© Reuters
Investing.com – The release of the US February jobs report on Friday will shed more light on the strength of the labor market, and investors will be watching Federal Reserve Chairman Jerome Powell’s speech in Congress for fresh ideas on the future path of the interest rate. The stock market looks set to remain volatile, with the central banks of Japan, Canada and Australia holding meetings, and data out of the UK will show how a reluctant economy held up earlier in the year. Here’s what you need to know at the start of the week.
1. Payrolls outside agriculture
Friday’s US employment report for February will be the last before the Fed meeting on March 21-22 and will take on special significance after the shocking report for January forced investors to reconsider expectations about the future path of the interest rate.
The economy is expected to have created 200,000 jobs last month, down from January, when job growth was 517,000 and the unemployment rate is expected to remain at a more than 50-year low. 4%.
Another stronger-than-expected report could heighten fears of a more hawkish Fed move: strong labor market demand pushes up wages, which in turn pushes up inflation, keeping the Fed under pressure to raise rates.
Investors are now anticipating another 25 basis point Fed rate hike this month, but market pricing suggests a bigger rate hike is slightly more likely than it was previously.
2. Powell performances
Before Friday’s employment report, Jerome will address Congress with the central bank’s semi-annual monetary policy report. On Tuesday, he will speak in the Senate, and on Wednesday – in the House of Representatives.
His comments will be closely watched for hints as to whether a bigger rate hike is being considered this month after the latest data pointed to still lingering inflation. Powell said the January jobs report showed why fighting inflation “is going to take quite a long time.”
At its most recent meeting on Feb. 1, the Fed slowed its pace of rate hikes to 25 basis points after a 50 basis point hike in December following four consecutive 75 basis point increases.
3. Stock market volatility
Wall Street saw a rally at the end of a volatile week last Friday, breaking a three-week losing streak and posting its first weekly gain since the end of January.
After a sharp rise in January, bonds and equities retreated in February as investors feared the Fed would raise interest rates higher than previously expected and hold them higher for longer to stave off inflation.
On the eve of the March meeting of the Fed, the market may well experience even greater volatility.
Meanwhile, the fourth quarter reporting season is in its final stages, and all but 7 of the S&P 500 companies have already reported. Quarterly results beat consensus estimates 68% of the time, according to Refinitiv data.
4. Decisions of central banks
This week the central banks of Japan, Australia and Canada will hold meetings on monetary policy.
On Friday, Bank of Japan Governor Haruhiko Kuroda will hold his last meeting after a 10-year stint at the helm overseeing super-loose monetary policy. No changes are expected before his successor Kazuo Ueda takes over the reins on April 8.
The Reserve Bank of Australia is meeting on Tuesday, and while officials hinted at the prospect of further tightening at their meeting last month, investors expect rates to remain stagnant following recent data that the economy grew at its weakest pace in a year in the fourth quarter. and January data indicate that inflation may have already peaked.
The Bank of Canada is also expected to keep rates steady at its first meeting on Wednesday after officials announced a conditional pause in January to give the economy time to adjust to rising borrowing costs.
5. UK GDP
The UK is due to release data on Friday showing how the economy performed in January after avoiding a recession in the last 3 months of 2022. Economists expect that the country’s GDP in January increased by only 0.1% compared with the previous month.
The UK economy is showing slightly more momentum than expected, with wage growth coming in slightly faster than the central bank forecast last month, Bank of England chief economist Hugh Pill said Thursday.
However, Britain is the only G7 economy still weaker than it was before the coronavirus pandemic. The International Monetary Fund believes it will be the only G7 economy to contract this year.
The Bank of England may have to keep raising rates as consumers appear to be holding on in the face of double-digit inflation.
Written by Noreen Burke
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