Fed, ECB minutes and all eyes on inflation in China

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(Reuters) – Minutes of the June Fed and ECB meetings, plus the latest inflation data from China – here’s a quick tour of next week’s top economic events and topics covered by Reuters’ offices.

FILE PHOTO: Banknotes of euros, Hong Kong dollars, US dollars, Japanese yen, GB pounds and Chinese 100 yuan are seen in this illustration in Beijing, China, Jan. 21, 2016. REUTERS / Jason Lee / File Photo

UNITED STATES

The week following the US payroll report is usually one of the easiest of the month in terms of economic reports, and the next week is no exception.

However, there is a marquee during the week and a likely market-shaking publication: The minutes of the US Federal Reserve’s meeting in June, when officials opened the debate on ending bond purchases in the time of crisis and signaled interest rate hikes, were closer than previously thought.

The reading of the Federal Open Market Committee meeting June 16-17 on Wednesday at 2:00 p.m. Eastern Time (1800 GMT) will shed light on the depth of the divide among the 18 policymakers at a critical turning point for the US Monetary policy in the world’s largest – and now booming – economy. Four guides to what to look for:

Inflation: How low is officials’ tolerance of this excess if inflation exceeds the Fed’s 2% target?

Employment: Will some policy makers theorize that a full return to pre-COVID employment levels is unlikely, raising questions about their goal of “maximum employment”?

Bonds Taper: The taper debate is in full swing. Questions include when and how quickly they will recall purchases of $ 80 billion a month in government bonds and $ 40 billion in mortgage-backed securities.

Interest: is the debate moving in the direction of an earlier step? FOMC members’ projections at the June meeting put the median expectation of an initial rate hike by 2023 from 2024, and a sizable minority of members circled for the first hike around 2022.

EUROPE

In Europe, concerns about the impact of new coronavirus variants on summer tourism – crucial to southern economies like Portugal, Greece, Italy and Spain – will continue to dominate next week as hotel bookings lag well below pre-pandemic levels.

On Tuesday, the UK’s fiscal watchdog, the Office for Budget Responsibility, released its annual report on risks to public finances, with a focus this year on the damage caused by COVID-19, climate change and the impact of higher interest rates on debt servicing costs.

The European Central Bank will publish the report on its June monetary policy meeting on Thursday. ECB observers will also be vigilant for news from a series of meetings scheduled over the coming weeks to refine their strategic view.

The bank is looking to raise its inflation target – currently close to but no more than 2% – but sources say there are still wide disparities among key policy makers. The aim is to carry out the review by September.

ASIA

In Asia, the Australian central bank is likely to keep its cash rate at a record low Tuesday and take a “flexible” approach to its bond purchase program. The economic results are far exceeding expectations, but the recent COVID outbreaks across the country and a slow adoption of vaccinations are adding to some risks. Analysts are already assuming that the RBA is one of the slowest central banks in the developed world to remove the incentives from the time of crisis.

The Malaysian central bank is holding its monetary policy meeting on Thursday with no changes expected. The focus will be on the recovery prospects.

Finally, China will release new inflation data on Friday. One focus would be on commodity prices, which have risen sharply due to higher commodity prices, and whether those increases are passed on to consumers.

Reporting by Reuters offices; compiled by Mark John, Dan Burns, Sam Holmes; Editing by Ana Nicolaci da Costa



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