Week ahead: Inflation figures to the fore again

Central banks were the headline acts last week with the Federal Reserve and Bank of England in action. Now it’s back to the reason for the hiking cycle – inflation. Core PCE inflation, the Fed’s preferred gauge of price rises, is due this Friday, with German, Spanish and Italian inflation figures set to be released earlier in the week.

Here are the week’s key events:

Monday

Remember the clocks went forward on Sunday so we’re back to the usual time difference between the North American and European sessions. On the data front, German import prices and the Ifo Business Climate report are due. UK CBI retail sales figures are also on tap.

Tuesday

Looking ahead to new Bank of Japan governor Ueda’s first meeting, the yen is likely to be sensitive to latest inflation data from the world’s third largest economy. The BoJ core CPI hit 3.1% a month ago but the national core CPI has been running in excess of 4%, a 41-year high. In the US, the latest CB consumer confidence report and Richmond Fed manufacturing index are due up. Consumer confidence decreased for a second straight month in February, but the adjacent expectations index - which reflects consumers’ short-term outlook for income, business, and labour market conditions— was notably lower, falling further to 69.7 from a downwardly revised 76.0 in January.

Wednesday

More inflation data from the UK in the shape of the BRC Shop Price index – remember this comes after data last week showed CPI rose by 10.4% in the 12 months to February 2023, up from 10.1% in January. Then it’s the turn of Australian CPI data – will the RBA feel the need to hike again? French CPI inflation and German GfK Consumer Climate reports kick off the European session and the US focus is on pending home sales. US crude oil inventories data to be released as usual.

Thursday

European inflation figures are due out – setting up expectations for what the European Central Bank does next – with the focus on the latest German, Spanish and Italian preliminary CPI releases. Last week ECB president Christine Lagarde said inflation remains too high and that the central bank was “neither committed to raise rates further nor … finished with hiking rates”. US weekly unemployment claims and the final GDP figures for the last quarter of 2022 are due.

Friday

All that matters at the end of the week is the Fed’s preferred inflation metric, the core personal consumption expenditures price index. Core PCE increased 0.6% for the month in January and was up 4.7% from a year ago. Headline inflation increased 0.6% and 5.4% respectively, all above consensus expectations and underlining the Fed’s difficult task in raising rates. With the Fed signalling last week it is close to being done with hikes, the higher inflation remains the tougher it will be for the central bank to maintain this position.