Key Data and Events for Next Week

RMB Week Ahead: Fed projections

Bottom line: The week ahead is 90% about the Fed! They will presumably double down on their dovish policy. But will the “Dot Plot” (projections of future rate moves) change? If many more members predict rate hikes prior to 2024 then global markets will come under pressure. Expect contained trade before the Fed announcement on Wednesday evening, with volatility thereafter.

Fed Dot Plot: Forecasts of future Fed rates
Source: Bloomberg

 

Key data and events in the week:

  • The Fed’s forecast of no rate hikes until after 2023 is being challenged by the market. The Fed will presumably aggressively push back against this at in their statement and at the press conference, by arguing that inflation will remain contained and that the rise in bond yields reflects good economic news and is nothing to worry about. But the market will be looking for consistency, and so will pay a lot of attention to what the individual Fed members are projecting for the Fed rate in the future (the so-called Dot Plot). At the December Fed meeting, only 5 of the 17 Fed members predicted that rate hikes before 2024. It will be interesting if more switch into this camp and if so, how many. At the extreme, it’s even possible that the Fed might hint at changing its QE program to reduce the pressure on bonds. If they do, then markets would rally aggressively.
  • Virus numbers. After declining sharply in January and February, global new case numbers seem to be accelerating again (see chart). A sharp acceleration might worry markets.
  • Tuesday’s US Feb retail sales is the headline data risk of the week. Expectations are for a slight decline after January’s sharp jump.
  • On the local political front, the parliamentary debate on the bringing charges against the Public Prosecutor will show the strength or weakness of the different factions within the ANC.
Global new virus cases with 7-day average

 

Source: RMB Markets