Week Ahead: RBA and ECB meetings

This week has the potential to be volatile with the RBA and ECB meetings, as well as the US CPI reading for May.

Last week, the Bank of Canada hiked rates by 50bps and said there was more to come. This week, the RBA and the ECB will get their respective turns to decide what should be done with monetary policy. The RBA is expected to increase interest rates by 25bps and signal that more rate hikes are likely. The ECB is expected to leave rates unchanged at -0.50, while signalling the end of QE and a hike at the July meeting. In addition, US Non-Farm Payrolls beat expectations last week, proving the labour market to be tight. And given the increased scrutiny of inflation data, traders will be closely watching the results of the CPI prints from both China and the US. Will the US CPI follow last month’s lower print and show that inflation is levelling off?


The Bank of Canada raised interest rates by 50bps last week from 1.0% to 1.5%, as expected, and delivered a clearly hawkish statement. The main concern for the central bank was inflation, especially in energy and food. April’s inflation reading was 6.8% YoY and the BOC noted that it expects that inflation will “move higher in the near-term before easing.” Therefore, the Governing Council judged that interest rates will need to rise further. In addition, the BOC noted that members are ready to “act more forcefully” if needed to meet the 2% inflation target. This week markets will get to see how the labour market is holding up as the Canadian Employment Change for May will be released. Expectations are for an additional 11,000 jobs to have been added to the economy in May, vs +15,300 in April.


The Reserve Bank of Australia meets on Tuesday this week and expectations are that the central bank will raise rates by 25bps from 0.35% to 0.60%. However, some are calling for the RBA to raise rates by much as 40bps, to 0.75%. Could Governor Lowe surprise the markets again? At the last meeting, markets were expecting the RBA to only raise rates by 15bps. However, the central bank raised rates 25bps. The Minutes from the May meeting noted that the board discussed three options, one of which was to raise rates by 40bps! Since the last meeting, the Q1 Wage Price Index was released. The results for the Q1 reading were 2.4% YoY vs 2.3% YoY in Q4 2022 and 2.5% YoY expected. Therefore, wages aren’t exactly spiralling out of control. But given the recent RBA Minutes from May, one should consider that the central bank may raise rates more than the expected 25bps!


The European Central Bank meets on Thursday this week and expectations are for the central bank to formally announced the end to its Quantitative Easing Program and set the table for the ECB to hike rates at the July meeting. Last week, the Eurozone released its Flash CPI for May at 8.1% YoY vs 7.4% YoY in April. Expectations were for 7.7% YoY. This was a record high for the inflation reading. However, there will not be an interest rate hike at this meeting as Christine Lagarde has previously stated that the ECB will not raise rates until a few weeks after the end of QE. However, the ECB hawks have been out in force, with some discussing the idea of the central bank raising raises by 50bps at the July meeting. This would bring interest rates from -0.5% to 0.0%! Watch for hints at the meeting this week regarding future rate hikes!

Economic Data

Last week, the economic highlights of the week were the Eurozone CPI and the US Non-Farm Payrolls. We already discussed the Eurozone CPI data above. The US Non-Farm Payroll print was +390,000 vs and expectation of +325,000 and an April print of +436,000. The Unemployment Rate and Average Hourly Earnings were both unchanged from April, with readings of 3.6% and 0.3% MoM, respectively. This week, the focus will be on the US CPI data. Expectations are for the May print to remain unchanged at 8.3% YoY and for the Core print to have risen “only” by 5.9% YoY vs 6.2% YoY in April. If the data comes out as expected, inflation will begin to show signs that it is plateauing (at a very high rate). This, along with the strong NFP data, could embolden the Fed to hike rates at a faster pace to bring down inflation. The next FOMC meeting is June 15th. In addition to the US CPI, Germany will release Factory Orders, China will release CPI and PPI, and Canada will release its May Employment Change.

significant economic data is as follows:


  • China: Caixin Services PMI (MAY)Tuesday

  • Australia: Building Permits Final (APR)

  • Australia: RBA Interest Rate Decision

  • Germany: Factory Orders (APR)

  • UK: Services PMI Final (MAY)

  • Canada: Trade Balance (APR)

  • US: Trade Balance (APR)

  • Canada: Ivey PMI s.a. (MAY)


  • Japan: GDP Growth Rate Final (Q1)

  • Australia: NAB Business Confidence (MAY)

  • Australia: RBA Chart Pack

  • Germany: Industrial Production (APR)

  • UK: Halifax House Price Index (MAY)

  • EU: GDP Growth Rate 3rd Est (Q1)

  • EU: Employment Change Final (Q1)

  • Crude Inventories


  • China: Trade Balance (MAY)

  • Mexico: Inflation Rate (MAY)

  • EU: ECB Interest Rate Decision

  • Canada: BOC Gov Macklem Speech


  • China: CPI (MAY)

  • China: PPI (MAY)

  • Canada: Employment Change (MAY)

  • US: CPI (May)

  • US: Michigan Consumer Sentiment Prel (JUN)