Building focus: A woman shelters from the rain near the BoE in London. The overall picture of the UK is one that is slowly moderating but still with excessive price growth, which may support the central bank’s gradual approach towards monetary easing. — AFP
LONDON: UK inflation probably surged back above the Bank of England’s (BoE) target in October, reinforcing the case for policymakers to act cautiously when cutting interest rates.The consumer price index due tomorrow rose an annual 2.2%, according to the median of 24 forecasts in a Bloomberg survey.
That’s up from 1.7% last month, when it slipped below the BoE’s 2% target for the first time in more than three years.
While the headline gauge is seen quickening because of higher energy costs, underlying measures, including service inflation, are likely to have weakened slightly.
The overall picture, of slowly moderating but still excessive price growth, may support the BoE’s gradual approach towards monetary easing so far.
Officials delivered a second quarter-point rate cut in November and avoided sending any signal that faster easing may be needed.
The stance is more restrained than that of the neighbouring eurozone and chimes with the unhurried tone espoused in the past week by US Federal Reserve (Fed) chief Jerome Powell.
Bloomberg Economics said: “Services inflation is likely to ease gradually from here, supporting the case for the BoE moving slowly. We think it will hold rates steady in December before cutting at a quarterly pace in 2025.”
BoE governor Andrew Bailey will be grilled on inflation and monetary policy when he appears before lawmakers on the eve of the data release.
Questions may focus on the economic impact of the Labour government’s recent budget and Friday’s news that growth cooled more than expected in the third quarter.
Alongside Bailey will be colleagues, including Alan Taylor, making his first public remarks as a rate-setter since joining the policy committee in September.
Speaking later in the week are deputy governor Dave Ramsden and Catherine Mann, the sole voter who wanted no change in borrowing costs this month.
A glimpse into the health of the UK consumer will arrive on Friday, when retail sales data for October are released.
Economists anticipate the numbers showing the first decline in four months. Purchasing manager index data come out the same day.
Elsewhere, wage numbers in the eurozone, inflation in Canada and rate decisions from Indonesia to South Africa will be among the highlights.
The US economic data calendar lightens up in the coming week, with fresh reads on the housing market taking the top billing.
Today, a government report is projected to show housing starts in October declined for the third time in four months as builders focus on reducing inventory.
National Association of Realtors data on Thursday are forecast to show October contract closings on previously-owned homes rose as a decline in mortgage rates the prior month helped spur demand.
On Friday, the University of Michigan will issue its final November consumer sentiment index, including responses in the wake of the presidential election.
Lisa Cook, Jeff Schmid, Austan Goolsbee and Beth Hammack are among Fed officials with scheduled events.
Statistics Canada will release consumer price data for October, and early estimates suggest inflation may have stayed below the Bank of Canada’s 2% target.
The data may help settle a debate over whether officials should cut borrowing costs by 25 or 50 basis points next month.
In line with guidance from the People’s Bank of China, lenders in China are expected to hold loan prime rates steady after making larger-than-expected cuts last month, leaving the one-year and five-year rates at 3.1% and 3.6%, respectively.
Bloomberg Economics forecasts another 10 basis points of reductions before the end of the year.
Elsewhere, Indonesia’s central bank may trim its benchmark rate tomorrow by a quarter-point, to 5.75%, after consumer inflation eased to the slowest pace in three years.
Bank of Japan (BoJ) governor Kazuo Ueda will speak at an annual event that is expected to attract scrutiny for any hints on the timing of the central bank’s next rate hike.
At the end of the week, Japan is expected to report that consumer inflation eased a tad in October to 2.2%, extending the streak of months at or above the BoJ’s target to 31 months.
The Reserve Bank of Australia releases minutes from its November meeting today, and governor Michele Bullock delivers a speech on Thursday.
Australia, Japan and India all get PMI statistics for November on Friday. Malaysia and Hong Kong also reported consumer price growth in the week.
Thailand’s economic growth held more or less steady in the third quarter, data is expected to show, while trade figures are due during the week from Malaysia, Japan, Singapore, South Korea and Taiwan.
A hectic week is in store for investors tracking the European Central Bank (ECB).
Multiple appearances by policymakers are scheduled, including two by President Christine Lagarde.
In all, more than half of the Governing Council will speak.
The ECB will also publish its quarterly wage indicator tomorrow, a key metric for officials gauging pipeline price pressures, and then its latest assessment of eurozone financial risks the following day.
Among data releases, the final measure of inflation for October today, consumer confidence on Thursday and then purchasing manager surveys the following day may be highlights.
Moody’s Ratings is scheduled to reveal a potential update on Italy at the end of the week, its first since the country unveiled plans to get its deficit below the European Union’s 3% ceiling by 2026.
Turning to the Nordics, Denmark will release gross domestic product numbers tomorrowy, with Norway doing so a day later.
And in Switzerland, policymaker Petra Tschudin and Swiss National Bank chief Martin Schlegel are scheduled to speak towards the end of the week. — Bloomberg
