Expectations are for the 3M unemployment rate in November to have held steady at 4.3% with 3M/YY average earnings forecast rising to 5.5% from 5.2% (no other consensus metrics are available at the time of writing). As a reminder, the prior release saw the unemployment rate hold steady at 4.3% with greater attention on the larger-than-expected uptick in wage growth that underscored the MPC’s decision to leave rates on hold at the December meeting. This time around, Pantheon Macroeconomics expects “unchanged payrolls month-to-month in December, as tax hikes weigh on hiring intentions”, adding that the “official unemployment rate likely held steady at 4.3% in November, but it is trending up gradually”. On the wages front, the consultancy suggests that “private-sector ex-bonus AWE likely rose 0.4% month-to-month in November, keeping the MPC cautious”. From a policy perspective, the labour force part of the survey continues to be taken with a pinch of salt given data reliability issues, however, a below/above consensus outcome for wage growth could shape BoE easing expectations which currently suggest 66bps of easing by year-end.
New Zealand's CPI Q/Q for Q4 is estimated to have risen by 0.4% (prev. 0.6% in Q3), with the annual inflation rate 2.1% (prev. 2.2%) - matching the RBNZ projections. Analysts at Westpac see the Q/Q metrics at 0.5% and the Y/Y at 2.1%, with the desk suggesting core inflation measures are showing signs of moderation, trending closer to the RBNZ's 2% target midpoint, and suggests that inflation pressures are better contained than in recent years, reflecting an improved balance in the economy. On that note, analysts cited by Shanghai Securities News noted the PBoC might cut RRR before the Lunar New Year this month.
It is widely expected that the CBRT will once again cut its policy rate by 250bps, taking the rate to 45% from the current 47.50%. Consensus sees a 250bps move, aligned with market pricing - which shows a 99% chance of such a cut. All 13 analysts polled by Reuters also expect a cut. Bank of America expects the policy rate to be reduced by 250bps, and the rate to be lowered to 30% by the end of 2025 through cuts over the year in 250bp increments. At the last meeting, the Central Bank signalled it would be taking a meeting-by-meeting basis, with no predetermined cycle. Around this time, Turkey’s President, Erdogan, said there would be “more interest rate cuts in 2025”. Recent commentary expressed that if inflation data surprises on the upside, the CBRT could reduce its steps or pause cutting at any point. December inflation data was supportive of further easing. The print for December was lower than expected, posting a surprising 1.03%, compared to an expected 1.6%. The downtick was supported by the subsidising of food prices and services inflation.
The BoJ will hold a two-day policy meeting next week which is seen as a live meeting where the central bank will decide whether to raise its rates from the current 0.25% level with a recent Reuters poll showing nearly two-thirds of economists surveyed expect the BoJ to hike rates, while money markets are pricing around an 80% chance of a 25bps increase. As a reminder, the BoJ provided no surprises at the last meeting in December as it maintained its rate as expected via an 8-1 vote with Board Member Tamura the dissenter who called for a 25bps hike to 0.50%. Nonetheless, BoJ Governor Ueda’s comments at the post-meeting press conference didn’t suggest any urgency for an immediate hike as he responded when asked about skipping a hike in December, that they determined that more information was required to gauge wage trends and the decision was mainly based on the assessment of wage trends, uncertainties of overseas economy and the next US administration. He also noted the January decision would be "holistic" with data available at that point and noted they couldn’t at that point really predict what wage trends will be in January. Furthermore, he said they need "one more notch" to decide on tightening for the next rate hike and that it was hard to say if the January Outlook Report and various info are sufficient as "one more notch". Ueda also stated that they want to see this year’s wage negotiation momentum and need to gauge the situation for quite a while with considerable time needed to see the full picture of wage hikes and Trump policies. Nonetheless, the risk of a hike at the upcoming meeting has since increased with Japanese yields climbing to fresh highs last seen more than a decade ago including the 40-year which rose to its highest since its inception in 2007 after a previous source report that the BoJ is said to be mulling the rate decision for January and considers upgrading core-core inflation forecasts for FY24 and FY25, although the report added that no decision has been made on raising rates and the BoJ intends to wait until the very last moment before deciding on increasing rates. There was also a more recent report that the BoJ is said to see a good chance of a January hike barring any major market rout following the Trump inauguration, while the latest rhetoric from officials also suggests that the upcoming meeting is live. Aside from deciding on whether to hike rates, the BoJ will also release its Outlook Report containing Board Members’ median forecasts for Real GDP and Core CPI, with officials said to be mulling upgrading their inflation forecasts although this wouldn’t be much of a surprise given the acceleration in the latest Nationwide Core CPI reading which rose to 2.7% vs Exp. 2.6% from 2.3%.
The December release was stronger than expected across the board, with Services returning to expansion though the Manufacturing situation remained dire with output declining at the quickest pace for 2024. However, this still left all three metrics below recent levels and the Composite sub-50 at 49.6. For January, the Sentix index reported that the European “economic engine is at risk of freezing up permanently” with 2025 beginning as 2024 ended and the Sentix headline at its lowest level since November 2023, largely driven by the German economy. As such, we appear primed for a release which is similar to the December one, though headwinds are present via business concerns ahead of Trump’s inauguration and potential tariffs. In terms of forecasts, manufacturing PMI is expected to tick higher to 45.2 from 45.1, services at 51.5 vs. prev. 51.6 and composite 49.4 vs. prev. 49.6.
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