecasts that consumer prices would peak in the first quarter. Core inflation, which Banxico sees topping out in the second-quarter, is likely to have pushed higher.

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