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Bank of Japan

Here are the week’s key events: 

US and Chinese inflation data are the major economic data releases for the week on the macro front; but the main focus is saved for Friday and the unofficial start of earnings season on Wall Street. Big banks are first up as JPM, Bank of America, Citigroup and Wells Fargo kick things off.  



The Bank of Japan is likely to change policy this year; the question is a matter of timing. A lot of this will depend on economic data, so pay attention to the latest Tokyo core CPI inflation numbers. Ensuring inflation is sustainably at or above 2% is a prerequisite for the central bank to normalise policy. The BoJ left policy unchanged in December and signalled it’s not in a rush to raise rates until the spring wage negotiations. Governor Ueda said “it is difficult to present a firm picture on exit (from ultra easy policy)" and that they "don't have a detailed picture on what steps and the order of it when it comes to exiting negative interest rates".  German factory orders and Swiss inflation numbers are also due up. 



It’s a relatively quiet session in terms of high impact economic data. Australian retail sales figures and the UK’s BRC retail sales monitor are of interest, before German industrial production figures get an outing. 



Australia’s CPI inflation report is due out, and should help guide expectations for what the Reserve Bank does next. The monthly CPI indicator rose 4.9% in the 12 months to October, which was quite a bit lower than the expected increase and a marked decline from the 5.6% recorded for September. The RBA projects the rise in prices to slow to 2.9% by December 2025. Whether it has the will hike in February is up for debate – it's been on pause since November but it has warned it could hike again dependong on how inflation progresses, meaning the inflation report will be closely watched by AUD traders. Also check a US 10yr bond auction for appetite. 



All eyes on the US CPI inflation report for December. The Fed used its December meeting to signal rate cuts were coming – inflation has been beaten, the market believes, so risk has been catching a strong tailwind. So, anything that detracts from this narrative and suggests the Fed may indeed still be ‘higher for longer’ will upset the consensus and could produce volatility. The question is how much more can inflation come down. The headline rate for November inched down to 3.1% on an annual basis from 3.2%. But core inflation rose – it was up 0.3% during November, while the year-on-year core rate remained flat at 4%. The last mile will be the hardest – the Fed could disappoint the market’s belief in cuts coming in the first half of the year should inflation be a bit more stubborn. 



The week closes out with China’s CPI and PPI inflation numbers, which lately have shown outright deflation. Consumer prices fell 0.5% in the year to November, the steepest decline in three years, while producer prices fell 3%. UK GDP figures and US PPI inflation is also due up. The focus for many switches to earnings – Wall Street’s big banks kick things off and are likely to provide insight into the health of the US economy more generally. 

Earnings: Bank of America (BAC), BlackRock (BLK), Citigroup (C), Delta Airlines (DAL), JPMorgan Chase & Co (JPM), UnitedHealth Group (UNH), Wells Fargo & Co (WFC) 

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