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The Bank of England‘s chief economist is about to hit the inflation alarm bell before leaving the building.
Andy Haldane is likely to highlight the risk of price growth spiraling out of control if he takes part in his final decision by the Monetary Policy Committee on Thursday. The only supporter of the panel in favor of reducing incentives, he was open about the growing threat of inflation and warned earlier this month that the UK is at a “dangerous moment”.
The BOE’s disagreement over risks is part of a wider soul-searching in global monetary policy as to whether a recovery from the pandemic could sow the seeds of a worrying spiral in consumer prices. Just last week, the Federal Reserve revealed its own startling unrest when it signaled the possible possibility of faster rate hikes.
Haldane’s unusual research focus on topics ranging from inequality to automation earned him a reputation as a loner in the world of central banking and much greater public attention than his predecessors in that position. Since no successor has been named at the moment, his departure can leave an intellectual void that overlaps in politics.
The BOE is now wondering whether any colleague in the MPC is ready to take on Haldane’s role as inflation prophet and perhaps to join his disagreement about the current conditions of the stimulus.
While the economists polled by Bloomberg News didn’t expect this, Gertjan Vlieghe – who himself is slated to leave this year – is the civil servant closest to changing sides.
What Bloomberg Economics says:
âThe Monetary Policy Committee is likely to vote unanimously to keep rates at 0.1%. We expect an 8-1 vote to keep the asset purchase target at Â£ 895 billion. “
–Dan Hanson, UK Senior Economist. For a full preview, click here
Elsewhere, central bankers in Mexico, Thailand, Hungary and the Czech Republic will meet and flash PMIs will provide a snapshot of the global economy.
Click here to see what happened last week and below is our round-up of developments in the world economy.
Europe, Middle East, Africa
While the BOE will hold its stimulus on Thursday, other central banks are switching quickly.
In Hungary, officials are ready on Tuesday to launch one of the region’s first monetary tightening cycles to tackle the fastest inflation in the European Union. Economists’ predictions vary widely as to how big a rate hike is likely.
The next day, the Czech central bank is followed by almost all economists with an increase of a quarter point to 0.5%.
The European Central Bank is still far from tightening, as emergency bond purchases are set to last through March and an accelerated buying pace is promised for the coming months. In her speech to the European Parliament on Monday, President Christine Lagarde could ask how committed the institution is to this timetable.
Other ECB officials who will speak this week include board members Luis de Guindos, Isabel Schnabel and Fabio Panetta.
In South Africa, Wednesday’s data could show that inflation rose to its highest level in more than two years in May. That would be in line with the projection model of the central bank, which last month announced a rate hike before the end of the year.
In Zambia, where the central bank has warned it will hike borrowing costs again if inflation does not ease, Thursday’s data is likely to show price growth remained above 20% in June.
The data on the arrival of foreign tourists in May will shed some light on whether Turkey is still hoping to regain its summer season, a major source of foreign income, while travel from many nations remains restricted due to the pandemic.
- For more information, see the full Bloomberg Economics week for the EMEA region
US investors will be listening closely to the latest personal income and expense readings, which will be released on Friday. The data will affect the outlook for the rate of inflation in the economy, a debate that intensified after the Fed statement on Wednesday.
Fed chairman Jerome Powell and his colleagues at the central bank surprised many with their rather restrictive stance on the inflation outlook. Powell is due to appear before Congress in Washington on Tuesday for an update on the Fed’s loan programs and in support of the economy.
Other reports appearing in the US include numbers for existing and new home sales, manufacturing, durable goods, and the latest weekly jobless claims.
- For more information, see Bloomberg Economics’ full US week
Bank of Korea Governor Lee Ju-yeol will deliver an inflation speech Thursday, which will be under scrutiny amid growing speculation that the bank will raise rates as early as the final quarter of this year. Preliminary June trade data earlier this week should support a case that Korea’s economy is back in full swing.
Bank of Japan Governor Haruhiko Kuroda and RBA Deputy Governor Luci Ellis will also speak this week. Tokyo inflation data released on Friday could show stagnant prices in Japan’s capital after 10 months of decline.
China sets its key interest rate on Monday, Thailand has an interest rate meeting on Wednesday and the Philippines on Thursday.
- For more information, see Bloomberg Economics’ full week for Asia
Mexico is releasing a bunch of economic indicators this week and the central bank will meet on Thursday where a decision to keep rates at 4% is all but certain. Demand and growth have picked up, as reports on retail sales, economic activity and unemployment should confirm, but persistent increases in consumer prices are depressing inflation expectations.
Argentina will also be active, reporting on the budget, trade, current account, unemployment and production in the first quarter. Local economists surveyed by the central bank cut their forecasts for inflation and growth for 2021-2023.
Brazil’s central bank released the minutes of last week’s meeting on Tuesday. A third consecutive 75 basis point increase brought the Selic to 4.25%, with the bank announcing a similar increase for the August 4th session as full normalization is now its base case. Updated projections in the bank’s quarterly inflation report on Thursday should give a good idea of ââwhat a “neutral” Selic might be. The release of inflation data in the middle of the month could show that the annual rate continues to rise above 8%.
- For more information, see Bloomberg Economics’ full Latin America Week
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