All Eyes on Powell Testimony as Jobs Gain: Global Economy Week

(Bloomberg) -- Federal Reserve Chairman Jerome Powell returns the spotlight this week as he testifies before lawmakers in appearances set to grip financial markets.

In the wake of Friday’s news that U.S. hiring outpaced forecasts in June, Powell will offer the latest outlook for monetary policy just three weeks before he convenes policy makers to set interest rates. He speaks before congressional panels on Wednesday and Thursday.

Stocks fell on Friday while Treasury yields and the dollar advanced as traders speculated the Fed has less reason to lower rates after payrolls climbed 224,000 in June.

“Powell’s testimony will help set expectations for the timing of the onset of a mini-easing cycle,” said Yelena Shulyatyeva and Carl Riccadonna of Bloomberg Economics. “While the strong June jobs report reduces the case for the Fed to cut rates aggressively in the near term, we still project rate cuts later this year, given low inflation and an inverted yield curve.”

Here’s our weekly rundown of other key economic events:

U.S.

As well as Powell, the other event to watch this week is Thursday’s release of the consumer price index. While the Fed prefers to monitor another gauge, this one isn’t without relevance. It’s predicted to show inflation of just 1.6% in June, a decline from the 1.8% of May. Investors are also waiting to discover when the next round of trade talks between the U.S. and China will take place.

Strong Dollar Is Importing Deflation

• For more, read Bloomberg Economics’ full Week Ahead for the U.S.

Europe, Middle East and Africa

The European Commission’s latest economic outlook will on Wednesday sum up the deteriorating state of the euro-area economy. Minutes of the European Central Bank’s June decision on Thursday may provide an indication of how far policy makers’ discussions went on the need for stimulus to fight the slowdown. Industrial production data on Friday may also help illustrate the economy’s predicament.

Germany Won’t Weigh on Euro-Area IP in May

At a meeting in Brussels, European finance chiefs may debate who to tap as their candidate to replace Christine Lagarde as managing director of the International Monetary Fund. One potential candidate already being discussed in capitals is Bank of England Governor Mark Carney. On Thursday, he presents the latest bi-annual financial stability report as Brexit nears.

Turkey will be dealing with the fallout of President Recep Tayyip Erdogan’s surprise decision to oust Central Bank Governor Murat Cetinkaya. Meanwhile, Egypt’s central bank will probably keep its main interest rate on hold at 16.75% on Wednesday as it monitors the impact of electricity price hikes on inflation. The Israeli shekel’s standout performance this year means the nation’s central bank may have lost its window to exit years of ultra-low rates; policy makers are expected to hold at 0.25% on Monday. Russia on Thursday will report movements in gold and foreign reserves -- last measured at about half a trillion dollars -- as a debate picks up over over putting more of the country’s stored wealth to work for its citizens.

• For more, read Bloomberg Economics’ full Week Ahead for EMEA

Asia

Malaysia’s central bank decides on interest rates on Tuesday, with economists expecting it to hold steady after a quarter percentage point reduction in May. Inflation data in China is set to show consumer prices are still rising at a rate close to the central bank’s preferred ceiling.

Indian inflation on Friday is set to remain below the Reserve Bank of India’s target, adding to pressure for more rate cuts. And trade data from Japan, Taiwan, the Philippines and China will be released throughout the week, along with South Korea’s export price index, giving the latest read on how shipments are faring amid a tech slowdown and the U.S-China tensions.

• For more, read Bloomberg Economics’ full Week Ahead for Asia

Latin America

June inflation data due this week is likely to show Latin America’s two largest economies have room to start cutting interest rates. On Monday, Mexico’s consumer prices are forecast to rise 3.94% year-on-year, returning to the central bank target range. On Thursday, Brazil’s benchmark IPCA index is expected to drop to an annual pace of 3.35% -- way below the 4.25% target -- with possible month-on-month deflation. How early the Brazilian central bank will start cutting rates will depend on how much progress the government’s reform agenda makes in Congress. This week, a key bill to overhaul the pension system may go to a vote on the floor of the lower house.

• For more, read Bloomberg Economics’ full Week Ahead for the U.S.

To contact the reporter on this story: Simon Kennedy in London at skennedy4@bloomberg.net

To contact the editors responsible for this story: Stephanie Flanders at flanders@bloomberg.net, Zoe Schneeweiss

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