Wednesday’s release of the minutes of the past FOMC meeting may provide more information on how long the third round of quantitative easing will last. The release of January’s consumer prices data the next day will show that, based on the inflation outlook, there is little reason to call time on QE3 soon.
Economists expect February’s euro zone Purchasing Managers Index, German IFO and ZEW surveys to indicate activity and sentiment have continued to improve, but from a very weak base. Meanwhile, markets will keep a close eye on developments in Italy before the general election on Feb. 24-25.
In the U.K., Wednesday will see the release of the minutes of the February meeting of the Bank of England's Monetary Policy Committee, when it announced no changes to monetary policy.
Interest rates remained at 0.50 percent, where they have been since March 2009, while no more QE was announced, with the size of its asset purchase program, financed by the issuance of central bank reserves, remaining at £375 billion ($582.04 billion). The Bank of England is actually keeping the QE target unchanged at £375 billion, by re-investing £6.6 billion of gilts held that are due to mature in early March.
“We expect there to have been no change in the voting patterns among the nine MPC members in February,” Howard Archer, chief economist at IHS Global Insight, wrote in a note to clients. “We suspect that David Miles was once again a lone voice calling for more QE, with the other eight members preferring to sit tight for now at least. Meanwhile, there is little doubt that all nine MPC members opted to keep interest rates unchanged at 0.50 percent.”
Archer expects interest rates to remain at 0.50 percent through this year, and highly likely through 2014 as well.
Turning to Japan, as speculation mounts about the identity of the new Bank of Japan governor, Tuesday’s release of the minutes of last month’s Policy Board meeting could be overlooked as old news, according to Mark Williams, chief Asia economist with Capital Economics in London. To recap, the meeting culminated in the announcement of a new policy of open-ended easing to meet a new 2 percent inflation target.
Elsewhere, there will be a policy rate announcement in Thailand on Wednesday, with the central bank likely to keep its key rate at 2.75 percent.
Below are entries on the economic calendar Feb. 19-22. All listed times are EST.
10 a.m. – Economists look for a modest increase to 48 in the February NAHB index of home builder sentiment, after a January reading of 47. The index has been steadily firming in recent months and now stands 31 points higher than at the start of 2011. Inventory of existing homes has continued to tumble, creating opportunities for new construction. Meanwhile, job growth accelerated at the turn of the year, which should add to optimism about future sales.
France -- President Francois Hollande meets Greek Prime Minister Antonis Samaras in Athens.
Australia – RBA board minutes.
Turkey – overnight lending rate and overnight borrowing rate.
E17 -- European Central Bank Executive Board member Joerg Asmussen speaks on “Shaping a Genuine Economic and Monetary Union” in Bratislava.
E17 – ZEW economic sentiment index for February.
Germany – ZEW economic expectations index for February.
Japan – Trade balance for January.
7:00 a.m. -- The Mortgage Bankers Association's Mortgage Index for the week ending Feb. 15.
8:30 a.m. – Economists forecast housing starts to slip to 925,000 in January, after surging 12.1 percent to 954,000 in December. The sharp increase in starts exceeded the gain in building permits, implying noise in the data. Moreover, the gain was driven by the Northeast and Midwest, which suggests weather distortions may have played a role. According to economists at Bank of America Merrill Lynch, abnormally warm weather in December, with little snowfall, likely boosted homebuilding in these regions. While weather remained favorable last month, the seasonal distortion was not more than in December, which means the monthly change should not be boosted again. Building permits likely rose to 918,000 in January, from 909,000 in December.
8:30 a.m. – The Producer Price Index likely rose by 0.3 percent month-over-month in January, after a 0.2 percent decline in December, boosted by higher gasoline prices and a modest increase in food prices. The annual inflation rate for the finished goods PPI should nonetheless remain soft, at 1.4 percent. Stripping away these volatile sectors, economists look for core PPI to accelerate slightly, to 0.2 percent monthly in January, from a 0.1 percent increase in December. This would be the fastest pace of monthly increase since July; As a result, year-on-year core PPI should drop to just 1.6 percent – the first time that rate has been below 2 percent since February 2011. The sluggish outlook for growth in 2013 will probably keep producer price inflation muted going forward.
2 p.m. – The minutes from the Jan. 29-30 FOMC meeting will be scanned primarily to see if they include any discussion of how long QE3 might last. The statement noted that the monthly $85 billion purchases will end only when the outlook for the labor market has improved “substantially.” What exactly that means is still open to debate. In addition, it will be interesting to see how officials responded to the news that fourth-quarter GDP contracted slightly: Whether they saw it as a temporary set-back or the start of something more worrying.
Thailand -- Benchmark interest rate.
U.K. – MPC minutes, bank rate vote and asset purchase vote.
Malaysia – 2012 annual GDP.
Venezuela – Q4 GDP.
Germany – January final HICP and CPI.
Japan – index of all-industry activity for December.
France – January HICP and CPI.
South Africa – January CPI.
U.K. – December ILO unemployment rate.
U.K. – January claimant count unemployment.
Malaysia – Q4 GDP.
E17 – “Flash” consumer confidence index for February.
8:30 a.m. -- Economists look for initial jobless claims to rise to 355,000 for the week of Feb. 16, up from 341,000 in the prior week.
8:30 a.m. – The Consumer Price Index likely rose by 0.1 percent month-over-month in January. The core CPI probably increased by 0.2 percent. Against year-ago levels, headline inflation should remain flat at 1.7 percent, while core inflation edges down to 1.8 percent.
8:58 a.m. – The Market Flash Manufacturing PMI likely dropped back to 55.0 in February, from 55.8 in January.
10 a.m. – Economists expect existing home sales to fall 0.7 percent month-over-month, to 4.90 million units in January, from 4.94 million units in December.
10 a.m. – The Conference Board’s index of leading indicators should show an increase of 0.2 percent in January. This number is expected to largely reflect improvements in financial conditions.
10 a.m. – The Philadelphia Fed index has been running below national measures of activity, such as the Institute for Supply Management, and has printed in negative territory in six of the past nine months. Economists look for a rebound to 1.0 in the February print, which would be a big improvement from the January reading of -5.8.
12:35 p.m. -- Federal Reserve Bank of St. Louis President James Bullard (FOMC voter) speaks on the economic and monetary policy outlook before the Center for Global Economy and Business in New York.
1 p.m. -- Federal Reserve Bank of San Francisco President John Williams (FOMC non-voter) speaks on monetary policy and the economy before the New York Forecasters Club.
9:15 p.m. -- Federal Reserve Bank of Dallas President Richard Fisher (FOMC non-voter) speaks on "'All My Exes Live in Texas ...' (Why the Texas Economy Outperforms the Nation)" before the Insurance Industry Charitable Foundation Benefit Dinner.
E17 -- Euro working group meeting.
Italy -- Prime Minister Mario Monti, former Prime Minister Silvio Berlusconi and Democratic Party leader Pier Luigi Bersani speaks on TV.
Switzerland – January trade balance.
E17 – February “flash” manufacturing PMI index, services PMI index and composite PMI index.
France – February “flash” manufacturing PMI index and services PMI index.
Germany – February “flash” manufacturing PMI index and services PMI index.
Netherlands – February consumer confidence index.
Ireland – Q4 GDP.
Ireland – January HICP.
10:15 a.m. -- Federal Reserve Bank of Boston President Eric Rosengren (FOMC voter) and Federal Reserve Board Governor Jerome Powell (FOMC voter) participate in discussion of report, "Crunch Time: Fiscal Crises and the Role of Monetary Policy" before the Initiative on Global Markets 2013 U.S. Monetary Policy Forum sponsored by the University of Chicago Booth School of Business.
6:30 p.m. -- Federal Reserve Board Governor Daniel Tarullo (FOMC voter) speaks on "International Cooperation in Financial Regulation" before the Cornell International Law Journal Symposium: The Changing Politics of Central Banks in New York.
Colombia -- Overnight lending rate.
E17 -- Publication of the winter 2013 European Commission forecasts.
E17 -- ECB Executive board member Asmussen speaks at Hertie School of Governance GmbH in Berlin.
Peru – Q4 GDP.
Singapore – Q4 final GDP.
Germany – Q4 final GDP.
Sweden – February consumer confidence index.
Germany – February IFO business climate index, current assessment index and business expectations index.
Italy – January final HICP and CPI.
Italy – February consumer confidence index.
Italy – December retail sales.
Sources: Central banks, European Commission, Reuters, Market News, Capital Economics, Barclays, Bank of America Merrill Lynch, Nomura, Societe Generale.