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Wednesday throws up a quiet schedule in terms of data releases, but the Federal' Reserve's policy meeting outcome will dominate the day. The only release of note in Europe is the publication of final EZ inflation figures at 1000GMT. In the North Americas, the release of Canadian inflation figures at 1230GMT and the FOMC statement at 1800GMT will be closely watched.
EZ inflation unchanged in February
The flash estimate of EZ inflation in February shows an unchanged reading from January's 0.9% and markets expect the final print to remain at the flash result. According to the flash estimate, prices for services, food and non-energy industrial goods decelerated, while energy prices fell at a slower pace than in the previous month. Among the member states, the Netherlands (+1.9%), Germany (+1.6%) and Italy (+1.0%) posted the highest rates, while Greece (-1.9%), Slovenia (-1.1%) and Cyprus (-0.9%) recorded the largest declines. Looking ahead, inflation is likely to rise significantly due to energy price base effects, while prices for services are likely to remain subdued due to muted demand.
Annual Canadian inflation seen higher
Markets are looking for an acceleration in annual Canadian inflation to 1.2% in February, up from 1.0% recorded in January. This would mark the third successive increase and the highest reading since February 2020. January's uptick was mainly driven by higher prices for durable goods and gasoline prices. Excluding gasoline, inflation rose to 1.3% in January. Seasonally adjusted monthly consumer prices increased by 0.4% in January, while unadjusted inflation ticked up 0.6%. In February, unadjusted monthly inflation is forecast to remain at 0.6%.
FOMC unlikely to announce any major changes
The Fed will likely repeat that it remains far from meeting employment and inflation goals and that it will be some time before it starts winding down QE. Investors looking for an "Operation Twist"-style switch to longer-dated bond buying to cap Bond yield are likely to be disappointed, former officials have told MNI. The FOMC could raise the rates it pays on excess reserves and overnight repurchase agreements to support short-end rates as the Treasury releases over a trillion dollars in reserves into the financial system.
The main event besides the announcement of the FOMC statement, is ECB's Frank Elderson speaking at a Morgan Stanley event.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.