Will the the Fed Deliver a Shocking Twist Next Week?

Tuesday, 17 December 2024, 15:30 – US Retail Sales (MoM) (Nov)

The U.S. retail sales for October rose by 0.4% month-over-month, surpassing the market expectation of 0.3%. This marks the continuation of robust consumer spending, with retail and food services sales growing from $716.03 billion in September to $718.87 billion. Contributing factors include a stable labor market, moderate wage growth, and a shift towards online shopping, as seen in strong e-commerce performance. The upcoming release of November retail sales is also expected to show a slight increase, driven by holiday season sales and seasonal adjustments.

Wednesday, 18 December 2024, 21:00 – Fed Interest Rate Decision

In November, the Federal Reserve announced a 0.25% rate cut, lowering the target range for the federal funds rate to 4.50%-4.75%. This follows a 0.5% reduction in September and marks a shift in the Fed’s focus from addressing high inflation to promoting economic growth. The central bank highlighted that inflation is moving toward its 2% target, and the labor market is stable, with unemployment remaining at 4.1%. However, core inflation, especially in housing costs, persists. Looking ahead, the Fed may continue to reduce rates in 2025, although the pace of cuts is expected to slow as decisions will be guided by data, particularly regarding inflation and the labor market. Another rate cut in December is anticipated.

Thursday, 19 December 2024, 05:00 – BoJ Interest Rate Decision

In October, the Bank of Japan (BoJ) kept its short-term interest rate at 0.25%, a move that was widely anticipated by the market, reflecting a cautious approach in light of mixed economic signals. Although inflation is close to the BoJ’s 2% target, the bank expressed concerns about global economic risks and emphasized the importance of ensuring sustainable wage growth before considering further rate hikes. Analysts predict that the BoJ may raise rates in early 2025, though political and economic factors could impact the decision. The upcoming December meeting is expected to maintain policy continuity, with the BoJ waiting for clearer signs of wage growth or economic stabilization.

Thursday, 19 December 2024, 14:00 – BoE Interest Rate Decision (Dec)

In its November 2024 meeting, the Bank of England (BoE) decided to lower its key interest rate by 25 basis points to 4.75%, marking the second reduction since August. This move reflects the BoE’s response to decreasing inflationary pressures, with UK inflation dropping to 1.7% in September, below the BoE’s 2% target. The decline was driven by lower energy prices and a cooling labor market. Additionally, expansive fiscal policies introduced by the government have raised concerns about potential inflationary effects in the medium term. Looking ahead, the BoE is expected to keep interest rates steady in the coming week, opting for a slower approach to reducing borrowing costs compared to central banks in Europe and the United States. Policymakers have also indicated that any future rate cuts will be gradual.