The Week Ahead - Rubber statistics, FOMC meeting, Monetary policy, China IPI

Fed building

Monthly rubber statistics

UPDATES on rubber statistics for the month of April 2021 highlighted a relatively quiet week for economic data. The Statistics Department is expected to release rubber statistics tomorrow.

Production of natural rubber decreased by 27.6% in March 2021 to 36, 068 tonnes as compared to 49, 840 tonnes in the previous month. On the contrary, year-on-year comparison showed an increase of 4.5%.

Rubber gloves were the main export item with an export value of RM6.4bil in March 2021, an increase of 9.4% as compared to February 2021 (RM5.8bil). The United States was the highest importer of rubber gloves, followed by Germany and China.

FOMC meeting

THE United States Federal Open Market Committee (FOMC) policy meeting on June 15-16 will be a key focus this week.

UOB Global Economics & Markets Research said it is a given that there will be no change in the Federal Reserve’s (Fed) policy stance in the June meeting.

Its base case remained for the Fed to stay on hold for most of 2021, at least, and the taper discussion will only start in late 2021/early 2022 unless the Fed indicates a clear change in the timeline.

US Fed building in Washington - FilepicUS Fed building in Washington - Filepic

UOB 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 Fed’s outlook for growth and inflation will be closely watched, especially the 2021 personal consumption expenditures inflation which may be revised higher from its current 2.4%.

Meanwhile, a Reuters poll of economists found that the Fed is likely to announce in August or September a strategy for reducing its massive bond buying programme, but won’t start cutting monthly purchases until early next year.

IHS Markit continued to see the likelihood of tapering in 2022 and interest rates lifted off only in mid-2024.

Monetary policy decisions

BANK Indonesia (BI), Bank of Japan (BoJ) and Taiwan Central Bank (CBC) are due to meet this week to decide on monetary policies.

All nine economists polled in the Bloomberg survey expect BI to keep the policy rate steady at 3.5%.

Bank of Japan building Bank of Japan building

UOB expects the same as well and views that BI will keep its accommodative monetary policy via other macroprudential, and liquidity-supporting measures to effectively transmit the lowering of the benchmark interest rate so far into the economy. UOB has kept its BI rate forecast steady at 3.50% for the rest of the year.

The CBC held its key discount rate at a record low of 1.125% in March.

China industrial production, retail sales

RETAIL sales, industrial production and urban fixed asset investment data are due from China.

IHS Markit said it would be interesting to see how production fared after the strongest factory gate inflation in almost 13 years.

The Caixin China General Manufacturing PMI, compiled by IHS Markit, showed output growth softened in May amid supply constraints and higher input costs.

Refinitiv consensus currently points to a lower year-on-year reading for the release. Retail sales are similarly expected to soften, in line with the slower expansion seen in the Caixin China General Services PMI.

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