Next week's heavy schedule: Central banks of the US, Japan, and the UK all in action! China's November economic data and the Federal Reserve's favorite inflation indicator will be released

A summary of major financial events from December 16 to December 33, all in Beijing time:

This week's key focus: The Federal Reserve, the Bank of Japan, the Bank of England, and the Central Bank of Russia will announce interest rate decisions, and China will release November economic data.

In addition, the United States will announce the November PCE price index, retail data, and the final annualized quarter-on-quarter GDP for the third quarter. The State Council Information Office will hold a press conference at 10 a.m. on Monday, and the Eurozone will release the preliminary December PMI.

The Federal Reserve's December interest rate decision is coming! Almost 100% rate cut?

• On Wednesday (18th), the Federal Reserve will hold an FOMC meeting, and on Thursday, it will announce its interest rate decision and quarterly economic forecasts.

On December 4, Federal Reserve Chairman Jerome Powell made his last statement before the quiet period began, indicating that considering the U.S. economy has performed stronger than when rate cuts began in September, this may lead policymakers to be more cautious about further rate cuts.

Currently, the market widely expects the Federal Reserve to announce a rate cut at the FOMC meeting, with the federal funds futures market currently indicating that Federal Reserve officials are almost 100% likely to choose to cut rates by another 25 basis points.

It is worth mentioning that this expectation is not based on the latest inflation data but rather on the overall economic trend.

Media analysis reminds us, do not be surprised by the forward guidance issued by the Federal Reserve after a rate cut this week; the Federal Reserve may cautiously consider the pace of subsequent rate cuts, and they may hint at pausing rate cuts at the beginning of the year and reducing the number of rate cuts in 2025.

Song Xuetao, chief macro analyst at Tianfeng Securities, believes that the Federal Reserve may adopt a "deep V" rate policy in 2025, first cutting rates and then raising them. There are two reasons for the initial rate cut:

The first reason is that Trump's return may put significant political pressure on Powell (the Federal Reserve Chairman) to cut rates.

The second reason is that the trend of inflation also supports cutting rates before raising them; Trump's encouragement of domestic oil drilling, the easing of the Russia-Ukraine conflict, and the Israel-Palestine conflict all contribute to lower oil prices, which in turn lowers inflation. The impact of tariffs raising inflation will manifest in the second half of 2025, putting pressure on the Federal Reserve to raise rates.

China's November economic data

• On Monday (16th), the National Bureau of Statistics will release economic data on national real estate development, retail sales of consumer goods, and housing prices in 70 cities for November.

Last month's data showed that from January to October, real estate development investment in China fell by 10.3%, and the sales area of new commercial housing decreased by 15.8% year-on-year. In October, the month-on-month decline in commodity residential sales prices in various cities narrowed or turned to an increase, and the year-on-year decline stabilized, with first-tier second-hand housing prices rising month-on-month for the first time in 13 months, with Shanghai increasing by 0.2% month-on-month and Beijing increasing by 1.0%.

Guo Lei from GF Securities believes that the Politburo meeting in September pointed out the need to promote the stabilization of the real estate market, and the Central Politburo meeting on December 9 reiterated the importance of stabilizing the housing market, highlighting the emphasis on this issue. Adjustments to local real estate policies are expected to continue, and there remains marginal space in 2025.The stock market also shows the importance of policies for the capital market's real financing and expectation transmission functions.

The "old-for-new" policy has driven China's total retail sales of consumer goods in October to grow by 4.8% year-on-year, marking a rebound for the second consecutive month and reaching a new high since January-February.

The Central Political Bureau meeting emphasized, "We must vigorously boost consumption and improve investment efficiency, and comprehensively expand domestic demand." China Galaxy Securities believes that expanding domestic demand should be prioritized, with boosting consumption being of utmost importance.

Since the Politburo meeting in July proposed that "boosting consumption should be the focus of expanding domestic demand," consumption has gradually become a key lever for expanding domestic demand. As China's macroeconomic environment faces greater uncertainty by 2025, boosting consumption has become even more critical for comprehensively expanding domestic demand.

Bank of Japan "staying put"? Market expects interest rate hike may be delayed until next year

• On Thursday (19th), the Bank of Japan announced its interest rate decision, followed by a monetary policy press conference held by Governor Kazuo Ueda.

Recently, the rebound of the yen has alleviated inflationary pressures from raw material imports, leading many Bank of Japan policymakers to be in no rush to take immediate action, even though Japan's borrowing costs remain close to zero.

On December 12, according to sources cited by Reuters, five individuals familiar with the Bank of Japan's thinking indicated that the central bank is inclined to maintain interest rates this week, as decision-makers prefer to take more time to assess overseas risks and clues regarding next year's wage outlook.

On the 11th, Bloomberg reported that Bank of Japan officials believe that waiting before raising interest rates incurs almost no cost, while still maintaining an open attitude towards a rate hike this week depending on data and market developments.

Some analysts believe that the current situation of the Bank of Japan is not suitable for a rate hike:

"If action is taken in December instead of January, it may lead the market to believe that the Bank of Japan is eager to raise rates to a neutral level for the economy."

However, delaying too long also carries risks. Bank of America strategist Shusuke Yamada warned:

"If the Bank of Japan delays a rate hike until March, the theme of arbitrage trading is likely to resurface, and the yen may depreciate again to 155 or slightly below the 157 level reached in November."

Fed's favorite inflation indicator to be released

On Friday, the U.S. will release the November PCE price index, with November retail data published on Tuesday and the final annualized quarter-on-quarter GDP for Q3 released on Thursday.

Last month's data showed that the October PCE data rebounded to 2.8% compared to September. Rising service prices were the main driver of inflation in October, increasing by 0.4%. This reflects a surge in portfolio management fees, which is synchronized with the rise in U.S. stocks.

Although the U.S. inflation rate has significantly decreased since the Federal Reserve began tightening monetary policy, inflation remains a tricky issue for households and plays a significant role in the U.S. presidential campaign. Despite a slowdown in inflation over the past two years, the cumulative impact of inflation has severely affected consumers, especially those with lower wage levelsIn addition, the economic agenda of the newly elected U.S. President Trump will complicate the policy path in the future. Some companies have already indicated that they are considering raising prices early next year due to anticipated tariff increases. Data from the Yale University Budget Lab shows that Trump's tariff policy and the retaliatory tariffs it triggers will lead to price increases across the board, from fruits to automobiles, resulting in a 0.75 percentage point increase in the U.S. CPI.

Last month's data showed that U.S. retail sales in October grew, driven by a surge in automobile purchases, while other retail categories indicated some growth momentum as the holiday season approached.

The U.S. GDP remained robust in the third quarter, primarily due to strong consumer spending. The report indicated that consumer spending grew by 3.5% in the third quarter, slightly below expectations and the initial value of 3.7%, but still the highest increase so far this year.

Other Important Data, Meetings, and Events

• On Monday, the State Council Information Office will hold a press conference to introduce the national economic operation in November.

On December 13, the State Council Information Office announced that it will hold a press conference on December 16, 2024 (Monday) at 10 a.m.

The press conference will invite the spokesperson of the National Bureau of Statistics and the head of the Comprehensive Statistics Department of the National Economy, Fu Linghui, to attend and introduce the national economic operation in November 2024, as well as answer questions from reporters.

• On Monday, the Eurozone will release the preliminary PMI for December.

Last month's data showed that business activity in the Eurozone declined again in November, with both the services and manufacturing PMIs entering contraction territory. New orders have fallen for six consecutive months, with the decline continuing to widen, and business confidence has dropped to its lowest level in a year. The level of business activity in France has declined for the third consecutive month, with the fastest contraction rate since January of this year.

• On Thursday, the Bank of England will announce its interest rate decision and meeting minutes.

UBS pointed out that the Bank of England will pause interest rate cuts this month.

For 2025, a cumulative rate cut of 150 basis points is expected, with cuts of 25 basis points each in February, May, August, September, November, and December, bringing the rate down to 3.25% by the end of 2025.

• On Friday, the Central Bank of Russia will announce its interest rate decision.

On October 26, the Central Bank of Russia unexpectedly raised interest rates, increasing the benchmark rate by 200 basis points to 21%. The 21% benchmark rate is a historical high. To curb inflation, the Central Bank of Russia has previously made several significant interest rate hikes