Key events in developed markets next week

Following the 25bp interest rate hike from the Federal Reserve on 16 March, which also saw individual forecasts for the projected path of the fed funds rate hiked sharply, financial markets are anticipating a 50bp move at the May Federal Open Market Committee (FOMC) meeting.

We fully back that call and see a strong chance that there will be another 50bp hike at the June FOMC meeting. Comments from officials suggest a much stronger desire to get inflation and inflation expectations lower with the strength of the labour market cited as a key factor that is driving this shift in attitude.

The March jobs numbers will be in focus, but while we know demand is incredibly strong, the issue is a lack of supply of workers to fill the vacancies available. Next week’s Job Openings and Labor Turnover Survey (JOLTS) is likely to confirm that there are 1.7 vacancies for every unemployed person in America, so we are forecasting a payrolls gain of 500,000, but it could well be lower. Like supply chain strains, a lack of suitable workers is holding back growth potential and putting up costs as wages get bid higher in a red hot jobs market.

Consequently, we expect the details of next week’s releases to support our call of 50bp of hikes at both the May and June policy meetings.