Policy Shift or Status Quo? BoJ’s Big Decision Looms!

Tuesday, 21 January 2025, 09:00 – UK Unemployment Rate (Nov)

The latest official data from the UK’s Office for National Statistics (ONS) indicates that the unemployment rate increased to 4.3% in the three months leading up to October 2024. This increase was mainly attributed to higher business costs, particularly due to rising taxes like employer National Insurance Contributions (NICs), which have put pressure on company budgets. In response, businesses have reduced hiring, frozen recruitment, and even made workforce cuts to cope with these financial challenges. Given the current economic environment and the effects of recent policy changes, it is expected that the unemployment rate could see a slight rise in the upcoming report. Analysts predict that the rate may reach around 4.5% by the end of 2025, influenced by factors such as higher employer NICs and other economic pressures.

Tuesday, 21 January 2025, 15:30 – Canada CPI (MoM) (Dec)

In November 2024, Canada’s Consumer Price Index (CPI) showed no change compared to October, with a 0% monthly variation. This result missed the market’s expected 0.1% increase and was lower than the previous month’s 0.4% rise. The stabilization of the CPI was largely due to a drop in gasoline prices, which offset price hikes in other areas. Housing costs played a significant role in the data, with mortgage interest costs slowing down, but rent prices continuing to climb, which balanced out the overall impact on the CPI. Looking ahead, a modest rise is anticipated, driven by ongoing energy price fluctuations and the stability of core inflation, reflecting adjustments in energy costs and consumer spending patterns.

Thursday, 23 January 2025, 15:30 – Canada Retail Sales (MoM) (Nov)

In October 2024, Canada’s retail sales rose by 0.6% from the previous month, reaching 67.58 billion Canadian dollars, slightly below the expected 0.7% increase. The growth was mainly driven by a surge in sales within the automotive sector, particularly motor vehicles and parts. However, other retail sectors, such as supermarkets and wine shops, saw declines. Consumer spending favored durable goods, especially vehicles, while spending on non-durable goods remained weak. Preliminary data for November 2024 suggests that retail sales were flat, showing no change from October. Given these trends, it is likely that the upcoming release will confirm the preliminary estimate, indicating minimal or no growth in retail sales for November 2024. This stagnation may reflect cautious consumer spending considering economic uncertainties and potential market saturation in key areas like automotive sales.

Friday, 24 January 2025, 05:00 – BoJ Interest Rate Decision

As of December 2024, the Bank of Japan (BOJ) decided to maintain its key short-term interest rate at 0.25%, the highest level since 2008. This decision was influenced by a range of factors, including the BOJ’s need for more time to assess economic risks, such as the U.S. economic policies and Japan’s wage outlook for the following year. Core consumer inflation in Japan reached 2.7% in November, largely due to high food and fuel prices. Additionally, the weakness of the yen, driven by the interest rate differentials between Japan and the U.S., has been pushing up import costs. The BOJ is expected to hold another policy meeting on January 23-24 and market anticipate a potential interest rate hike to 0.50% by the end of March 2025. This expected rate hike is a response to strong domestic wage growth and rising price pressures, signaling a shift toward more conventional monetary policies after an extended period of accommodative measures. Governor Kazuo Ueda has also indicated that the central bank will deliberate on whether to increase interest rates in their upcoming meeting, depending on new quarterly growth and inflation forecasts.