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Winds of inflation in the United States strengthened further in November, with consumer prices expected to post the largest annual increase in decades, keeping pressure on the Federal Reserve to tighten faster his politics.
The widely followed CPI gauge is likely up 6.7% from November 2020, according to the median projection of a Bloomberg survey of economists. Compared to the previous month, prices are expected to increase by 0.7%.
The surge in inflation this year reflects resilient demand, fragile transportation networks and shortages of supplies and manpower, pressures inflicted by the disruption of the pandemic rippling through the entire global economy.
Fed Chairman Jerome Powell has signaled that the worsening pricing environment is likely to encourage authorities to speed up the withdrawal of stimulus measures, an assessment that may still be valid despite the smaller growth gain in the year. employment this year revealed in data on Friday.
What Bloomberg Economics Says:
“With the omicron now circulating in the United States, posing upside risks to inflation, and the release of next week’s CPI likely to show the highest inflation since 1982, we would expect that this jobs report is not enough to deter the Fed from announcing a faster cut. “
–Anna Wong, Andrew Husby and Eliza Winger. For a full analysis, click here
The government report will end a relatively quiet week for US economic data. Other key releases include job postings and consumer sentiment.
Elsewhere, at least a dozen central banks are expected to hold meetings, including that of Brazil, which could generate a 150 basis point hike, and the Bank of Canada, which is set to withdraw support next year.
Click here to find out what happened over the past week and here’s our recap of what’s happening in the global economy.
Canada
The Bank of Canada is expected to keep the spotlight on inflation in a policy decision next week, as investors anticipate the start of an aggressive campaign of interest rate hikes next year.
Officials are not expected to change the policy on Wednesday. But the Canadian central bank has already ended its bond-buying stimulus program and has started hinting at an accelerated timeline for the start of rate normalization.
Recent data showing strong growth in economic activity and employment will only cement these expectations, with markets already forecasting five increases in the next 12 months.
Asia
After scrapping its yield curve control program, Australia’s central bank will announce its last policy decision of the year on Tuesday as the market bets it will have to reverse its emergency stimulus settings faster than expected.
India’s central bank faces similar pressures as inflation rises, but is expected to keep key policy rates unchanged on Wednesday.
Bank of Japan Governor Haruhiko Kuroda will likely share his views on the risks of the omicron variant in a speech to European financiers on Monday. The bank’s vice-governor spoke with local business leaders on Wednesday as investors seek clues as to whether the BOJ will extend its Covid aid program after March.
And in China, November trade data is expected to remain strong on Tuesday, while inflation data on Thursday is expected to show a slight moderation in factory prices from October highs and a recovery in consumer costs.
Europe, Middle East, Africa
Monthly data in the UK and Eurozone will hint at how these economies are performing in the face of global supply bottlenecks, but before the omicron variant is announced.
In Britain, economists expect October gross domestic product to show some moderation. The data will be part of the last snapshots available to Bank of England policymakers ahead of their final decision of the year on December 16.
Meanwhile, in Germany, reports on industrial production and factory orders will show how logistics increases around the world impacted Europe’s largest economy in the first month of the last quarter, with implications for the region’s overall growth figures.
Multiple appearances from European Central Bank policymakers are also scheduled, which could draw investors’ attention to clues about their big stimulus decision on the same day as the BOE. Towards the end of next week, they will enter a quiet period on monetary policy.
Economists expect Poland’s central bank to raise interest rates again as inflation hits a new 20-year high, while Serbian and Ukrainian officials will also meet.
Hungary, the most hawkish jurisdiction in Europe, currently makes weekly assessment as well as monthly rulings. Officials will determine whether to tighten further after a cumulative 110 basis points of rate hikes in November.
In South Africa, Tuesday’s data will likely show the economy contracted in the third quarter. The central bank expects production to decline 2.5%, in part due to civil unrest and tougher measures to curb a third wave of Covid-19.
On Wednesday, Namibia, which is part of a common currency area with South Africa, could follow its neighbor’s central bank and raise its key rate by 25 basis points to preserve the currency’s peg to the rand and continue to attract foreign investors.
PMI data for the United Arab Emirates on Monday could show a further increase as growth rebounds faster than expected, thanks to an open travel policy and the hosting of the delayed global exposure.
Turkey releases unemployment figures on Friday as President Recep Tayyip Erdogan tries to create jobs ahead of the 2023 election with a low interest rate policy that has pushed the lira to record highs and raised inflation sharply.
Latin America
The current inflation surge in Latin America is perhaps nowhere more dramatic than in Chile: Some forecasts predict a November print of 6.7% on Tuesday, more than double the April pace.
Brazil’s retail sales results for October on Wednesday are likely to prolong a slump as rising interest rates and inflation sideline consumers.
Brazil’s central bank has been clear: A second straight rate hike of 150 basis points is expected on Wednesday to push the policy rate to 9.25%, with more hikes to come. Despite a record tightening in 2021, policymakers are likely to miss their inflation target by more than 600 basis points and do not expect to reach it until 2023 at the earliest.
Peru’s central bank seems comfortable with a gradual tightening cycle, so expect a fourth straight half-point hike to take the policy rate to 2.5%.
Mexico also reported consumer price data for November on Thursday and the forecast is over 7%, more than double the target of 3%. The central bank forecasts inflation of around 6.8% in 2021, which would be the fastest full-year rate in two decades
At the end of the week, analysts expect consumer prices in Brazil to accelerate for an 18th consecutive month in November to just under 11%. Inflationary pressures in Latin America’s largest economy remain widespread.
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