The Week Ahead - Rubber statistics, US FOMC meeting, monetary policies

The data will give an indication on production of natural rubber including rubber gloves exports.

Monthly rubber statistics

THE Statistics Department is expected to release the January 2021 rubber statistics today.

The data will give an indication on production of natural rubber including rubber gloves exports.

In December 2020, the production of natural rubber increased 17.1% to 49,825 tonnes as compared to 42,554 tonnes in the previous month. On the contrary, year-on-year showed a decrease of 14.7%.

Exports of natural rubber amounted to 61,547 tonnes in December 2020.

Rubber gloves, the main export item, increased 3.6% to RM4.6bil in December 2020. The United States, China and Germany were among the highest importers of rubber gloves.

US FOMC meeting

The Federal Open Markets Committee (FOMC) meeting is scheduled for March 16-17. The central bank is expected to keep its supportive monetary policies intact over the next two years.

Markets will be watching for signals that FOMC members have bought forward expectations of future rate hikes.

UOB Global Economics & Markets Research continues to hold the view that the Fed will keep policy rates at the current 0.0%-0.25% region at least until 2023.

The research house says this is premised on the continued successful rollout of vaccinations, as well as more fiscal stimulus in the coming months. Of interest will be the Fed’s outlook for growth and inflation, of which gross domestic product growth forecast for 2021 may be significantly revised higher from its current 4.2%

AxiCorp chief global market strategist Stephen Innes says in December, there were five dots for liftoff by 2023, and while economists are debating whether two to three dots to join them, which will keep the median dots at no hike, it is a close call.

But four dots showing liftoff will bring the median dot to a hike in 2023; this could be the sort of hint the market would take as an approaching taper signal, he says.

Monetary policies

THE Bank of England (BoE), Bank Indonesia (BI) and Taiwan Central Bank are expected to meet this week to decide on their monetary policies.

All four economists polled in a Bloomberg survey expect the BoE to keep the policy rate at 0.1% and its asset purchase target unchanged at £875bil.

UOB expects the BI to keep the policy rate steady at 3.5%.

BI cut its benchmark rate by 25 basis points to an all-time low of 3.50% at its February meeting as it sought to support the Covid-19 hit economy.

UOB thinks that this cut is likely to mark the end of the rate cut cycle by BI.

Meanwhile, all three economists expect the Taiwan Central Bank to keep the policy rate steady at 1.125%.

Taiwan’s benchmark discount rate is currently at a record low of 1.125%.

China data

INDUSTRIAL production, retail sales, house price and surveyed jobless rate are all due on Monday for the January to February period.

IHS Markit said while the latest export data showed trade surging, purchasing managers’ index (PMI) numbers have indicated a slowing in the pace of economic growth amid Covid-19 restrictions and logistics delays.

The Caixin/Markit Manufacturing PMI fell to 50.9 in February, the lowest level since last May.