MNI BRIEF: BOI Sees "Modest" Q2 EZ Growth Driven By Services

MNI China Daily Summary: Friday, July 12

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CHINA PBOC CONDUCTS CNY2 BILLION VIA 7-DAY REVERSE REPOS FRI

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MNI GLOBAL WEEK AHEAD - FOMC Minutes and Flash PMIs In Focus

TUESDAY - Canada CPI

Canada CPI lands on Tuesday. BoC communications from late January centred on how the discussion is shifting away from whether the policy rate is restrictive enough to how long it needs to stay at the current level, a point reiterated by Dep Gov Mendes on Tuesday. Mendes added that inflation is still too high and underlying inflation pressures are still too broad. This brings us to Gov. Macklem’s remarks at the January press conference when MNI asked about the shift in language to underlying rather than core inflation. “It’s more of a concept than a measure and reflects a number of things. The Bank's preferred measures of core inflation (CPI-trim, CPI-median) are a very important element), but we also look at other measures such as CPIxFE, CPIX and the breadth of price gains. Those are some of the key things we’re looking at as we assess the trend - we’re looking for continued evidence that inflationary pressures are easing with clear downward momentum.” To this end, we expect focus on metrics beyond just the BoC’s previously preferred median and trim measures. Different metrics have been pointing to a wide range recently, with the average of median and trim at 3.8% annualized over six months and CPIxFE at 3.7%, but CPIX within the 1-3% target band at just 2.5%.

WEDNESDAY BI Decision

Financial stability is likely to remain BI’s primary focus, which should see policy held steady at next week’s policy meeting. USD/IDR is off 2024 highs but remains susceptible to shifts in US yields and Fed expectations. A dovish surprise from the BI may also undermine FX stability at a time when Indonesia is going through a change of government. The rough sell side consensus is that BI cuts won’t materialise until the fed has either cut rates or close to doing so.

WEDNESDAY - FOMC Minutes

The immediate focus in the January FOMC meeting minutes will be on participants' thinking surrounding the prospect for future rate cuts - both timing and magnitude. Recall that the January FOMC meeting marked the end to the Statement's tightening bias, but the headlines and market reaction centered on Chair Powell's pushback against the likelihood of a rate cut at the next meeting in March ("based on the meeting today, I would tell you that I don't think it is likely that the Committee will reach a level of confidence by the time of the March meeting to identify March at as the time to do that, but that is to be seen.") Almost equally important: the minutes will be scrutinized for any discussion surrounding the timeline and contours of a potential slowing of asset runoff and how soon a decision may be reached. On the topic of QT tapering, Powell mentioned "we had some discussion of the balance sheet" though he cast doubt on an announcement as soon as March and/or initiation soon thereafter ("We are planning to begin in-depth discussions of balance sheet issues at our next meeting in March...questions are beginning to come into greater focus about the pace of runoff.").

THURSDAY - Eurozone Final January HICP

Eurozone final HICP for January is released on Thursday, including the full breakdown sub-components. The flash estimate printed at an unrounded +2.75% (vs +2.7% cons; +2.9% prior), as services stickiness tempered a reversal of December's energy-induced uptick. As always, we will also focus our attention on the extent to which inflation breadth improved in January, alongside the release of the ECB's underlying inflation measures (e.g. PCCI). We would note that in a recent speech, ECB Chief Economist Lane caveated the reliability of the signals sent by underlying inflation measures, due to "the relative price shocks that have been triggered by the scale and breadth of the energy shock and the pandemic- and war-related shocks".

THURSDAY - February Flash PMIs

The February round of flash PMIs is due on Thursday. In the UK and Europe, we will as ever be watchful of indications of inflationary pressures. For services, wages have been repeatedly flagged as a driver of increased input prices. Amongst manufacturers, the January survey round saw the first references to ongoing Red Sea disruptions in driving input prices higher. The extent to which these forces push output charge inflation higher is of particular interest.

THURSDAY - BoK Decision

The BOK is widely expected to keep interest rates on hold next week. Inflation has come down significantly but the central bank is likely to stay patient and wait for further confirmation of a reduction in inflation expectations before it switches to a more dovish outlook. The growth backdrop is not weak enough to warrant a dovish pivot either, with unemployment holding near cyclical lows. The BOK will also be mindful of the pushback in the timing of Fed rate cuts. An earlier pivot could undermine KRW sentiment.

THURSDAY - CBRT Decision

The CBRT meets on Thursday having very likely concluded its rate hiking cycle last month. While no change to the one-week repo rate is expected, the central bank is likely to adjust banking regulation further while continuing to use alternative tools to manage financial conditions. Given this is the first meeting under newly appointed Governor Fatih Karahan, the policy statement will be closely watched for any potential hawkish tweaks.


DateGMT/LocalImpactFlagCountryEvent
19/02/20242350/0850*JP Machinery orders
19/02/20240700/0800***SE Inflation Report
19/02/20241330/0830*CA Industrial Product and Raw Material Price Index
20/02/20240900/1000**EUCurrent account
20/02/20241000/1100**EU Construction Production
20/02/20241000/1000**UK Gilt Outright Auction Result
20/02/20241015/1015UK BOE's Bailey et al at TSC to discuss MPR
20/02/20241330/0830***CA CPI
20/02/20241330/0830**US Philadelphia Fed Nonmanufacturing Index
20/02/20241630/1130*US US Treasury Auction Result for 26 Week Bill
20/02/20241630/1130*US US Treasury Auction Result for 13 Week Bill
20/02/20241800/1300*US US Treasury Auction Result for Cash Management Bill
20/02/20241800/1300**US US Treasury Auction Result for 52 Week Bill
21/02/20242350/0850**JP Trade
21/02/20240001/0001*UK XpertHR pay deals for whole economy
21/02/20240030/1130***AU Quarterly wage price index
21/02/20240700/0700***UK Public Sector Finances
21/02/20241000/1000**UK Gilt Outright Auction Result
21/02/20241100/1100**UK CBI Industrial Trends
21/02/20241200/0700**US MBA Weekly Applications Index
21/02/20241300/0800US Atlanta Fed's Raphael Bostic
21/02/20241355/0855**US Redbook Retail Sales Index
21/02/20241400/1400UK BOE's Dhingra MNI Connect Event on BoE projections
21/02/20241500/1600**EU Consumer Confidence Indicator (p)
21/02/20241630/1130**US US Treasury Auction Result for 2 Year Floating Rate Note
21/02/20241800/1300**US US Treasury Auction Result for 20 Year Bond
21/02/20241800/1300US Fed Governor Michelle Bowman
21/02/20241900/1400***US FOMC Minutes
22/02/20242200/0900***AU Judo Bank Flash Australia PMI
22/02/20240030/0930**JP Jibun Bank Flash Japan PMI
22/02/20240630/0630UK BOE's Greene, Kroll South Africa breakfast
22/02/20240745/0845**FR Manufacturing Sentiment
22/02/20240815/0915**FR S&P Global Services PMI (p)
22/02/20240815/0915**FR S&P Global Manufacturing PMI (p)
22/02/20240830/0930**DE S&P Global Services PMI (p)
22/02/20240830/0930**DE S&P Global Manufacturing PMI (p)
22/02/20240900/1000**IT Italy Final HICP
22/02/20240900/1000**EU S&P Global Services PMI (p)
22/02/20240900/1000**EU S&P Global Manufacturing PMI (p)
22/02/20240900/1000**EU S&P Global Composite PMI (p)
22/02/20240930/0930***UK S&P Global Manufacturing PMI flash
22/02/20240930/0930***UK S&P Global Services PMI flash
22/02/20240930/0930***UK S&P Global Composite PMI flash
22/02/20241000/1100***EU HICP (f)
22/02/20241100/0600***TR Turkey Benchmark Rate
22/02/20241330/0830***US Jobless Claims
22/02/20241330/0830**CA Retail Trade
22/02/20241445/0945***US S&P Global Manufacturing Index (flash)
22/02/20241445/0945***US S&P Global Services Index (flash)
22/02/20241500/1000***US NAR existing home sales
22/02/20241500/1000*US Services Revenues
22/02/20241500/1000US Fed Vice Chair Philip Jefferson
22/02/20241530/1030**US Natural Gas Stocks
22/02/20241600/1100**US DOE Weekly Crude Oil Stocks
22/02/20241600/1100**US Kansas City Fed Manufacturing Index
22/02/20241800/1300**US US Treasury Auction Result for TIPS 30 Year Bond
22/02/20242015/1515US Philly Fed's Pat Harker
22/02/20242200/1700US Minneapolis Fed's Neel Kashkari
22/02/20242200/1700US Fed Governor Lisa Cook
23/02/20240001/0001**UK Gfk Monthly Consumer Confidence
22/02/20240035/1935US Fed Governor Christopher Waller
23/02/20240700/0800***DE GDP (f)
23/02/20240800/0900EU ECB's Lagarde and Cipollone in Eurogroup meeting
23/02/20240800/0900EU ECB's Lagarde, de Guindos, and Cipollone in ECONFIN meeting
23/02/20240900/1000***DE IFO Business Climate Index
23/02/20240900/1000**EU ECB Consumer Expectations Survey
23/02/20240920/1020EU ECB's Schnabel lecture on Inflation fight at Bocconi
23/02/20241300/1400EU ECB's Schnabel speech at Forum Analysis
23/02/20241330/0830*CA Quarterly financial statistics for enterprises
23/02/20241330/0830**US WASDE Weekly Import/Export
23/02/20241400/1500**BE BNB Business Sentiment
23/02/20241600/1100CA Finance Dept monthly Fiscal Monitor (expected)
23/02/20241800/1300**US Baker Hughes Rig Count Overview - Weekly

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