Central banks of the world continue monetary normalization

The policy meetings of the main central banks will be the dominant theme next week, with forecasts that the US Federal Reserve will raise its rate and the European Central Bank will indicate the possible future closure of its bond purchases program despite the problems from Italy.

Here are the topics that the Reuters news agency highlighted about the world’s banking systems:

• The ECB will discuss next week if it puts an end to its asset acquisitions later this year, said the organization’s chief economist Peter Praet.
• “If the ECB does not blink for Italy, why would the Fed do it?” said Aaron Kohli, rate strategist at BMO Capital Markets in New York. Although the European Monetary Agency doesn’t buy Italian bonds directly, the prospect of a stricter stance contributed to the fall of the country’s debt.
• For its part, the market expects the Fed to apply the second rate increase of three that it would have in 2018. But the caution of the markets due to the intensification of trade tensions, with the latest announcements of US tariffs, limits the outlook for a greater adjustment.
• This issue will be presented at a summit of the Group of Seven (G7) weekend in Canada. The leaders will pressure President Donald Trump for the tariffs he imposed on metal imports, although they will be polite in their attempt to dissuade the US president.
• In addition, Trump will meet with the North Korean leader, Kim Jong Un, in Singapore. There, it is possible that both sign an agreement to end the Korean War. This rapprochement between the United States and North Korea would be a positive factor for global markets.
• With respect to economic data, consumer inflation in May will be released in the United States, which would show an annual price increase of 2.6 percent, the strongest pace since February of last year. In addition, industrial production and retail sales figures will be disclosed.
• In the euro zone, the final measurement of the consumer price index last month will also be known, which, as in the United States, would give the highest reading since February 2017. The figure would equal the preliminary number of 1.9 percent, which surprised by its strength.
• In Asia, the most relevant event will be the policy meeting of the Bank of Japan. The agency would wait longer than previously thought to abandon its monetary expansion program, according to a Reuters poll.

N. Moncada

Source: Reuters

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