UK, Canadian Inflation Reports In Focus, Gold Prices Remain Close To All-Time Record High

The week is full of important interest rate decisions coming from the Federal Reserve (Fed), Bank of England (BoE) and Bank of Japan (BoJ), but for the time being economists will be focusing on the UK CPI inflation report due tomorrow morning and the Canadian inflation data which is expected later today.

In other news, gold prices remained close to an all-time high, trading at $2,580 per ounce on Tuesday morning. On the eve of the Fed’s interest rate decision, the US dollar rallied after hitting a 14-month low on Monday.

UK CPI Inflation August 2024 Report 

Early tomorrow morning, analysts will have the opportunity to scrutinise the UK CPI inflation report for the month of August. Forecasts suggest that headline inflation remained unchanged at 2.2% on an annualised basis. However, core inflation is expected to rise to 3.5% from 3.3% recorded in July.

The BoE’s governing council closely monitors inflation figures, especially the services inflation report as it has proven to be the most difficult to manage despite the strict monetary policy measures applied by the central bank. Some economists suggest that wage increases in the public sector and the recent reduction of interest rates may have helped inflation surge in August.

Canadian Inflation Likely To Hit 3-Year Low

Canadian CPI inflation is forecast to come in at 2.1% in August on a year-to-year basis, dropping from 2.5% recorded in July. Monthly inflation is expected to come in at 0.0%, also recording a drop from 0.4% in the previous month. The Bank of Canada (BoC) is projected to reduce its borrowing costs two times by 25 basis points by the end of the year.

ECB’s Lane & Kazimir Talk Rates

Two of the ECB’s policymakers shared their opinions on interest rates yesterday. Philip Lane said that a gradual approach to dialing back restrictiveness will be appropriate if the incoming data are in line with the baseline projection while adding that negotiated wage growth will remain high and volatile over the remainder of 2024.

On the other side, Slovakian central bank Governor Peter Kazimir said that it would take a significant shift in the outlook for the ECB to lower the policy rate further in October.  Kazimir suggested that “the ECB will almost surely have to wait until December for the next rate cut,” as the October meeting would be too soon to assess the economic situation in the eurozone.

Economic Activity In June Quarter Drops In New Zealand

Data released by New Zealand’s Treasury showed indications that economic activity in the country ticked lower in the June quarter. The report noted that “we anticipate the economy contracted by 0.4% in the quarter, down from a forecast of 0.2% growth at our Budget Update.” 

Treasury officials reported that “economic data has been weak despite a period of record migration-led population growth. However, with migration levels normalizing, weakness is emerging across more services industries,” adding that house sales continued to drop. The forecast regarding the September quarter said that “there may be some light at the end of the economic tunnel with two weeks left in the September quarter, more timely indicators signal flat rather than falling activity for that quarter.”

The Treasury report comes two days before the official data release related to the Q2 2024 GDP growth by Statistics New Zealand.

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