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RBA and FOMC Minutes – Further Clues On the Upcoming Policy Decisions?

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The week ahead is slow with only a few major events lined up. The Reserve Bank of Australia and the U.S. Federal Reserve will be releasing the meeting minutes during this week which will provide further clues on the upcoming policy decisions. Among the economic indicators, Germany’s Ifo business climate data will be released during the week, and the UK’s ONS will be issuing fresh GDP revisions for the third quarter of 2016.

RBA meeting minutes

A slow week ahead will see investors focus on the meeting minutes from the Reserve Bank of Australia. The minutes being released will be from the RBA’s February meeting as investors look for cues from the central bank.

Commentary from the central bank after the February’s monetary policy meeting saw officials estimating Australia’s gross domestic product to expand at a pace of 3% on average in the years 2017 and 2018. This was in contrast to the central bank’s monetary policy statement released earlier in February which said that growth was expected to average around 2% during the first half of this year.

Besides the mixed signals on the GDP, the central bank also had similar views on inflation which increase the risks as officials turn more optimistic than the officially estimated projections. This could potentially make the RBA walk a thin line as rising inflation expectations and strength of the Australian dollar will weigh on the growth and inflation aspects.

The Recent release of economic indicators from Australia showed that the unemployment rate fell to 5.7% from 5.8% previously. However, it was a mixed bag with job gains seen coming from part-time jobs rather than full-time jobs, a concern for some, while for most, the jobs report for January was simply “better than expected.”

FOMC meeting minutes

The U.S. Federal Reserve will be publishing the meeting minutes from the early February monetary policy meeting on Wednesday. The meeting minutes will offer investors insights into the deliberations among policy makers.

The Federal Reserve held the short-term interest rates steady at 0.75% during the early February meeting and did not give much in terms of forward guidance on the next rate hike. This partially led the markets to scale back expectations of any near-term interest rate hikes.

U.S. Annual Inflation Rate: 2.5%
U.S. Annual Inflation Rate: 2.5%

But, Fed Chair Janet Yellen’s meeting with the U.S. Congress last week saw the head of the central bank re-affirming the commitment to maintain the tightening cycle. Ms Yellen said that rate hikes were possible at every upcoming meeting and subject to policy makers assessment of the economy.

Recent reports showed that consumer prices in the U.S. surged past the Fed’s 2% inflation target rate which will slowly start seeing expectations increase of a March rate hike. In this context, the meeting minutes could reveal any concerns policy makers might have in the short term that could prove to be an obstacle for the Fed from hiking interest rates.

Eurozone flash PMI and Eurozone meetings

Data from the Eurozone this coming week will see traders focus on the flash PMI releases starting from Tuesday. Flash data is expected to show stable growth during the first quarter of 2017 with data seen so far suggesting that growth in the Eurozone might have likely expanded at a pace of 0.5% during the quarter.

Final Eurozone Composite PMI: 54.4 (January 2017)
Final Eurozone Composite PMI: 54.4 (January 2017)

The focus will remain on the pace of expansion in the manufacturing sector, however, which continues to surge to record highs. In France, as the race to the elections heats up, the focus will be on whether the recent positive signs in the manufacturing and services sector will be able to maintain the momentum. French PMI’s have helped alongside Germany’s PMI’s in pushing the Eurozone composite indicators higher.

Eurozone meetings take place this week, and Greece will be back on the table, although it is hard to expect any big decisions are coming out this week. There is still some uncertainty with some experts calling it too early for a second review of the Greece debt relief program.

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