Caution pervades at four of world’s top central banks

IT is a sign of the caution that permeates the global economic outlook when four of the world’s top central banks, all due to meet within days of each other, are almost unanimously expected to make no change to their extraordinary stimulus programmes.

While the US Federal Reserve, Bank of England, Swiss National Bank and the Bank of Japan are all dealing with varying amounts or shortages of inflation, none are expected to act ahead of one of the biggest risk events of 2016.

Britain’s referendum on whether to remain in or leave the European Union has been creeping from the back to the front of investors’ minds. During the last full week of campaigning before the June 23 vote,itmaydominatemostdiscussion. Janet Yellen’s Fed has spentmostof thepastmonthor so dropping hints that a summer rate hike was on the way.

However, disappointing May hiring data and a UK vote that is too close in the polls to have confidence in the outcome have toned down her message,makingarateriseon June 15 now highly unlikely.

That leaves financial marketsstuckinaholdingpattern with renewed fears about global growth pushing against safety nets that central banks have built up over the years, according to Valentin Marinov, head of G10 FX strategy at CA-CIB.

So,apackedweekof datareleases for the world’s largest economy, including retail sales, housing starts, building permits as well as inflation, willatbestbeabletohelpbuild thecaseforaFedriseassoonas July, rather than September.

“Weak labour market data have messed up the carefullyprepared script for the Fed’s next rate move. An interest rate rise at the meeting next week is off the table,” wrote Christoph Balz, economist at Commerzbank, in a note.

“However ... the US labor market recovery is not over yet and a rate hike at the meeting in July is therefore still on the agenda.”

A recent Reuters poll showed four-fifths of a sample of 90 economists expect a rate rise in either July or September, with most leaning toward the latter month, and with manysayingahiringrebound could seal an earlier move.

June jobs data won’t be released until early July. But for the most part, the economy has been performing well: an analysis of key economic releases since the last Fed meeting shows 70% have come in at oraboveReuterspoll forecasts.

US retail sales may stage a milder 0.4% rise on the month after a 1.3% surge in April, while housing starts and permits will be watched closely afterablowoutmonthinAprilfor pending and new home sales.

Core consumer price inflationislikelytoremainonarelatively steady course a few ticks above 2%.

In Britain, where not a soul expects the Bank of England to change policy just ahead of the EU referendum but instead focus on contingency planningandmarketliquidity in the event of a vote to leave, price pressures are weaker. But with a slowdown this year in the UK economy which a majority of analysts attribute to jitters ahead of the referendum, talk about interest rates has shifted from the next rate rise to whether they will need to be cut. Reuters

Britain’s referendum on whether to remain in or leave the EU has been creeping from the back to the front of investors’ minds