Powell shares his problems with Lagarde and Bailey: Eco Week

Bloomberg — When the heads of the central banks of the United States, the euro zone and the United Kingdom exchange views in public on Wednesday, the admonishments of politicians may still ring in their ears.

Last week, US Federal Reserve Chairman Jerome Powell was warned by Democratic lawmakers not to risk a recession, a message also received in Brussels by European Central Bank President Christine Lagarde. The Bank of England, with its Governor Andrew Bailey at its head, was recently accused of being “flat-footed” on inflation.

The trio of officials will appear together at the annual meeting of the ECB in the Portuguese town of Sintraa so-called retreat that probably isn’t much of a getaway.

As they each try to rein in prices, they know that every move risks having a shock to voters that may leave their political counterparts uneasy.

The dilemma between stifling inflation and damping growth is on the minds right nowand is likely to be a recurring theme at the ECB meeting focused on “monetary policy challenges in a rapidly changing world”.

Goldman Sachs analysis released last week suggests the ECB may be the least hesitant to raise rates, even though its officials haven’t even begun to do so. Lagarde assured European leaders on Friday that she and her colleagues would take the necessary steps.

But confidence in that outcome is mixed. For example, Ernest Urtasun, a Spanish legislator in the European Parliament, has already warned Lagarde of the risk of failure.

“Our fear is that as long as the ECB cannot tame inflation with higher interest rates, it could trigger a recession,” Urtasun said.

Elsewhere, the likely uptick in the Fed’s favorite inflation gauge, another eurozone inflation record, the Bank for International Settlements’ annual report, and the Bank of Japan’s latest meeting minutes will keep investors attentive. The central banks of Sweden and Colombia could also raise rates.

USA

Among the data to be released are figures for the Fed’s preferred inflation gauge. Economists estimate that the Price Index of Personal Consumption Expenditures it accelerated in May compared to the previous month, indicating that inflation remains high.

The figures will help shape the debate at the Fed’s July policy meeting on whether the inflationary environment calls for another 75 basis point hike in the benchmark rate. The central bank is walking a fine line in trying to control price pressures without overly suppressing demand and causing an economic downturn.

San Francisco Fed President Mary Daly, normally a supporter of monetary policy, on Friday lined up with supporters of a 75 basis point hike in July.

Monthly price indicators from the Personal Consumption Expenditures (PCE) Price Index show that US inflationary pressures remain a bubbledfd

The PCE report is also expected to show that inflation-adjusted personal spending fell in May, indicating that high prices may be starting to weigh on household demand. Other data next week, including durable goods orders, consumer confidence and a survey of the manufacturing sector, are expected to show the economy moderating.

Asia

The Bank of Japan will publish details of its June meeting discussions on Monday, which will shed light on its decision to keep rates at rock-bottom levels despite the yen’s sharp decline and a wave of monetary tightening sweeping the world.

Figures to be released the same day will likely show that the central bank is inching closer to a 50% share of Japan’s bond market, as it defends its performance limit.

Inflation data in Tokyo later in the week will indicate whether price growth is gaining traction, while the Bank of Japan’s Tankan report will show how sentiment holds up in Japan’s boardrooms.

South Korea's trade balance posted record deficits.dfd

Secondly, South Korea’s export figures will offer a pulse on the health of world trade, as well as a measure of how the weakening won is adding to the pain of the country’s trade deficit.

China it publishes industrial profit figures on Monday and purchasing manager surveys on Thursday.

Europe, Middle East and Africa

Inflation in the euro area is likely to hit another record this month, and economists expect data due on Friday to show a reading of 8.5%.

National figures are due out early in the week, with data from Spain and Germany due – and possibly causing more concern – on the last day of the ECB meeting in Sintra, Portugal, on Wednesday.

On the same day, confidence data is likely to show a drop to the lowest level since February 2021 as consumers and businesses are increasingly concerned about inflation and the effects of Russia’s war in Ukrainewhich has now entered its fifth month.

Euro zone inflation probably accelerated to 8.5% in Junedfd

It is likely that the Swedish Riksbank raise interest rates by half a point on Thursday. Attention will be focused on the extent to which the central bank accelerates its tightening in the coming months.

A series of data from Russia will provide the latest indications on the performance of its economy. Retail sales are likely to fall again in May as households become more frugal – many Western products are unavailable – and consumer costs rise.

At the same time, current account data will likely show that Russia’s balance sheet remains strong thanks to the benefits of rising commodity prices.

Russian retail sales have been affected by international sanctionsdfd

On Thursday, data from Kenya They will show that June inflation exceeded the upper limit of the central bank’s target range, between 2.5% and 7.5%, for the first time in almost five years, due to the increase in the cost of fuel and food.

Low inflation in the seychelles have your monetary officials keep the key interest rate at 2% on Tuesday to support the economic recovery of the Indian Ocean island nation.

Meanwhile, the data from saudi central bank They may provide clues about the distribution of record oil revenues in the world’s largest crude exporter, which is earning some $1 billion a day.

Latin America

Next week offers the opportunity to take the temperature of the labor market in the region, since unemployment data is expected from Chile, Mexico, Colombia and Brazil.

Unemployment rates in Latin America are approaching pre-pandemic levelsdfd

Banxico’s monthly survey among economists will be highly anticipated for new headline and core inflation forecasts following the central bank’s rate hike of 75 basis points on June 23.

The report on the Chilean GDP corresponding to the month of April was consistent with an economy that is in the process of slowing down, so a greater cooling is expected in the figures for May.

In ArgentinaAlthough growth is also slowing, the April GDP estimate report is not expected to stray too far from the pace seen in the first-quarter output data. Economists surveyed by the central bank expect the economy to enter a brief recession in the coming months.

The broadest inflation index in Brazil remained above 10% for the 23rd consecutive month in June, while Lima’s consumer prices may have risen from a 24-year high reached in May.

Central banks in Latin America are simultaneously in the midst of the steepest tightening cycles since adopting an inflation targeting regimedfd

The central bank of Colombia it is almost certain to prolong a tightening cycle that has already pushed up the key interest rate by 425 basis points, with a seventh consecutive hike on June 30. Forecasts focus on an increase of 150 basis points, the largest since 1998, to place the official interest rate at 7.5%.

— With contributions from Zoe Schneeweiss, Robert Jameson, Malcolm Scott, Vince Golle, David Goodman, Sylvia Westall, and Ott Ummelas.