As mentioned earlier this morning, it’s a busy week.
We’ve got multiple Fed meetings, a raft of important data (including the NFP print), and of course the now ubiquitous “tweet risk” emanating from the bowels of the White House.
Now, I would certainly understand if you were more interested in Goldman’s take on “tweet risk” than their read on central bank meetings and economic data. After all, thanks to Trump’s cabinet picks, we know the revolving door between Wall Street and government is spinning faster than ever. “Government Sachs” lives, dammit.
But, for those interested in the bank’s projections for all things “non-Trump”, you can find their preview of this week’s headliners below.
BOJ begins central bank bonanza this week. We expect the BOJ will leave its policy stance unchanged on Tuesday (Monday night ET), maintaining both its short-term (-0.1%) and long-term (around 0%) interest rate targets. In the quarterly “Outlook Report”, the BOJ will likely raise its real GDP outlook slightly (around 0.1-0.2pp), but keep its outlook on core CPI unchanged.
FOMC holding pattern. The FOMC will very likely keep policy unchanged on Wednesday, and make only modest revisions to the post-meeting statement. We expect constructive comments on economic activity, and possibly, a shift to say that headline PCE inflation will reach 2% “relatively soon” (instead of “over the medium term”). We expect the balance of risk assessment and characterization of current policy (“accommodative”) to remain unchanged .
BOE to close out week of central bank inaction. We also expect no changes to the current monetary policy stance in the UK, but we think the tone of the Press Conference, Inflation Report and MPC minutes will be quite cautious but tilt slightly hawkish.
European headline inflation to move higher, even as core remains subdued (and priced in forwards). We expect Euro area annual HICP inflation to be +1.6% in January (consensus 1.5%, last +1.1%), driven by a large surge in energy price inflation. We expect core inflation (excluding energy, food, alcohol and tobacco prices) to edge down to +0.7%yoy (consensus 0.9%, last +0.9%yoy). A number of ECB Governing Council Members stated last week that the trajectory of Euro area inflation is still unsatisfactory and that the ongoing stimulus is warranted. This supports our Top Trade to be long 10-year European inflation swaps and our view that the market is still underpricing medium-term inflation in the Euro area.
We expect a January non-farm payrolls print of 200k (consensus +175k, last +156k). We also expect the unemployment rate to fall one-tenth to 4.6% − which would mark a return to the cycle low – in part driven by reduced year-end retail layoffs. We expect average hourly earnings to rise 0.3% month over month and 2.8% year over year reflecting firming wage growth and state-level minimum wage hikes.