Japan wholesale price, bitcoin, China Covid, US inflation

Japanese wholesale prices rise faster than expected

Japan’s producer prices, or wholesale prices, rose 10.2% in December from a year ago, according to official data.

That was higher than the 9.5% increase expected by economists polled by Reuters and marked the third consecutive rise in monthly readings.

The country’s producer prices rose 0.5% month-on-month, beating expectations for a 0.3% increase.

– Jihye Lee

Next week: China industrial production, retail sales, GDP and Bank of Japan rate decision

A range of economic data is expected for the week of January 16, including China’s industrial production and gross domestic product, as well as the Bank of Japan’s interest rate decision.

On Monday, South Korea will publish revised trade data and Indonesia will release its trade balance for December. India is scheduled to release its wholesale price index, which economists polled by Reuters expect to fall to 5.6% in December.

On Tuesday, China will release December retail sales, industrial output, urban fixed capital investment, as well as gross domestic product for the quarter. Singapore will publish non-oil exports for December on the same day.

The Bank of Japan will conclude its monetary policy meeting on Wednesday and is likely to maintain ultra-low interest rates. Investors will be looking for clues about who might be Governor Haruhiko Kuroda’s successor and the next policy change.

Japan is scheduled to release November vehicle orders on the same day, while Malaysia is scheduled to release December trade data.

On Thursday, Malaysia’s central bank will announce its monetary policy rate, while Australia will release employment figures.

China is scheduled to publish one-year and five-year lending rates on Friday. Japan’s consumer price index for December is also expected.

– Jihye Lee

Inflation forecast softens again, traders fully pricing in quarterly rate hike

The decline in consumer inflation expectations coincides with expectations that the Federal Reserve will cut interest rates within a few weeks and soon end them altogether.

A University of Michigan survey of consumer sentiment on Friday showed the one-year inflation forecast fell to 4%, the third straight monthly decline and the lowest level since April 2021.

Meanwhile, traders have pegged a 94.2% chance of a 0.25 percentage point rate hike on February 1 when the Fed’s next two-day meeting ends. That represents a smaller move than the 0.5 percentage point increase in December, which was a slowdown from four straight 0.75 percentage point gains.

“Inflation expectations have stabilized and are improving as price pressures ease across many sectors. The Fed is likely to hike 0.25% at its meeting later this month,” said Jeffrey Roach, chief economist at LPL Financial. “We shouldn’t be surprised if the Fed starts talking about a break in the near future.”

– Jeff Cox

Consumer sentiment is rising for the second month

The University of Michigan said its consumer sentiment index rose for the second month in a row, despite remaining at historically low levels. The index rose to 64.6 from 59.7 in December. Still, it remains about 4% lower than the previous year.

“Uncertainty about both measures of inflation expectations remains high, and changes in global factors in the coming months could cause a reversal of recent advances,” said Joanne Hsu, director of Consumer Surveys.

– Fred Imbert

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How will the Fed react to low inflation, bank CEO recession warnings?

Thursday’s negative inflation reading and Friday’s warnings of a mild recession from major banks could signal the Fed will pause soon or even cut rates this year, but that would require a shift in another direction from the central bank.

“You don’t have to agree with the Fed’s policies to believe them,” said Lauren Goodwin, an economist and portfolio strategist at New York Life Investments.

Goodwin pointed out that the vast majority of the Fed’s voting members at the last meeting predicted that the Fed would raise funds rates at 5% or higher this year. Given the concerns some central bankers have expressed about the consequences of a break too soon, they may be determined to hit that mark.

“With a relatively high degree of consolidation and confidence, they’ve said they’re going to raise the policy rate to 25 basis points above what the market is saying. Frankly, unless we see a slowdown in inflation or a sharp collapse in economic growth. … I don’t think they’re going to change their mind,” Goodwin added.

– Jesse Pound

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