Noreen Burke

Investing.com — It’s going to be a big week for central banks, with the Federal Reserve widely expected to deliver a second 50 basis point rate hike on Wednesday. Investors will be watching closely to see what Fed Chair Jerome Powell has to say about future rate hikes after Friday’s much stronger than expected inflation data. A rising cost of living crisis is forcing the Bank of England to announce its fifth consecutive rate rise. Policy meetings will be held by the Bank of Japan as well as Swiss National Bank. The U.S. Retail Sales data will provide insight on whether inflation is decreasing households’ purchasing power, and the equity markets are set for another volatile week. Here’s what you need to know to start your week.

1. Federal Reserve to Increase Again

It is likely that the Fed will raise its rate by 50 basis points Wednesday. This would be in addition to 75 bps of rate increases since March.

A further half-percentage-point is priced in for July, with a strong chance of a similar move in September but this is less clear cut.

Friday’s hot May inflation data has revived fears that Powell could flag a faster pace of future rate hikes. Investors worry that a Fed-led push for higher rates could lead to a recession.

Market watchers will be keeping a close eye on Powell’s after The policy meeting and on the Fed’s updated economic forecasts and its “dot plot”, which shows the projected outlook for interest rates.

2. BoE to deliver 5^thStraight Rate Increase

The BoE is expected to announce its fifth straight 25bps increase on Thursday, even though global central banks are increasingly opting for half point hikes.

Although the BoE was the initial major central bank in the world to reverse its pandemic stimulus in December, it did not stop U.K. inflation from reaching a 4-year high in April. This is almost five-times the BoE target of 2%.

BoE anticipates that inflation will exceed 10% by the end of the year. In April, Governor Andrew Bailey indicated that the bank had to choose between fighting the inflation surge and creating a recession.

It’s also a busy week for U.K. economic data, starting with figures for April on Monday, which are expected to be flat. On Tuesday, employment data is expected to show that the labour market remains tight. It will continue to shrink while it accelerates. 

3. BOJ, SNB will meet

It is expected that the meeting will continue Friday’s ultra-easy monetary policy. However, pressure is mounting to alter its stance due to widening yield differences pushing the yen down to multiple-decade lows. This is increasing inflationary pressures.

The is not expected to make a change to its -0.75% interest rate – the world’s lowest – when it meets on Thursday. With the Swiss becoming the most competitive in the last 14 years and with the European Central Bank threatening to raise rates in July, it is possible that a move towards higher interest rates will finally be realized.

Christine Lagarde (ECB President) will give a speech on Wednesday. This is a close-watched speech after she stated last week that the ECB would soon announce its first rate rise since 2011 and then a larger one in September.

4. U.S. Data

Data on the U.S. for May will be released on Wednesday. They are expected to slow due to lower auto sales. On Friday, the U.S. will release data on for May. These numbers are expected to decrease but still remain strong.

Additionally, the economic calendar includes data on Wednesday and Tuesday.

On Friday, data showed that U.S. consumer prices rose year over year in May. This was the largest gain since 1981. The record-breaking gasoline price and the escalating food costs led to record-breaking inflation.

Consumers face rising price pressures, which is fueling concerns about a possible recession.

5. Stock market volatility

U.S. stocks experienced their sharpest weekly percentage drops since January.

Concerns over rising interest rates, inflation and the probability of a downturn have led to stocks falling for much of the year.

The market declines were partially reversed in the past few weeks due to hopes that an inflation peak would enable the Fed be less aggressive this year.

Capital Economics analysts wrote Friday that “Given the fact that U.S. price pressures show no sign of easing,” they doubted that the Fed would ease the pedal anytime soon. We believe that the U.S. stock markets will experience more turmoil as Treasury yields rise and stock market pressure continues to mount.

This report was contributed by Reuters