Central Banks’ Meetings, Retail Sales, GDP & More

This week, traders, consumers, and analysts will gain a better understanding of the global economic situation as some of the final Central Banks meetings of the year, coupled with economic data from key economies such as the UK, China, and the Eurozone, are set to be released. Here's what you can expect from this week's economic releases:

Central Banks Decisions: Fed, ECB & BoE

Central Banks’ decisions are closely monitored by both investors and consumers as they can provide valuable insight into the state of the economy and its possible economic trajectory. As such, this week may be an important one given that the US’, the UK’s, and the Eurozone’s Central Banks are set to reveal their last interest rate decisions of the year.

The Federal Reserve (FOMC)

The Federal Reserve (FOMC) is scheduled to meet today, Tuesday, December 12, and tomorrow, Wednesday, December 13, to release its final rate decision of the year. 

Despite the Fed's ongoing hawkishness this year and Fed Chair Jerome Powell's speech about further rate hikes, the majority of current projections indicate a likelihood of keeping interest rates unchanged at 5.25%-5.50%. 

This change of direction seems to be the result of a dovish Fed speech and the notion that rates have peaked. 

If these predictions materialize, it would mark the Fed's second consecutive decision to keep rates the same (like it did in November). Only time will tell which route the world’s biggest economy’s Central Bank will take. 

The European Central Bank (ECB)

The European Central Bank (ECB) is set to release its rate decision on Thursday, December 14, and is expected to take a dovish stance after it decided to raise rates. 

The projections may be the result of inflation rates plummeting in the Eurozone as noted by Isabel Schnabel, the German ECB governing council member, who stated that the ECB may be done hiking rates for now and stated that inflation has slid rapidly. 

Additionally, EZ Consumer Price Index (CPI) rates for November showed a drop to 2.4% compared to the prior three months’ 5.3% rate, hence reflecting that inflation may be declining. 

Still, it is important to acknowledge the economic hurdles faced in Europe as economies like the French economy contracted in Q3 while Germany experienced limited growth.

The Bank of England (BoE)

The Bank of England (BoE) is scheduled to release its rate decision on Thursday, December 14. Among the main factors believed to influence this Central Bank’s decision is wage growth.

This may lead to dissent among some Monetary Policy Committee (MPC) members favoring higher rates. Dissenters on the MPC include external members Catherine Mann, Megan Greene, and Jonathan Haskel. 

While the decision is yet to be made, it seems that the BoE is adopting a “Table Mountain” approach, which means it would keep rates higher for longer due to the fact that inflation and wages are now higher in the UK.

Moreover, recent UK wages data, which was released today, Tuesday, December 12,  has shown the most slowdown in almost two years, while pay was rapidly rising, possibly indicating that the BoE may not cut rates in the meantime. However, despite this, rate cuts are anticipated to happen in 2024. (Source: Reuters)

UK GDP: Can the UK Avoid a Recession?

Besides the Bank of England’s rate decision, this week holds significant events for the UK’s economy, with the release of the monthly Gross Domestic Product (GDP) scheduled for Wednesday, December 13. 

Similar to many other countries, the UK has been on the verge of a recession this year, particularly in Q3. However, recent data indicates a much-needed "slight improvement" in Q4, raising hopes that the UK might avoid a recession by the end of the year. 

Therefore, traders and consumers alike may want to closely monitor this week’s GDP data to gain insights into the actual trajectory of the UK’s economy.

China Retail Sales: How Is the Second-Biggest Economy in the World Faring?

Retail Sales data from China are scheduled to be released on Friday, December 15. After a tumultuous and challenging year for the Chinese economy, it is believed that the upcoming data will reveal that China’s economy may finally be improving. 

It appears that Chinese consumers are now putting their money into spending. However, as European luxury brands can confirm, their products are not experiencing a rapid sell-off. 

The upcoming November figures will provide additional insights, particularly as they will encompass the sales from Chinese Singles Day which took place on Saturday, November 11.

Conclusion

This week brings crucial events for the global economy, with Central Banks, including the Federal Reserve, ECB, and the Bank of England, making pivotal decisions and economic data from China to the Eurozone set to be revealed. 

Traders and analysts may want to closely monitor these developments as they can reveal a lot about the possible trajectory of the economy as we near the end of the year.