Weekly Outlook: Bank of England and US Federal Reserve interest rate decisions loom

Monday March 14

  • – Annual results of Bodycote
  • – Half-year results of Cranware
  • – German wholesale inflation
  • – In Asia, the quarterly results of Meituan and Prada

tuesday march 15

  • – Annual results of Informa, Ultra Electronics and IT fluid systems
  • – Growth in retail sales, industrial production and fixed asset investment in China
  • – Unemployment and wage growth in the UK
  • – German ZEW Economic Survey
  • – US producer price inflation
  • – In Europe, the quarterly results of volkswagen and RWE

Wednesday March 16

  • – Annual results of Fever Tree Drinks, Owner of Wagamama Restaurant Group, IP Group, Gym Group, CLS Holdings and gold digger centamine
  • – US Federal Reserve interest rate decision
  • – Retail sales in the United States
  • – US Oil Inventory Data
  • – US Homebuilding Industry Survey NAHB
  • – In Asia, quarterly results of the supplier Apple Precision Hon Hai
  • – In Europe, the quarterly results of BMW and E.On
  • – In the United States, the quarterly results of Pinduo-duo and Jabil

In such a difficult and tragic macroeconomic environment, AJ Bell chief investment officer Russ Mold and financial analyst Danni Hewson said that “from a narrow financial markets perspective” the concern is whether where “rising commodity prices fuel inflation and also affect economic activity”. .

“Such concerns can only shed even more light on the policy meetings of two major Western central banks this week – the US Federal Reserve on Wednesday March 16 and then the Bank of England on Thursday March 17.

“How much influence their interest rate and quantitative easing policies may have right now is a moot point – no monetary authority can print oil, gas, aluminum or copper.”

Mold and Hewson added, “Additionally, inflation at a 30-year high and a 40-year high in the United States of 7.5% means that interest rate cuts or more QE or both aren’t really viable options this time around, even though they’ve been policymakers’ standard tools in every financial market upheaval since the Russian debt default and hedge fund meltdown. LTCM in 1998.”

They said the numbers suggest rate hikes “are the order of the day, to contain inflation and prevent it from eating away at the real incomes of consumers and businesses and therefore their ability and willingness to spend or to hire and invest”.

“But fears that high fuel, energy and commodity prices will hit the global economy as they did in 2008 mean central bankers could find themselves between a rock and a hard place and having to choose between letting inflation damage the economy on the one hand or higher interest rates dampening activity on the other.

“Some would say the Fed and the Bank of England caused this by leaving interest rates too low for too long, but there remains a risk that Chairman Jay Powell and the Governor of the Bank of England will find themselves locked in. .”

James McCann, Deputy Chief Economist at Abrdn, added: “The Fed’s job doesn’t get any easier. Russia’s invasion of Ukraine has caused market turbulence and skyrocketed commodity prices, two factors that present headwinds for the economy. However, rising energy and food prices will also exacerbate an already very uncomfortable inflation backdrop, and the Fed is unlikely to tell markets that it can slow down its policy tightening plans in the face of the deterioration. prospects.

“Indeed, his updated dot chart – showing the median view of interest rates on the FOMC – is expected to lead to hikes in nearly every meeting this year, and a peak in the Fed Funds rate above 2%. Chairman Powell could soften that message slightly, telling markets that the Fed will be nimble in an environment of rapidly changing growth and inflation, but the underlying message is likely that getting inflation under control is the goal. principal of the Fed, even if it proves to be disruptive for the markets and the activity.

Thursday March 17

  • – Annual results of Deliveroo, Wickes, Cineworld and OSB
  • – Half-year results of DFS Furniture
  • – Commercial statements of ocado and Railway line
  • – Bank of England interest rate decision
  • – EU inflation
  • – New building permits and new housing starts in the United States
  • – US industrial production and capacity utilization rate
  • – Weekly US Unemployment Claims
  • – In Europe, the quarterly results of Sample
  • – In the United States, the quarterly results of Accenture, Fedex and General dollar

Friday 18th March

  • – Half-year results of JD Wetherspoon
  • – British GDP figures
  • – Bank of Japan interest rate decision
  • – GfK UK Consumer Confidence Index
  • – Sales of existing homes in the United States

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