Wow. It’s only the first working week of 2014 and there’s already plenty in store for monetary policy watchers.
This is the month the US Federal Reserve begins to wind down its mammoth $85 billion a month bond-buying programme by $10 billion. It will be interesting to watch how emerging markets react to the ‘tapering’.
In addition, there are several other interesting events lined up for this week:
Monday (January 6)
The US Senate will vote on the nomination of Janet Yellen as the new Federal Reserve head (replacing Ben Bernanke). It’s expected to be smooth sailing for Yellen, who is scheduled to take over as the head of the world’s most influential central bank on February 1.
Wednesday (January 8)
The minutes of the Fed’s December 17-18 meeting (which announced the highly-anticipated tapering of the central bank’s bond-buying program) will be released.
Investors will be waiting to pore over the document to sniff out further details on what lies ahead for the Fed’s tapering plan, what the consensus view is among the key board members, etc.
Thursday (January 9)
Brace yourself for policy review meetings by the European Central Bank and the Bank of England. Don’t expect any monumental interest rate changes, but keep an eye out for any talk on whether unconventional policy measures will be considered.
The eurozone is still struggling to shake off a slump and the latest data on bank lending suggests corporate activity is still moribund, which will keep a lid on hiring, consumption and any revival in overall economic activity.
Lending to companies in the eurozone shrank by 3.9% in November from a year ago, which is the fastest pace on record. That will add the pressure on the ECB to do something – and fast.
Friday (January 10)
A bunch of economic reports will be released during the week, but the most important one, monthly jobs report, will be released on this day. The number of jobs added and the joblessness rate are data points that the Federal Reserve pays close attention to when deciding on monetary policy, including interest rates.
As Marketwatch.com notes: “ If all goes according to plan, the US is expected to show a net gain of around 190,000 jobs in December, a number that could spur top Fed officials to trim bond purchases for a second time when they meet in late January.”