Key Events In Developed Markets Next Week - Saturday, April 24

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US: No Change from the Fed but GDP Figures to Reflect Vaccine Optimism

It is looking to be a jam-packed calendar next week, with the Federal Reserve monetary policy decision and the Q1 GDP report on the horizon. The Fed is set to leave monetary policy unchanged – rates remaining in the 0-0.25% range and QE monthly asset purchases at $120 billion – with policymakers set to re-affirm there will be no shift in stance until “substantial further progress” on the recovery front.

Recent comments suggest that officials continue to think this is some way off, with the March forecast update suggesting that most members still think 2024 will be the starting point for lift-off in interest rates. However, the Q1 GDP report is likely to show another fantastic growth figure, led by stimulus-fueled consumer spending.

We are expecting annualized growth of 7.4%, and with the vaccination program's success meaning more than 135 million Americans have had at least one dose and the economy opening up more and more each day, we expect to see more than a million jobs created in April - with GDP growth likely to be in double figures for the second quarter.

With inflation likely to hit close to 4% and prove to be somewhat stickier than the Fed is publicly acknowledging – largely due to house price developments and ongoing supply capacity issues – we continue to think that the Fed could start tapering asset purchases before the end of the year. We are looking for the first-rate hike to come in 1H 2023, but the odds are increasingly moving in the direction of a possible December 2022 rate hike.

Eurozone: A Technical Recession Alongside Energy Price Fueled Inflation

The eurozone is set for another technical recession, with numbers on Q1 coming out on Friday that will likely show another decline. Extended lockdowns have pushed the economy in the red, even though underlying activity in sectors less hindered by restrictions seem to be performing well at the moment.

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Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...

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