Spotlight Today on Central Banks
May 10, 2024
Published minutes from the April European Central Bank Governing Council meeting observe an ongoing and projected moderation of wage pressures, downwardly skewed growth risks, and diminishing public concern shown in survey evidence that inflation in the long term will stay above target. Inflation is projected to be at target by the middle of next year, and the possibility of a June rate cut is mentioned explicitly:
It was seen as plausible that the Governing Council would be in a position to start easing monetary policy restriction at the June meeting if additional evidence received by then confirmed the medium-term inflation outlook embedded in the March projections.
The National Bank of Poland‘s policy interest rate was maintained at 5.75%, its level since October 2023 and a full percentage point below the peak seen from October 2022 until September of 2023. Polish CPI inflation has receded to 2.4% from 18.4% back in February 2023, but officials worry about the effect of higher food taxes and elevated energy costs.
The Central Reserve Bank of Peru‘s key interest rate has been sliced by another 25 basis points to 5.75% and bringing its drop so far in 2024 to a full percentage point. The rate had been at 7.5% from January through September of 2023. On-year total CPI inflation, which had been as elevated as 8.8% in June 2o22, printed at 2.4% last month. Such lied inside the target corridor, and core inflation of 3.0% was at the band’s ceiling. “Future reference rate adjustments will be conditional on new information.”
Like the Fed and ECB, the National Bank of Serbia’s policy interest rate remains at its peak level. Serbia’s rate plateaued after 6.5% in July 2023, having been raised by 400 basis points during the final three quarters of 2022 and by another 150 basis points in 2023. CPI inflation in Serbia has decelerated to a 31-month low of 5.0% from 16.2% one year earlier. That’s still above the 1.5-4.5% target range but not by much. Nonetheless, monetary officials are taking a cautious approach to lessening monetary restraint. A statement released today warns that “caution in monetary policy conduct by the NBS is necessary due to the volatile movement of global prices of primary commodities, notably of oil, in an environment of pronounced geopolitical tensions, continued OPEC+ supply cuts, and a number of other factors.”
Investors await the remarks of several Fed officials scheduled to speak publicly today, including Logan, Barr, Goolsbee, and Kashkari.
In overnight market action, the dollar held generally steady. Ten-year sovereign debt yields dipped a basis point in Germany, France, Italy, Spain and the United Kingdom but firmed two basis points in the United States. U.S. stock futures were holding only modest gains less than a half hour before the market opening. Larger share price advances were experienced in Europe and Hong Kong. The price of gold had jumped over 1%, and those of Bitcoin and oil were up but by a lesser amount.
Friday’s released data menu includes several British indicators:
- Most importantly, the first look at first-quarter GDP growth exceeded market expectations and reveals that a recession last year has ended. March GDP compiled from the supply side went up 0.4% on month and 0.7% on year. First quarter GDP jumped 0.6%, the fastest quarterly increase in nine quarters and enough to lift the year-on-year change back into the black with a 0.2% rise. Consumption, investment, government spending and net exports each contributed positively to the quarterly growth rate.
- British industrial production had been expected to slip somewhat in March but instead rose 0.2% versus February and 0.5% compared to a year earlier.
- Construction output, however, fell 0.4% on month and 2.2% on year.
- The goods and services trade deficit fell to a 3-month low of GBP 1.098 billion in March, and the first-quarter shortfall of GBP 4.066 billion was 59% narrower than a year earlier.
- The merchandise trade deficit was GBP 42.1 billion last quarter versus GBP 50.1 billion in the first quarter of 2023.
Japanese data reported today revealed a wider current account surplus of JPY 25.34 trillion last fiscal year than JPY 16.26 trillion experienced in the financial year that ended in March 2023. The seasonally adjusted JPY 2.011 trillion surplus in March was also wider than February’s surplus of JPY 1.41 trillion. Separately, real household spending growth in March of 1.2% on month surpassed expectations. On-year bank lending growth rose to 3.1% last quarter from 2.8% in the final quarter of 2023. And finally, the economy watchers index, a barometer of service sector workers sentiment, fell 2.2 points to a 20-month low of 47.4 in April.
Norwegian consumer price inflation slowed to a 7-month low of 3.6% in April, roughly half to peak 7.5% seen in October 2022. CPI inflation in Hungary in April matched February’s 3.7% after a 35-month low of 3.6% in March but was far beneath the 25.7% peak in January 2023. Brazilian CPI inflation of 3.7% last month was its lowest in ten months and down from 12.1% in April 2020, and Moldovan CPI inflation of 3.5% was at a 21-month low and down from 34.6% in October 2022.
A far greater-than-forecast 90.4k leap in Canadian employment last month was the most since January 2023. The year-to-date rise equals 166.2k. The jobless rate held steady at 6.1%, 2.2 percentage points above the U.S. jobless rate, and wage growth climbed back above 4% to 4.5% year-on-year versus the U.S. 3.9% pace.
Turkish unemployment of 8.6% in March matched last October’s 11-year low. Turkish industrial production slid 0.3% in March reduced the 12-month rate of rise to 4.3% from February’s two-year high of 11.2%.
Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British industrial production and GDP, Canadian labor market statistics, Central Reserve Bank of Peru, ECB minutes, National Bank of Poland, National Bank of Serbia
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