Key events to watch in the week ahead: 18 - 24 March 2024

This week’s overview

Higher-than-expected US inflation figures this week proved that there is still some persistence in pricing pressures and that the final stretch of bringing inflation to the 2% Federal Reserve (Fed)’s target remains a challenging process. That said, major US indices managed to stay within its near-term consolidation, with some argument that the previous recalibration for a delayed Fed’s rate cut to June 2024 will suffice.

As we head towards the end of the week, traders will be buckling up for heightened volatility as it is triple witching day. The last three triple-witching events were met with a slight retracement in the S&P 500 in the days that followed, so that will leave one to watch for any signs of weakness if the trend holds.

Into the new week, here are six things on our radar.

19 March 2024 (Tuesday, 11am SGT): Bank of Japan’s (BoJ) interest rate decision

At the previous meeting, the BoJ discussed the possibility of exiting from its negative interest rate policy (NIRP), with growing views among policymakers that the wage and inflation conditions for a policy pivot have ‘increasingly been met’.

With stronger wage growth in January and the Japan’s economy avoiding a technical recession since then, the odds of a negative-rate policy exit next week is now seen as almost a coin flip. The BoJ has also emphasised the importance of the spring wage negotiations (Shunto) in its policy thinking and results have been encouraging, with major firms agreeing to fully meet union demands for pay hikes.

Even in the event of a status-quo in policy settings next week, eyes will be on whether the BoJ will lay the groundwork for an exit of its NIRP in the April meeting. Focus will also be on any plans around the dismantling of its current yield curve control (YCC) policy, considering that policymakers have loosened its grip on the 10-year bond yield cap since last year.

19 March 2024 (Tuesday, 11.30am SGT): Reserve Bank of Australia’s (RBA) interest rate decision

As widely expected, the RBA has kept its official cash rate on hold at 4.35% at its Board meeting in February. The central bank noted that higher interest rates were working to establish a more sustainable balance between demand and supply. Reflecting this progress, the RBA revised its unemployment forecasts higher and lowered its growth and inflation forecasts.

The RBA noted that while inflation is easing, it remains too high and does not expect inflation to return to its 2-3% target until the middle of 2026. The RBA retained a mild tightening bias to aid the return of inflation to target.

We expect the RBA to keep rates on hold at 4.35% at its board meeting next week, and its communication will likely echo the tone of the February meeting. We expect the RBA to cut rates by 25 basis point (bp) in August before a second cut in November, which will see the cash rate end the year at 3.85%.

20 March 2024 (Wednesday, 3pm SGT): UK inflation rate

The February UK consumer price index (CPI) release will offer the last piece of inflation data for the Bank of England (BoE) to digest before deciding on their policy rate on Thursday.

Thus far, UK consumer prices have been on an easing trend, with headline inflation moderating from its peak of 11.1% in October 2022 to the 4.0% in January 2024. The core aspect has also touched a near one-year low at 5.1% in January this year, down from its peak of 7.1% in May 2023, which reflects some success in current restrictive policies in bringing inflation back to its 2% target.

With market rate expectations split on whether the BoE will move to cut rates in the June or August meeting, the inflation data may help to anchor some views. If the inflation numbers were to reflect further progress, that may offer more room for the central bank to consider earlier cuts, especially with BoE Governor Andrew Bailey’s recent remarks that he is now less concerned about a wage price spiral developing.

21 March 2024 (Thursday, 2am SGT): US Fed’s interest rate decision

At its last meeting in late January, the Fed kept the Fed Funds rate unchanged at 5.25%-5.50% for a fourth straight meeting. In the accompanying statement, the Fed signalled that while it is open to cutting interest rates, it is in no rush and wants to gain greater confidence that inflation is moving sustainably toward 2%.

This month, the Federal Open Market Committee (FOMC) is expected to keep the Fed Funds rate unchanged at 5.25%- 5.50%. The statement is expected to be similar to the January statement and reiterate that while the Fed expects to cut rates at some point in 2024, it is not in any great rush.

After an extended run of firm economic data in 2024, the main point of interest will be in the Feds dots. If just two participants lower their projections, the median dot will show that the Fed expects just two rate cuts in 2024, down from three cuts and well below the seven cuts that the rates market was forecasting in the second week of January.

21 March 2024 (Thursday, 8.30am SGT): Australia’s employment change/unemployment rate

Last month (January), the Australian economy added 0.5k jobs, less than the 25k gain expected as the unemployment rate surged to 4.1%, the highest since January 2022. The participation rate was unchanged at 66.8% compared to the 66.9% expected, while the underemployment rate increased to 6.6%.

The Australian Bureau of Statistics (ABS) noted that the soft jobs growth in January might have overstated the weakness in the labour market due to seasonal factors. A higher-than-usual number of people said they were not employed but expected to start work shortly, a trend that had been increasing in recent January’s and not likely fully accounted for by the seasonal adjustment.

This month, the market is looking for the economy to add 30k jobs and for the unemployment rate to ease to 4% from 4.1%. The participation rate is expected to remain at 66.8%.

21 March 2024 (Thursday, 8pm SGT): BoE interest rate decision

At the previous meeting in February, the BoE kept its policy rate unchanged at 5.25% for the fourth consecutive meeting, but opened up the possibility for rate cuts by saying that inflation was "moving in the right direction” and that the current high borrowing costs are “under review”.

Opinions among policymakers were more divided however, with the Monetary Policy Committee (MPC) voting 6-3 in favour of holding rates versus the 8-1 expected by markets. Two members were seeking another 25 bp hike, while one member was rooting for a 25 bp rate cut.

For the upcoming meeting, wide consensus is for the BoE to keep its policy rate unchanged at 5.25% once more, but market participants will be watching for whether policymakers will be more aligned in their rate views. That may help to anchor market expectations, which are also very much split on whether the central bank will kickstart its rate-cutting process in the June or August meeting.