Monday: BoE’s Haskel (hawk) said further rate hikes cannot be ruled out. The BoE’s Mann (the hawk) stressed that a wage increase above 4% would mean it would be difficult to return CPI to 2%.

Tuesday: The UK jobs report beat across the board, with the jobless rate falling to 3.8% versus 4.0% expected and previously negative employment figures revised to reflect a gain. The worst part for the BoE is the pace of wage growth. Average weekly earnings came in at 6.5% versus expectations of 6.1%, with the previous report revised upwards from 5.8% to 6.1%. Average weekly earnings without bonus printed at 7.2% versus 6.9% expected and previous figures were revised to 6.8% from 6.7%. The BoE’s Mann stressed just the day before that a wage increase above 4% would make it difficult to return to the 2% inflation target, so the BoE has a lot of work to do here as high inflation takes hold.

Average UK earnings excluding bonuses

The BoE’s Greene said it was reasonable to expect inflation to fall fairly quickly, but getting back to the 2% target would be difficult. He doesn’t like the idea of ​​stop-start monetary policy because it could end up with a much higher final rate and a worse recession. He also added that the MPC needs to act proactively on inflation dynamics (a bit late).

The PBOC cut the 7-day reverse repo to 1.9% for the first time since August 2022, from 2.0% previously, as policymakers worry about China’s recovery. On the same day, it also reduced the standing lending facility (SLF) by 10 basis points.

US CPI beat expectations for the leading indicator with a 4.0% year-on-year figure versus 4.1% expected and a 0.1% month-on-month increase versus 0.2% expected. The problem is that Core CPI, which the market is likely to focus on now, met expectations with a 5.3% YoY reading and 0.4% M/M. Core inflation appears to be stuck at a higher level compared to the previous three decades.


BoE governor Bailey (hawk) commented on the labor market data, defining it as “very tight”. The BoE’s Dhingra (dov) said inflation was still too high compared to its 2% target, but urged patience, saying it would take time for the full effects of the rate hike to hit the economy. Dhingra (and Tenreyro) are the most dovish members of the MPC and voted to keep rates unchanged at the last meeting.

Wednesday: US PPI fell further year-on-year to 1.1% vs. 1.5% expected, while the M/M figure printed at -0.3% vs. -0.1% expected. Core PPI decreased year-on-year to 2.8% vs. 2.9% expected, while the M/M reading came in at 0.2% vs. the expected 0.2%. We saw some dovish but limited reaction in the markets to the FOMC risk a few hours later.

US PPI year-on-year

The Fed met expectations with a slightly hawkish surprise, leaving interest rates unchanged at 5.00-5.25% but adding 50bps to the terminal rate in the Dot Plot. The FOMC vote was unanimous. It seemed more like a move to avoid a dovish interpretation of their hiatus. Growth for 2023 was revised down to 1% from 0.4% in March, unemployment revised down to 4.1% vs. 4.5% earlier and Core PCE was revised to 3.9% vs. 3.6% previously. Further, the Fed revised interest rates upward by 30 basis points in 2024 and 2025. The Fed decided to hold off because it would “allow the committee to assess additional information and its implications for monetary policy.” Fed Chairman Powell said at a press conference that the July meeting is “live” but everything will depend on the incoming data set.


Thursday: The PBOC cut the Medim-term Lending Facility (MLF) rate by 10 basis points from 2.75% to 2.65%. A similar move in LPR rates is expected next Tuesday.

The ECB raised interest rates by 25 basis points, bringing the deposit rate to 3.5%, as widely expected. The central bank also raised its inflation projections and cut growth forecasts. In addition, the ECB confirmed that it will stop reinvesting proceeds from its asset purchase program (APP) from July to reduce its balance sheet by 25 billion a month. President Lagarde indicated that “a further hike is likely in July” unless there is a “significant change” in economic data. Later in the day, as is usually the case, a report from “ECB sources” said the central bank would discuss a September hike in the summer.


US Jobless Claims again missed forecasts coming in at 262,000 versus an expected 249,000 and the previous number was revised slightly higher to 262,000 from 261,000. Continuing claims, a measure of how hard it is for people to find work after losing their jobs, rose to 1775,000 vs. 1,776,000 expected, up 20,000 from the previous revised number of 1,755,000.

US Jobless Claims

US retail sales rose 0.3% in May vs. -0.1% expected, while the control group printed 0.2% vs. the expected 0.2%. The year-on-year figure was 1.6% versus expectations of 2.2% and the previous downwardly revised rate of 1.2%. Note that these are nominal numbers, if we adjust them for inflation, retail sales were negative for 7 yearsThursday consecutive months, the longest streak since 2009.

Year-over-year US retail sales

Friday: The BoJ left everything unchanged as widely expected, with the interest rate at -0.10%, the 10-year JGB yield target around 0% and the tolerance band at +/-0.5%. The central bank said the economy is accelerating but expects core consumer inflation to slow towards the middle of the current fiscal year (around September/October). Later in the day, BoJ Governor Ueda said they did not change policy because Japan’s inflation is not sustainable and more time is needed to meet the 2% inflation target. He also added that the negative effects of the US rate hike could be felt later, including the possibility of an economic downturn.


Below is a list of ECB members’ comments from this morning. The TL;DR is that they haven’t peaked rates yet and will be raising 25 bps in July, while the September hike will be data dependent.


ECB’s Nagel (hawk)

  • The “all clear” on inflation is still a long way off.
  • Core inflation is proving stubbornly high.
  • There is still a long way to go to achieve the inflation target.
  • We may have to maintain tourist rates after the summer break.

Vasle from the ECB (hawk)

  • We will have to continue with gradual tightening.
  • I believe in another 25 bps increase before the summer break (July).
  • The decision to raise rates after the summer depends on the dates.

Simkus of the ECB (hawk)

  • It is too early to say what the ECB will do in September.
  • We are nearing the end of the tightening cycle.
  • We have to raise rates in July.
  • I don’t see a rate cut early next year.

ECB’s Rehn (hawk)

  • GC will continue to follow a data-driven approach.
  • We will ensure that the ECB’s key interest rates are brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% target.
  • Prices will increase at least in July.

ECB’s Muller (hawk)

  • ECB rates haven’t peaked yet.
  • Inflation remains too high.
  • What happens after July is pure speculation.

ECB’s Holzmann (hawk)

  • What happens after the summer depends on the dates.

Centeno (dove) from the ECB

  • Interest rates are in restrictive territory and should remain there for some time after the summer.
  • The vast majority, if not all, of the inflationary shocks are now almost reversed.
  • The reversal of the shocks will eventually reach final consumer prices. If this does not happen, there is a risk of interest rates rising again.

Wunsch (hawk) from the ECB

  • We need to see a sustained decline in core inflation.
  • If there is no significant decline in core inflation, it could rise again in September.
  • Core inflation holding around 5% could prompt a rate hike in September and possibly later.
  • We do not yet see the beginning of a slowdown in core inflation.

Villeroy of the ECB (hawk)

  • No one should jump to premature conclusions about our calendar or our terminal rate.
  • We are data driven.
  • Monetary policy is working and inflation has peaked.
  • I am convinced that the ECB will meet the inflation target within two years.
  • The ECB has covered most of the ground with rates.
  • The duration of high interest rates is more important than their level, and persistence is more important than the peak.


The Fed’s Waller (hawk) said financial stability is necessary for the Fed to fulfill its mandate, but monetary policy should not be changed because of ineffective management at a few banks. The instruments of monetary policy and financial stability are separate and distinct. He also added that the US economy is still reeling and that the policy delay is not the same as it used to be because it relied on future guidance. He went on to complain that core inflation was not falling as he had thought and that it was worrying that it was not moving, concluding that further tightening may be needed.

The Fed’s Barkin (a hawk, a non-voter) said the pandemic may have strengthened the resilience of the labor market and that inflation remains too high and stubbornly persistent. He added that slowing the rate of increase gives more time to evaluate the data and that he would be comfortable doing more if the data warranted it. He went on to say that higher rates may create the risk of a sharper slowdown, but the experience of the 1970s shows that the Fed should not back down too soon from its fight against inflation.

The University of Michigan consumer sentiment report printed at 63.9 versus expectations of 60.0 and 59.2 previously. The current conditions index was 68.0 vs. 65.1 expected and 64.9 previous and the expectation index was 61.3 vs. 55.2 expected and 55.4 previous. One-year inflation expectations fell to 3.3% from 4.1% and 4.2% expected earlier, while 5-10-year inflation expectations were at 3.0% from 3.0% and 3.1% expected earlier. Overall a goldilocks report.

University of Michigan Consumer Sentiment

Next week will be quieter on the data front:

  • The US has a holiday on Monday, June 16.
  • The PBOC is expected to cut the LPR on Tuesday.
  • UK CPI will be published on Wednesday.
  • On Thursday, we have the SNB and BoE rate decisions, the US Jobless Claims report and Fed Chair Powell’s Testimony.
  • We will finally see the global S&P PMI on Friday.

That’s it friends, have a great weekend!

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