Weekly Market Outlook: Fed Leads Super Central Bank Week

Insights - This week, markets await the Federal Reserve’s final rate decision of 2024, alongside policy updates from Japan, the UK, Russia, Thailand, the Philippines, Norway, and Sweden. Dubbed "Super Central Bank Week," these meetings are expected to drive market volatility. The Fed takes center stage, with expectations for a third consecutive rate cut. Key U.S. data, including November Core PCE, retail sales, and Q3 GDP final estimates, will also attract attention. On the earnings front, Micron Technology (MU.US), FedEx (FDX.US), and Carnival Corporation (CCL.US) are in focus.

Last week, the latest U.S. CPI rose 2.7% year-over-year in November, up from 2.6% in October, the fastest since April. The ECB cut its key rates by 25 basis points, marking its fourth rate cut this year. Both President Lagarde and the statement hinted at further easing. Meanwhile , Broadcom reported record revenue and profits for fiscal 2024, with AI-related revenue surging 220% year-over-year. This drove its stock up 24.43% on December 13 to $224.8 per share, pushing its market cap above $1 trillion for the first time.

Fed’s December Interest Rate Decision

The Fed is expected to announce a 25bps rate cut, its final policy move for 2024. Chair Jerome Powell will hold a press conference, with investors watching for updated projections and dot plots signaling 2025 rate paths.  The meeting will also feature updated economic projections and the dot plot, with investors closely watching whether the Fed signals a lower pace of rate cuts for 2025.

BOJ’s Rate Hike Path

The Bank of Japan is expected to discuss its rate hike trajectory during this week’s policy meeting. While the next hike is approaching, officials see little urgency for immediate action. Traders currently assign less than a 20% probability of a rate hike this week, though the BOJ’s history of surprise moves keeps markets cautious.

According to sources, BOJ officials believe that delaying action until January or later would not incur significant costs, as the risk of inflation exceeding the target remains minimal. Some officials reportedly would not oppose a December hike if proposed. 

Core PCE and Retail Data

The Fed’s preferred inflation measure, the Core PCE Price Index, will be released on Friday. In October, core PCE rose 2.8% year-over-year, the highest since April. 

The U.S. November retail sales data, set to be released on Tuesday, is also expected to show robust momentum. Last month’s data revealed growth in October retail sales, driven by a surge in auto purchases, while other categories indicated signs of growth heading into the holiday season.

Key Economic Events

Tuesday: U.S. November Retail Sales  

Thursday: Fed, BOE, and BOJ Rate Decisions  

Friday: U.S. November Core PCE  

Key Earnings

Wednesday: Micron Technology (MU.O)  

Thursday: FedEx (FDX.N)