The Week Ahead – All On The US: Jackson Hole, CPI, FOMC Minutes…

The focus of the week will likely be in the US, in particular the annual event of the Jackson Hole symposium beginning on Thursday. With the theme ‘Reevaluating Labor Market Dynamics’, we look forward in this year’s conference to the Fed’s latest view on US labor market slack as well as Fed Chair Janet Yellen’s keynote speech on Friday (10 am EST). The Fed would likely indicate that there remains a considerate degree of slack in the economy and it is not in a rush for a policy rate hike which would only be gradual. On Tuesday, the inflation report might show headline CPI easing to +2% y/y in July from +2.1% a month ago. Core inflation probably stayed at +1.9%. July housing starts and permits would also be due on the same day. The July FOMC minutes would be released on Wednesday. On Thursday, the Philly Fed survey and flash Markit manufacturing PMI would allow a glimpse of the health of the manufacturing sector.

In Asia, the RBA minutes would be due on Tuesday whilst the RBA Governor’s semi-annual testimony to the House of Representatives’ Standing Committee on Economics in Brisbane would be held on Wednesday. While we do not expected much news from the Minutes, in particular the August Statement on Monetary Policy was released shortly after the August meeting, we look forward to the testimony as Governor Steven Glenns would likely comment
on the most recent data, including the improvement in business and consumer confidence, and business conditions. New Zealand’s Treasury would publish its pre-election economic and fiscal update (PREFU) tomorrow ahead of the September 20 election. China’s flash manufacturing PMI (by HSBC/Markit) for August, due Thursday, probably shows a -0.2 point drop to 51.5.

In the UK, the BOE minutes for the August would be due on Wednesday. We expect to see rationales for maintaining the Bank rate at a record-low 0.5%5 and the asset purchase program at 375B pound. The central bank indicated at the quarterly Inflation Report last week that the committee has a ‘wide range of views’ on the level of slack in the economy. BOE governor Mark Carney’s comments over the weekend regarding the timing of rate hike sent the pound higher on Monday. Carney noted that ‘we have to have the confidence that prospective real wages are going to be growing sustainably… We don’t have to wait for the fact of that turn to raise them’. This suggested that the tightening might begin sufficient evidence of sustainable economic growth. On the broader economy Carney indicated that ‘the expansion is proceeding, momentum is more assured’ and ‘wherever the finish line was in the depths of the crisis, we are much more than halfway toward that finish line now’.

In the Eurozone, the preliminary PMI probably fell -0.4 point to 51.4 in August with deterioration of manufacturing activities seen in Germany, the largest economy in the 18-nation bloc. Germany’s PMI probably dropped to 51.8 in August from 52.4 a month ago.

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