- Next week, key inflation reports from Canada, the UK, New Zealand, and Japan will be closely monitored.
Canadian Inflation – Tuesday
Canada’s annual inflation rate climbed to 2.9% in May 2024 from a three-year low of 2.7% in April, defying expectations of a slowdown to 2.6%.
While the unexpected uptick interrupted a trend of price easing, the latest CPI print remains within the Bank of Canada’s (BoC) 1% to 3% target range.
However, it raises potential challenges for the central bank’s plans for consecutive rate cuts and underscores ongoing price pressures for consumers.
UK Inflation – Wednesday
The UK’s annual inflation rate slowed to 2% in May 2024, marking the lowest level since July 2021, down from 2.3% in April.
The Bank of England’s Monetary Policy Committee projects an increase later this year towards 3%, followed by a decline to 2% next year.
Robert Gardner, chief economist at Nationwide Building Society, suggests a high probability of rate cuts in August but cautions that disappointing inflation numbers could push this back to November. Some policymakers remain skeptical about the sustainability of the drop from over 11% in 2022 to 2% in May 2024 and seek more data before making a definitive decision.
New Zealand Inflation – Thursday
New Zealand’s quarterly inflation edged up to 0.6% in the first quarter of 2024, following a 0.5% rise in the previous quarter.
ANZ Research indicates an easing in inflation for the second quarter of 2024, with the CPI rising by 0.4% quarter-on-quarter.
Next week’s CPI data will be closely monitored by the Reserve Bank of New Zealand (RBNZ), and a notable drop in headline inflation could increase the likelihood of an Official Cash Rate (OCR) cut in August.
Japanese Inflation – Thursday
Japan’s annual inflation rate accelerated to 2.8% in May 2024 from 2.5% in April, marking the highest reading since February.
The Bank of Japan (BoJ) projects inflation to remain around its 2% target in the coming years. However, last month’s soft household spending figures highlight the fragile state of consumer activity, casting doubt on the BoJ’s optimistic outlook.
Markets anticipate further rate hikes by the BoJ this year but are divided on whether this will occur this month or later. ING forecasts that the BoJ will act sooner than expected, with rate hikes projected for July and October.
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