The inflation rate in the United States is likely to rise again: Eco Week

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U.S. inflation has likely reached its fastest level in four decades, leading to a shift in the Federal Reserve’s approach to monetary policy as well as greater consumer concern about the economy.

The widely followed consumer price index on Wednesday is expected to rise 7.0% for the year through December and 0.4% from the previous month. The next day, another report from the Ministry of Labor is expected to show prices paid to producers jumped nearly 10% in 2021. Retail sales and industrial production reports for December arrive on Friday.

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The surge in inflation shows why US officials are bracing for faster-than-expected monetary policy normalization. Added to this is evidence of a tight labor market, including rising wages and falling unemployment in Friday’s data.

Fed watchers may have more specifics in the coming week as to whether the interest rate take-off could take place as early as March and when the central bank begins to reduce its balance sheet by $ 8.8 trillion. .

For more information, read the full upcoming week of Bloomberg Economics for the United States.

President Jerome Powell testified Tuesday before the Senate Banking Committee on his appointment for a second four-year term. Two days later, Fed Governor Lael Brainard appears before the same panel in a hearing to confirm his elevation to vice president. Other Fed officials who will speak include Loretta Mester, Esther George, Charles Evans and James Bullard.

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What Bloomberg Economics Says:

“With the unemployment rate falling below the median estimate of the long-term neutral rate by the FOMC participant and wages rising rapidly, this employment report will likely alleviate lingering doubts on the part of the more accommodating members of the FOMC. “

–Anna Wong and Andrew Husby. For the full report, click here

Elsewhere, inflation data could show Chinese price pressures easing, Germany will give an indication of its growth in the last quarter of 2021, and South Korea and Romania are expected to continue to tighten monetary policies.

Click here to find out what happened over the past week and here’s our recap of what’s happening in the global economy.

Asia

Sri Lanka hosts a visit from Chinese Foreign Minister Wang Yi this weekend as the country questions whether it might need to seek help from the International Monetary Fund or Beijing as its foreign exchange reserves are depleted. weak.

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South Korea’s employment figures precede the Bank of Korea’s interest rate decision on Friday, with some economists now predicting a back-to-back hike from Governor Lee Ju-Yeol.

China is releasing midweek price data that may offer more evidence that inflation pressure has peaked there at the moment. In contrast, Indian inflation is expected to pick up again.

China’s trade figures at the end of the week are expected to show a new annual export record as Beijing sticks to a Covid-zero strategy that keeps its factories open, benefiting from recovering global demand. The Bank of Japan gives its assessment of the health of the country’s local economies ahead of a policy meeting the following week.

To learn more, read the full upcoming week for Asia from Bloomberg Economics.

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Europe, Middle East, Africa

Joachim Nagel’s first full week as President of the German Bundesbank will be marked by a virtual handover event on Tuesday featuring his predecessor, Jens Weidmann, Finance Minister Christian Lindner and European Central Bank President Christine The guard.

Meanwhile, on Friday, an official German growth estimate for 2021 will offer the first indication in the Group of Seven of an expansion for the fourth quarter, after news of an unexpected drop in industrial production in this country in November. The impact of this drop on overall industrial production in the eurozone will be visible in Wednesday’s data.

Friday will also be a highlight in the UK, where monthly gross domestic product and industrial data for November will be released, likely showing a fourth consecutive increase.

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Inflation in the eurozone remains a hot topic after a surprise acceleration reported on Friday. Isabel Schnabel, member of the ECB’s executive board, said on Saturday that the continent’s green energy transition could mean that “inflation will stay higher for longer”.

Eastern Europe will be a hot spot for monetary policy action. Romania’s central bank is expected to raise interest rates on Monday, while decisions are also expected Thursday in Serbia and Hungary.

Ghana’s figures due Wednesday are expected to show inflation accelerated to 12.5% ​​in December, surpassing the top of the central bank’s 6% to 10% target range for a fourth month. Even so, authorities may not raise rates until they see whether the 100 basis point increase in November stops inflation.

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Turkey’s current account data on Tuesday is expected to show a shift to a deficit in November in the absence of a significant boost from tourism. Turkey posted a surplus for three months before November thanks to a jump in trade and the services balance.

To learn more, read the full upcoming week of Bloomberg Economics for the EMEA.

Latin America

Mexican industrial production figures for November, released on Tuesday, could add to the evidence that Latin America’s second-largest economy is slipping into a recession.

December’s reading on consumer prices in Brazil should broadly show that inflation has peaked and ended 2021 slightly below the central central bank forecast of 10.2%. The return to the target will not happen before the third quarter of 2023 at the earliest, now forecasts the bank.

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The Mexican labor market is on the rise, although it remains below pre-pandemic levels. Continuing weakness in services employment is likely to weigh on December’s formal employment data released on Wednesday. In Brazil, the services sector is also struggling and November data due Thursday will likely show a slowdown in activity for a sixth month.

Look for Argentina’s consumer price report for December Thursday to show a slight easing from November’s 51.2% pace. The 2022 inflation path will owe a lot to the timing of a new loan agreement with the IMF that sets targets on public spending and debt.

Inflation, rising interest rates and high household debt have soured Brazilian consumers’ sentiment. Buyers sidelined have many analysts looking for a fourth month of negative impressions in retail data released on Friday.

For more information, read the full upcoming week of Bloomberg Economics for Latin America.

© 2022 Bloomberg LP

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