China Industrial profits data for May come in at +1% YTD y/y

• prior +3.5% YTD y/y

and -6.5% y/y for the month alone

The latest Reuters poll has 67 of 91 analysts polled forecasting a 75-basis-point Federal Reserve rate hike in July.

• would take the fed funds rate to a range of 2.25%-2.50%, which is around a ‘neutral’ level

The Reuters report goes on:

• A strong majority expect the central bank to hike its policy rate by another 50 basis points in September,
• with opinion more split on whether it will hike by 25 or 50 basis points in November.
• A majority expect the Fed to raise rates by 25 basis points at its December meeting.
• That would take the fed funds rate to a range of 3.25%-3.50% by the end of this year, 75 basis points higher than thought in a poll published just two weeks ago.
• “Since the Fed is still underestimating the inflation problem … not recognizing that a wage-price spiral has already started, we expect they will have to raise rates faster than they now expect,” Philip Marey, senior U.S. strategist at Rabobank, wrote in a note. “Unfortunately, the hiking path is also likely to be followed by a recession.”

Bank of Japan April 2022 meeting minutes

Minutes are preceded many weeks in advance by the summary,:

Reuters reports on remarks from Heather Boushey, a member of President Joe Biden’s Council of Economic Advisers, on Tuesday at an event hosted by the Washington Post.

• Asked about Biden’s recent comment that a recession was not inevitable, Boushey said she agreed, adding strong family balance sheets, the low unemployment rate and the economy’s ability to weather the COVID-19 pandemic and other “storms,” without elaborating on specific data.
• “That gives us some confidence that should oil prices continue to be high or maybe go up, which would be horrible, … there’s enough of wiggle room that businesses and families will be able to make it through because they have resources to fall back on,”

Sheesh. This does not sound too convincing and I suspect she is just going through the motions. Other members of Biden’s administration are talking the economy up also. For example:

• Prior was 3.70%
• 5-year loan prime rate 4.45% vs 4.45% prior

There are no surprises here. In almost every case, China leaks rate moves to the press in the days leading up to a decision, just like the Fed did last week.

In other news, China today reported 38 new confirmed covid cases in mainland China versus 36 a day ago.

There is no firmly scheduled time for the BOj statement. It is reasonable to expect it in the 0230 to 0330 GMT time slot.

Previews:

traders are on edge awaiting similar from the Bank of Japan. The SNB is an example of NEVER ruling anything out in markets (and watch out for overconfidence in making predictions). Having said that I’d be urging you not to hold your breath waiting for a 50bp rate hike from the Bank of Japan.

All of the above I have posted earlier. Adding in a couple of snippets now:

NAB:

• The Bank of Japan June meeting is expected to come and go with no change to short or long-term rate targets but dislocation in JGB markets, ramped-up efforts to defend the yield curve target and increasing commentary on the weaker yen make it a more interesting meeting than usual.
• The BoJ is facing a weaker yen and headline inflation above its 2% target for the first time in 7 years, but the rise is driven by fuel and food, and policymakers have signalled they are waiting for wage gains sufficient to sustain at target inflation.

Société Générale

• We expect the BoJ to maintain its main monetary policy.
• Going forward, our main scenario is for the USD/JPY rate to stop exceeding 130 yen and for the core CPI to continue to be greater than 2.5% YoY. Therefore, we expect the BoJ to maintain its current policies – at least under Governor Kuroda.

The dot plot for June 2022 shows the median rate at the end of 2022 at 3.4%, up from 1.9% in March 2022. With the current rate at 1.7%, that implies an additional 170 bps.

For 2023, the median Fed funds target rate is up to 3.8%, up from 2.8% in March 2022 or an increase of 40 basis point from the end of 2022.

In 2024, the Fed projects a Fed funds target rate of 3.4%, down 40 basis points from the end of year 2023.

Below is the current dot plot from June 2022:

The Dot plot from March 2022, looked like this:

The table of central tendencies from June 2022 now shows:

A summary of the central tendencies compared to March shows for 2022:

• GDP 1.7% from 2.8% in March. That is down 1.1% from March
• Unemployment 3.7% from 3.5% in March. That is up from 3.5% March
• PCE inflation 5.2% from 4.3% in March. That is an increase of 0.9% from March
• Core PCE inflation 4.3% from 4.1% in March. That is an increase of 0.2% from March

In 2023, the FOMC now sees:

• GDP 1.7% vs. 2.2% in March
• unemployment 3.9% vs. 3.5% March
• PCE inflation 2.6% vs. 2.7% in March
• Core PCE inflation at 2.7% from 2.6% March

• HICP +8.7% vs +8.7% y/y prelim

Slight delay in the release by the source. No change to the initial estimates as German inflation continues to run higher last month with the monthly increase also seen at +0.9%.