Key events to watch in the week ahead: 16 – 22 December 2024

This week’s overview

Wall Street took a breather this week, with market participants finding reason to de-risk on a higher-than-expected US producer price index (PPI) and weaker-than-expected jobless claims data release. However, hopes of a year-end rally could still be in place, with seasonal patterns suggesting a more subdued first half of December for the US markets, followed by a stronger finish into the second half.

Heading into the new week, here are four key events to watch.

19 December 2024 (Thursday, 3am SGT): US Federal Reserve (Fed) interest rate decision

At its November meeting, the Fed cut rates by 25 basis point (bp) to a range of 4.50% to 4.75%, as widely expected.

Fed Chair Jerome Powell noted that recent data pointed to solid economic expansion and that inflation “has made progress toward the committee's 2% objective but remains somewhat elevated.”

The minutes of the meeting noted that “participants anticipated that it would likely be appropriate to move gradually toward a more neutral stance of policy over time” if “the data came in about as expected, with inflation continuing to move down sustainably to 2 percent and the economy remaining near maximum employment.”

Since the Fed’s rate cut in November, US inflation data has been in line with expectations and helped increase confidence that inflation remains in a downward trend. As such, the expectation is for the Fed to deliver a 25 bp rate cut at the December Federal Open Market Committee (FOMC) meeting.

19 December 2024 (Thursday, 11am SGT): Bank of Japan (BoJ) interest rate decision

Expectations are for the BoJ to maintain its short-term interest rate at 0.25% next week, marking the fourth consecutive meeting with no change. However, the central bank’s current stance of inaction is unlikely to persist, with any rate hold expected to come with strong forward guidance for a potential January hike.

Inflation dynamics suggest conditions are ripe for another rate hike, with underlying pricing pressures, such as service prices, pointing to broadening inflationary trends.

Recent remarks from BoJ Governor Kazuo Ueda, suggesting that the timing of the next rate hike is "approaching," also imply that policymakers are actively considering another increase. However, his confidence for an imminent move is tempered down by uncertainties around Trump’s tariffs.

A rate hike next week, while unexpected, could be accompanied by dovish rhetoric to temper market reactions. This strategy would aim to prevent significant overreaction in the Nikkei 225 index and the Japanese yen, similar to what was observed in July 2024.

19 December 2024 (Thursday, 8pm SGT): Bank of England (BoE) interest rate decision

The BoE is widely expected to keep its bank rate on hold at 4.75% next week. The above-target inflation in the UK, which is likely to be further complicated by the upcoming government's tax and spending plans, may call for policymakers to go slow with its easing process.

Annual inflation rate in the UK came in higher than expected at 2.3% in October 2024, its highest in six months. Pricing pressures are likely to persist, with UK grocery price inflation edging higher in November for the third month.

BoE governor Andrew Bailey previously stated that there was still "a distance to travel", with inflation likely to hover a bit above the BoE's 2% target until 2027. Market expectations are for the central bank to ease rates by 25 bp only in February next year, with cumulative 75 bp worth of rate cuts through 2025.

20 December 2024 (Friday, 9.30pm SGT): US core personal consumption expenditures (PCE) price index

For its October read, headline US PCE prices increased by 2.3% YoY, up from a three-year low of 2.1% in September, which aligned with market expectations. The core PCE price index, which is the Fed's preferred measure for underlying inflation, rose by 0.3% from the previous month, consistent with September's pace and market forecasts. This took the annual rate of core PCE prices to 2.8% in October, the highest increase in six months.

This month (November), headline PCE is expected to rise to 2.5%. The stronger-than-expected core PPI reading brings upside risks to the core PCE reading.