Key events to watch in the week ahead: 25 - 31 March 2024

This week’s overview

An eventful week of central bank meetings saw Wall Street scaling yet another record high, as market participants took comfort in the Federal Reserve (Fed)'s decision to stick to its original guidance of three rate cuts this year despite hotter inflation over the past two months. It seems that with the broader inflation trend leaning on the downside, the Fed is shifting its focus towards supporting growth prospects to achieve a potential soft landing scenario.

As we head into the new week, here are four things on our radar.

25 March 2024 (Monday, 7.50am SGT): BoJ Monetary Policy Meeting Minutes

At its recent meeting, the Bank of Japan (BoJ) raised its short-term interest rates to around 0% to 0.1% from previous -0.1% with a 7-2 majority. This marked the nation's first interest rate hike in 17 years and an exit from its negative interest rate policy (NIRP). However, the central bank stopped short of guiding for further tightening, maintaining its tone that it is in no rush in terms of policy normalisation.

The central bank also put an end to its yield curve control (YCC) policy and exchange traded funds (ETF) purchases, but will continue its Japanese Government Bond (JGB) purchases with “broadly the same amount as before” – a sign for easy monetary conditions to remain for longer.

Given the dovish tone from the BoJ, market rate expectations have priced out any impending changes in rates, at least over the next two policy meetings. With that, the minutes will be scrutinised for policymakers’ views around prevailing economic risks and the factors that may prompt the central bank to take on a quicker pace of rate rises.

26 March 2024 (Tuesday, 3pm SGT): Germany’s GfK Consumer Confidence

Heading into March, German Consumer Confidence increased to -29 from an 11-month low of -29.6. Expectations of European Central Bank (ECB) rate cuts are starting to filter through into some business sentiment surveys, such as the ZEW, which recently jumped to its highest level in two years.

This impact, along with slowing inflation and rising household incomes, should also be observed in upcoming consumer confidence surveys. However as can be viewed on the chart below, a good deal of improvement is required before consumer confidence returns to positive territory.

27 March 2024 (Wednesday, 8.30am SGT): Australia’s monthly CPI indicator

In January, the monthly consumer price index (CPI) indicator rose by 3.4% year-on-year (YoY), unchanged from December and below market forecasts of 3.6%. The core inflation, which excludes volatile items, rose by 4.1% YoY in January, easing from 4.2% in December. Annual trimmed mean inflation fell to 3.8% from 4% in December.

While the data confirmed that inflation has made further progress towards the Reserve Bank of Australia (RBA)'s target, January's monthly CPI indicator, being the first month of the new quarter, included mainly goods but very few services prices. Sticky services inflation has been a key concern and focus for central banks, and was highlighted again at this week's RBA Board meeting.

For the upcoming read, the monthly CPI indicator is expected to increase to 3.5% YoY due to higher petrol prices and the unwinding of electricity rebates. This is in line with the RBA's expectations of 3.5% YoY over the quarter.

29 March 2024 (Friday, 8.30pm SGT): US core PCE price index

Both the US headline and core Personal Consumption Expenditures (PCE) price index has been on a declining trend since September 2022, with the headline figure easing to 2.4% from previous 2.6% in January this year. The core aspect has also eased to 2.8% in January, down from previous 2.9%. This marked its lowest level in almost two years.

At the recent Fed meeting, policymakers have revealed some tolerance for slightly higher inflation and continued to pencil in three rate cuts through 2024. In the press conference, Fed Chair Jerome Powell noted that higher inflationary data has not changed its overall trend downward and that the path of inflation towards its 2% target will be a “bumpy road”.

Further easing in pricing pressures will provide some validation for the Fed’s decision to stick to its path of rate cuts. Ahead, the US core PCE price index, which is the Fed’s preferred inflation gauge, is expected to come in at 0.3% month-on-month, down from the previous 0.4% in January. On the other hand, the headline PCE price index is expected to tick higher to 0.4%, up from the previous 0.3%.