The highlight of Monday will be the release of Canada’s CPI. This will be followed by the release of New Zealand’s inflation figures on Tuesday, which will be a busy day. The UK publishes the change in the number of applicants, the average income index 3 million/year, and the unemployment rate, while the US publishes the change in ADP employment, retail sales m/m, and pending home sales m/m.
Mr. Warsh, who was nominated to be Fed chairman, is also scheduled to testify before the Senate Banking, Housing, and Urban Affairs Committee in Washington, D.C., as part of the nomination process.
On Wednesday, the UK will release its inflation data, and on Thursday, preliminary manufacturing and services PMI figures will be released for Australia, the euro area, the UK and the US.
Finally, on Friday, the UK and Canada will release month-on-month retail sales figures, and the US will release revised consumer sentiment and inflation expectations from the University of Michigan.
In Canada, consensus for CPI month-on-month was 1.1%, compared to 0.5% previously. Median CPI YoY is expected to be 2.4% vs. 2.3%, trimmed CPI YoY is expected to remain stable at 2.3%, and general CPI YoY is expected to rise from 2.4% to 2.6%.
Inflation is expected to rise in March, mainly due to a significant 21% rise in gasoline prices. Headline CPI is likely to rise from 1.8% year-on-year to around 2.5%, and core inflation is expected to rise slightly to around 2.2%.
This recovery is primarily driven by energy, as the effects of last year’s carbon tax wear off and fuel prices continue to rise. Inflation could top 3% in April, RBC analysts said, but temporary tax cuts taking effect this week could help limit the rise. Meanwhile, food inflation is expected to ease as annual distortions such as the February 2025 federal HST/GST holiday disappear from the data.
Underlying price pressures have remained relatively subdued for now, giving the Bank of Canada some leeway to see if energy-driven higher prices should stop rising. Wells Fargo analysts said the central bank is also likely to wait for the outcome of the USMCA renegotiation and may not consider raising rates until July.
In New Zealand, the consensus quarter-on-quarter CPI was 0.8%, up from 0.6% previously. Inflation is expected to rise modestly in the first quarter due to higher food and fuel costs. However, annual inflation is expected to fall from 3.1% to 2.8%, below the RBNZ’s latest forecast, while core inflation is expected to remain strong.
Westpac analysts said the decline did not reflect the full picture. The easing in annual inflation in March is likely to be temporary, with inflation expected to rise again until mid-year due to higher oil prices and its broader economic spillovers. Annual inflation could reach around 4.3% by mid-year.
In the UK, the consensus on the change in the number of claimants is 21.4,000 compared to 24.7,000 previously. The average income index for the year 3 million is expected to be 3.6%, compared to 3.9% previously, while the unemployment rate is expected to remain unchanged at 5.2%.
This week’s data should provide insight into how the UK economy is being affected by the Middle East conflict. The Bank of England will closely monitor labor market indicators as well as the latest inflation figures.
Labor market data shows a gradual cooling. Wage growth is expected to slow over the past three months, suggesting income momentum is weakening. Although the unemployment rate is expected to remain stable, it is still rising. Overall, the data shows that the labor market is softening rather than deteriorating sharply.
On the inflation front, CPI y-o-y is expected to rise from 3.0% to 3.3%, while core CPI is expected to remain unchanged at 3.2% y-o-y. The rise in headline inflation is primarily driven by rising energy costs, and the stabilization of core values suggests that the previous disinflationary trend may be stagnant.
From a monetary policy perspective, central banks are likely to continue to rely on data. Rising headline inflation alone could be an argument in favor of policy tightening, but slower wage growth, weaker economic activity and rising unemployment support a wait-and-see approach. Interest rates are likely to remain unchanged for the time being, but there is an upside risk if inflation begins to be more broadly reflected in wages and prices.
In the US, the consensus for month-over-month retail sales is 1.4% (previously 0.6%), with core retail sales expected to increase 1.3% versus 0.5%.
Early signs indicate that consumers have largely absorbed the initial fuel price hike. High-frequency card data shows spending holding steady through early April, with retail sales likely to show a strong headline increase of around 2% in March. However, this strength appears to be driven in part by price effects.
Because retail sales are reported in nominal terms, a significant portion of the increase is likely to reflect higher gasoline prices rather than actual volume increases. Although overall spending remains supported, underlying demand appears soft when adjusted for the rise in commodity prices, which rose markedly during the month.
Looking ahead, consumption is expected to remain resilient, although the pace will slow. So far, support from tax rebates has helped offset the impact of rising fuel costs. Still, if price increases persist and widen, pressure on household budgets could begin to increase.
As for the Fed, even as the Fed enters a pre-meeting blackout period, the focus is beginning to shift to Kevin Warsh, with both policy and politics in the spotlight during his April 21 confirmation hearing.
Mr. Warsh has been largely silent in recent months, and the key question for the market is what he will signal. The hearing will be an opportunity to gauge his views on topics such as current interest rate levels, long-term neutral interest rates, and his approach to tools such as forward guidance and balance sheets.
Once seen as more of a hawk, he now faces increased scrutiny over the extent to which he aligns with Donald Trump, who has advocated deep interest rate cuts in contrast to current Chairman Jerome Powell.
ING said Warsh is expected to strike a cautious tone, suggesting that rate cuts may become appropriate over time, while stressing the need for credible justifications to maintain market confidence. Part of this discussion may hinge on productivity gains from technology and AI, a perspective that seems consistent with the Fed’s more optimistic long-term growth outlook.
On the other hand, the political background remains unclear. Thom Tillis continues to oppose the nomination because he believes the Justice Department’s “vindictive” investigation into the Fed is ongoing, increasing the risk of a delay. This uncertainty could potentially extend Jerome Powell’s interim term if a replacement is not confirmed by the deadline.
In the US, the revised UoM consumer sentiment consensus was 48.4 vs. 47.6, representing a slight improvement but still reflecting a cautious backdrop.
Regarding inflation expectations, changes in energy prices tend to be reflected quickly, so short-term indicators such as the one-year outlook may see some adjustment. However, RBC analysts said long-term forecasts for the five- to 10-year range remain stable despite a notable rise in short-term preliminary numbers.
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