The U.S. consumer price index (CPI) for January will be released this week. The inflation data is expected to accelerate, not only highlighting the challenges the Federal Reserve (Fed) still faces in reining in prices, and may affect its path of raising interest rates. In addition, Japanese Prime Minister Fumio Kishida will also submit a personnel case for the new president of the Bank of Japan (central bank) to the Diet. Kazuo Ueda is expected to be formally nominated. The new president’s views on monetary policy will attract attention from all walks of life.
U.S. CPI is expected to accelerate the Fed’s interest rate hike path
The U.S. Department of Labor will announce the January CPI on February 14. Economists generally predict that the CPI will increase by 6.2% from the same period last year, which is smaller than the 6.5% increase in the previous month; but the month-to-month ratio of the CPI in January will increase from 0.1% in December last year Accelerated to 0.5%, writing the largest increase in three months; the core CPI in January also rose by 0.4% month-on-month for the second consecutive month.
The message from the forecasts is in line with the Fed’s view that even though U.S. inflation has fallen from a 40-year peak, central bankers still need to raise interest rates further to ensure that price pressures are removed. Investors attach great importance to CPI data. This inflation figure will affect the trend of US stocks and will also affect the pace of Fed rate hikes. If inflation accelerates, it may cause US stocks to come under pressure.
Movements in U.S. goods and services prices last month may also have unnerved Fed officials. U.S. central bank officials have recognized the role of falling commodity prices in the slowdown in inflation, and Fed Chairman Jerome Powell and other officials have said they will pay close attention to whether this spreads to the services sector. Inflation has started to come down in the goods sector but not yet in the services sector, Powell said, and it will take time. The service industry accounts for 56% of the US economy, ranking first among major industries. So, if central bankers are to get inflation back to their 2 percent target, what happens to services sector inflation is crucial.
Fed officials took turns last week, almost all conveying the same view: the central bank needs to keep the benchmark interest rate at a high level for a period of time to ensure that inflation is fully controlled. Several Fed officials will still give speeches this week, including New York Fed President John Williams, Philadelphia Fed President Patrick Harker, and Dallas Fed President Lorie Logan. , is expected to continue to release hawkish signals.
At present, the FedWatch tool of the Chicago Mercantile Exchange shows that the market estimates that the probability of the Fed raising interest rates by 1 yard (25 basis points) in March is 90.8%, and the probability of raising interest rates by 2 yards is 9.2%.
Kazuo Ueda, BOJ’s new governor, may take a ‘balanced’ route
The term of Bank of Japan Governor Haruhiko Kuroda will end on April 8, and Kishida will submit a new president candidate to the Diet on the 14th. According to Japanese media reports, Kishida will nominate Ueda, a former review member of the Bank of Japan, as the next president. If the Senate and the House of Representatives approve the personnel case, Ueda will take office on April 9 and become Japan’s first scholar-born president after World War II.
Ueda, 71 years old, graduated from the University of Tokyo in 1974 and received a Ph.D. in economics from the Massachusetts Institute of Technology in 1980. After completing his studies, he taught at the University of British Columbia in Canada and served as a member of the Bank of Japan Review Committee from 1998 to 2005. .
Investors are now most concerned about Ueda’s views on Japan’s monetary policy. After the market reported that Ueda may be the new president of the Bank of Japan, investors initially interpreted that Ueda’s stance may be hawkish, triggering a surge of more than 1% against the dollar on Friday, but the yen rose later after Ueda’s dovish remarks. Potential convergence.
However, observers at the Bank of Japan believe that Ueda, who is a scholar, may take a “balanced” route after taking office. He should be able to combine theory and practice. In addition to implementing policies in accordance with real economic fundamentals, he will also attach importance to dialogue with the market. In contrast, Masakashi Amamiya, vice president of the Bank of Japan, who was previously regarded by the market as a popular candidate for the successor of the president, may continue to take the “loose” route, making it difficult to promote the normalization of monetary policy.
However, Ueda’s tenure may also be the most turbulent five years in the history of the Bank of Japan. Once the economic situation is misjudged or the signal is wrongly transmitted, it is likely to cause violent shocks in the stock, bond and foreign exchange markets. Therefore, how to figure out a way to exit the ultra-loose policy smoothly is a difficult task. Ueda, who has a cautious personality, may be the right helm in Kishida’s eyes.
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