Central banks are set to dominate the headlines this week as they prepare to make decisions on interest rates that will determine borrowing costs around the world.
The Bank of Japan will meet on Tuesday. Inflation-busting pay rises, the biggest in 30 years, at major Japanese firms last week have given it more scope to end its eight-year negative interest rate policy.
However, economists have stressed that nothing is guaranteed, with the Bank not raising rates since February 2007.
Also on Tuesday, the Reserve Bank of Australia is expected to hold rates at 4.35 per cent on the back of weaker-than-expected inflation in January and hawkish comments from policymakers.
All eyes will be on the US Federal Reserve on Wednesday. Economists expect policymakers to hold rates at a 23-year high of between 5.25 per cent and 5.50 per cent for the fifth time in a row.
However, investors will be looking out for signals on whether the three cuts the Fed has pencilled in for this year could be trimmed amid strong job growth and higher-than-expected inflation in January in February.
Chair Jerome Powell told Congress earlier this month that the Fed was “not far” from gaining the confidence to cut rates, boosting hopes of policy easing within the next few months.
Policymakers in the UK, Switzerland and Norway are tipped to keep rates on hold, but markets will be looking closely for any signs of a dovish pivot on future rate cuts.
Rate-setters at the Bank of England will have new inflation data and purchasing manager surveys fresh in their minds when they meet on Thursday.
Last month’s vote saw the Bank’s first three-way split since the financial crisis after Swati Dhingra voted to lower rates to five per cent from 5.25 per cent – a 16-year high.
Other countries with rate decisions this week include Brazil, Mexico, Turkey, Russia, Pakistan, Morocco and Indonesia.
FTSE 100 corporate results due this week include insurer Prudential and retailer Next.
Investors will be looking for signs of progress on Prudential’s growth plans under chief executive Anil Wadhwani, who joined the firm last February.
One of his plans includes reducing the company’s reliance on China and Hong Kong. Prudential shares are down 21 per cent over the last year amid a slow post-Covid economic recovery in the world’s second-largest economy.
After a bumper Christmas, Next said it expected to report a pretax profit of £905m in 2023 – up £20m on initial projections. Its earnings come amid a challenging time for retailers as due to the cost of living crisis and disruption to international shipping routes.