Data talks

Soft CPI, PPI and retail sales prints further support our Research team’s Fed-on-hold call, while also adding focus on the upcoming data batch ahead of the September FOMC. In contrast to the Fed, our analysts now expect the Bank of Japan (BoJ) to hike in September rather than October, while an ECB hike and a BoE hold in September remain all but certain.

• US: The major tensions in our Research analysts’ outlook have all resolved in recent weeks, with moderation in inflation, labor market, and activity data all undermining the reacceleration narrative. With disinflation back on course for now, our analysts think the FOMC will remain on hold as it patiently monitors data developments.
  
  
• Euro Area: A hot and dry summer is set to add to euro area inflationary pressures, while low Rhine water levels may temporarily weigh on German manufacturing output. Our Research team continue to expect the ECB to hike by 25bp in September, with risks remaining tilted towards a more restrictive policy stance later on.
  
  
• United Kingdom: Activity grew at a solid pace in Q2, helped by stronger investment growth. Our Research analysts expect CPI to accelerate in July, as utility bills begin to feel the impact of the Middle East conflict. The unemployment rate should hold steady in June, although our analysts still expect it to increase in the future.
  
  
• Japan: The summary of opinion was more hawkish than Governor Ueda’s post-July Monetary Policy Meeting remarks, with several calls for a “nimble” policy response. Together with firmer market expectations for a September hike, this leads our Research analysts to bring forward their call for the next hike from October to September.
  
  
• China: While the People’s Bank of China (PBoC) remains accommodative, it is likely to favour targeted credit easing and liquidity tools over rate/RRR cuts. The shift to a DRC01-centric framework could improve policy transmission and funding stability while limiting scope for significantly easier money market conditions.
  
  
• Emerging Asia: With the US CPI and PPI data reaffirming our US economists’ view for a Fed hold through 2027, our analysts believe the monetary policy divergence in EM Asia focusing on domestic conditions will continue.
  
  
• EEMEA: The Central Bank of Turkiye signalled potential near-term operational normalization in the main funding rate. The CNB in Czechia remains in wait-and-see mode. Israel CPI remains contained, supporting further cuts. South Africa CPI to fall sharply. Declaration of Zambia election results not without controversy.
  
  
• Latin America: Economic activity has been showing mixed results across Latin America, but the aggregate picture suggests that there was an acceleration in Q2. However, drivers seem hard to sustain, which makes our Research team expect a softer performance in H2 26.