Nicholas Glinsman | July 17th, 2022

Central banks from the euro zone to Japan are about to reveal if they can resist the global urge for aggressive monetary tightening led by the US Federal Reserve. Almost all forecasts suggest that the European Central Bank on Thursday will limit its first interest-rate hike in more than a decade to a mere quarter point, hours after the Bank of Japan keeps its own stimulative stance unchanged. 

Such outcomes would showcase some of the world’s last bastions of hesitancy in the face of surging inflation. Monetary officials from South Korea to Canada ratcheted up tightening in the past week, while investors began betting on an historic one percentage-point move by the Fed.

Since early June, when ECB policy makers outlined a plan to begin hikes only gradually, they’ve stuck to that line, insisting that inflation, even at four times their goal, doesn’t reflect underlying pressures in an economy bordering on a war zone. 

Officials in Japan, where consumer-price growth is much lower, also face questions on how long ultra-low rates can persist. The Japanese government’s strong election victory last week shows public angst against inflation isn’t yet at critical levels, but the assassination of former Prime Minister Shinzo Abe has removed one of the most vocal advocates of easy monetary policy within the ruling party.

With global tightening intensifying, policies in the euro region and Japan have prompted investors to sell their currencies, complicating the central banks’ tasks as import costs soar. The euro has fallen so far that it brushed with parity against the dollar in last week for the first time since 2002, while the yen has set fresh lows stretching back to 1998. 

Other Group of 20 outlier decisions are due. Turkey’s rates may stay unchanged given its unorthodox policy not to tighten despite inflation, Indonesia should stay on hold, and Russian officials may cut. By contrast, South Africa is seen enacting an aggressive hike. Among data reports on the agenda, UK inflation may edge closer to 10%. 

Meanwhile in the US specifically, the economic data calendar is light and concentrated on the housing sector. Data on home construction starts are expected to show a modest bounce in June after slumping a month earlier to the lowest level in a year. Figures on sales of existing homes are forecast to show lingering weakness after a rise in mortgage rates.

Investors will also watch weekly jobless claims on Thursday for signs of softer labour demand.

Fed policy makers are in a blackout period ahead of their July 26-27 meeting.


Treasury Secretary Janet Yellen travels to South Korea at the start of the week following the G-20 meeting of finance ministers in Bali. Shoring up supply lines and touting her Russian oil price cap are themes she may touch on.

Now, the BOJ is expected to maintain rock-bottom rates on Thursday. Its latest price forecasts, and separate inflation figures due Friday, will offer clues on whether that stance will continue.

Chinese banks are expected to keep lending rates unchanged on Wednesday as the economy ekes out a slower-than-expected recovery from Covid lockdowns. China’s central bank chief Yi Gang said this weekend that his institution will step up the implementation of its prudent monetary policy to provide stronger economic support.  

Meanwhile, new Covid cases in the country continued to climb as outbreaks in some regions widened, with authorities in Shanghai saying the situation in the city remains severe. 

Reserve Bank of Australia Governor Philip Lowe and his deputy, Michele Bullock, will speak in the coming week as bets emerge that the RBA will opt for a 75 basis point hike in August after robust labour market figures.

Early July export data from South Korea on Thursday will give the latest global trade pulse. Indonesia’s central bank also decides on rates that day.


The ECB’s decision will be the dominant event. Aside from a focus on the size of its rate hike, investors will watch for details of a new crisis tool aimed at containing the fallout on Italy from rising borrowing costs — just as a political crisis threatens to force out Prime Minister Mario Draghi. Euro region data may illustrate the worsening growth situation facing the ECB, with surveys of purchasing managers and consumers predicted to weaken. Hanging over the economy is the threat of a shutoff in Russian gas, which could take effect on Thursday.

The case for faster Bank of England rate hikes may harden if a predicted uptick in underlying wage pressures and another acceleration in inflation materialize. Economists reckon consumer-price increases will edge closer to 10%.

Governor Andrew Bailey could address those concerns during a speech in London on Monday, while political machinations fixate Westminster as the race to succeed Prime Minister Boris Johnson narrows to two candidates in the days that follow. We also get UK retail sales on Friday, and while the Jubilee weekend is likely to have boosted food sales in June, the biggest squeeze on incomes in a generation is set to constrain consumer spending in coming months. 

Central banks will draw attention elsewhere on Thursday, too. Officials in war-torn Ukraine have indicated they aim to keep their key policy rate unchanged, while Hungary’s weekly decision may showcase its struggle to stabilize the forint. Turkey’s central bank is expected to keep its rate on hold. 

In Russia, which is also bucking the global rate-hiking trend, another cut is possible on Friday as inflation slows and the economy contracts amid international sanctions.

Price pressures and currency weakness in South Africa will probably translate to a rate increase on Thursday. Investors are pricing in a half-point move but see a chance of a bigger hike.  

Nigeria’s central bank may raise rates for a second consecutive meeting on Tuesday after inflation accelerated to a five-year high. 


An unusually light week in Latin America starts on a high note: Colombia’s GDP-proxy readings for May should show strong growth again after very robust April readings. Bear in mind that Colombia’s economy last May was staggered by nationwide protests, so the year-on-year comparisons will likely overstate its strength. For the same month, the country will likely post a 53rd straight trade deficit on surging import demand.

In Argentina, analysts expect the May GDP-proxy readings to present mixed signals as rising rates, sustained currency weakness and accelerating inflation — many economists see it hitting 90% by year-end — undercut the economy.

In Brazil, the potential reappearance of the central bank’s weekly Focus survey of market expectations, put on pause by a staff strike, would be welcomed by analysts and investors.

Mexico on Thursday posts retail sales figures before Friday’s release of its bi-weekly consumer prices report, the second-to-last reading before the central bank’s August meeting. Early estimates see a rise from the 8.09% print posted for the second half of June.

Ever-higher headline and core readings and what a Banxico policy maker called a “concerning” jump in expectations may well put a 100 basis-point rate hike on the table.