Global Rate-Cut Juggernaut Is Struggling to Start

(Bloomberg) — Central banks cagey about joining the global interest-rate cutting cycle may reveal themselves this week with a quartet of decisions in advanced economies.

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Days after the Federal Reserve pared back projections for US monetary easing this year, policymakers from the UK to Australia are likely to signal that they’re still not convinced enough about disinflation to start lowering borrowing costs themselves.

Such outcomes would reaffirm how June, originally penciled in as a month-long opening ceremony to a series of global rate cuts, may increasingly turn out to be a widespread display of hesitancy.

While Canada did deliver the first such move of the Group of Seven on June 5, the European Central Bank’s reduction in borrowing costs a day later, accompanied by a higher inflation projection, showed limited enthusiasm for further easing.

At the Bank of England on Thursday, a looming election and some lingering price pressures are adding to the case to wait at least until August before cutting rates.

Peers in Australia and Norway, also meeting this week, are in no rush to do so either, while half of economists surveyed reckon the Swiss National Bank may avoid a second reduction for now following its bold move in March to ease before its neighbors.

Decisions elsewhere may showcase the different stages of global monetary cycles, with Brazil and Paraguay expected to keep borrowing costs on hold, and Chile anticipated to slow rate cuts.

What Bloomberg Economics Says:

“Major central banks look set to keep interest rates on hold, having looked more likely to cut only a few weeks ago. The BOE is almost certain to keep policy unchanged in June ahead of the UK election. It’s a closer call for the SNB.”

—For full analysis, click here

Elsewhere, US retail sales, a raft of Chinese data, and inflation numbers from the UK and Japan will be among highlights for investors this week.

Click here for what happened last week and below is our wrap of what is coming up in the global economy.

US and Canada

A week after a series of reports showed moderating US inflationary pressures, investors will get a look at fresh figures on consumer demand, the housing market and industrial production. Fed officials also return to the public-speaking circuit after penciling in just one rate cut for 2024.

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Policymakers speaking this week include Thomas Barkin, Susan Collins, Lisa Cook, Mary Daly, Austan Goolsbee, Patrick Harker, Adriana Kugler, Lorie Logan, Alberto Musalem and John Williams.

Speaking on Sunday, Minneapolis Fed President Neel Kashkari said the central bank is in a good position to take its time and watch incoming data before starting to cut rates.

Retail sales figures out Tuesday are projected to show shoppers reengaged somewhat in May after pulling back a month earlier, underscoring a resilient consumer. Separate data are seen showing an increase in production at the nation’s factories, mines and utilities.

On Thursday, housing starts data may show a modest increase in May construction from a month earlier as builders adjust to swings in underlying demand while staying diligent on inventories.

A limited number of listings in the resale market, along with the recent rise in mortgage rates, is taking a toll on sales of existing homes. On Friday, the National Association of Realtors is projected to report another decline in previously owned home sales.

Looking north, the Bank of Canada will release a summary of the deliberations that led it to cut rates this month, providing further insight into how policymakers reached the decision and the conditions for a rate cut at their next meeting July 24.

Statistics Canada will publish population estimates for the first quarter, and retail sales data will also offer new insight into the strength of the Canadian consumer.

Asia

The week in Asia kicks off with China’s monthly deluge of data on Monday. The figures are likely show gains in industrial output and retail sales in May were slightly below the year-to-date pace, while the increase in fixed asset investment held steady at 4.2% and the drop in property investment deepened a tad.

A day later, the Reserve Bank of Australia is expected to hold its cash rate target at 4.35%, with focus falling on how authorities view the inflation trajectory after consumer price growth unexpectedly picked up in April.

The slowing pace of disinflation could potentially delay a pivot to rate cuts or spur another hike, according to Bloomberg Economics.

Japan’s key price gauge is expected to show consumer inflation accelerated to 2.6% in May, keeping the Bank of Japan on track for a rate hike as early as next month.

New Zealand’s economic growth may have edged back into positive territory in the first quarter after two straight periods of modest contractions.

Japan trade data on Wednesday may show growth in exports accelerated in May to the fastest clip since November of 2022.

Singapore, Malaysia, South Korea and Indonesia also get trade statistics. The week concludes with a blast of PMI figures for Australia, Japan and India.

Meanwhile, Pakistan is trying to increase its chances of securing a new loan from the International Monetary Fund. It raised taxes in its budget last week to boost revenue and on Sunday announced that it will be increasing power prices by an average 20%.

Europe, Middle East, Africa

In the UK, consumer-price numbers on the eve of Thursday’s BOE decision may draw the focus on investors. That report could show inflation reaching the 2% target for the first time in almost three years.

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