Global Economic Outlook: Inflation, Central Bank shifts, and Looming Data Releases
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The global economic landscape remains a complex interplay of shifting monetary policies, fluctuating inflation rates, and key data releases poised to shape market sentiment in the coming weeks. From potential leadership changes at the Federal Reserve to OPEC+ production decisions and critical employment figures, investors are bracing for a period of heightened volatility and uncertainty.
Fed Chair Succession and US Monetary Policy
The future leadership of the Federal Reserve is drawing increasing scrutiny.US President Trump has indicated a decision regarding the successor to current Chair Powell is expected early in 2026, according to CNBC reporting from the first week of January.While NEC Director Hassett was initially considered the frontrunner, recent reports suggest internal opposition may be growing, diminishing his lead. Polymarket currently places Hassett at 41% probability,followed by former Fed Governor Warsh at 32%,with current Governor Waller at 15% and BlackRock’s Rick Rieder trailing at 4%. Powell’s term expires in May 2026.
Adding to the uncertainty, President trump has repeatedly criticized the Fed’s current monetary policy, advocating for lower interest rates despite persistent inflationary pressures. This divergence between the White House and the central bank adds another layer of complexity to the economic outlook.
OPEC+ Dynamics and Oil Production
Despite recent tensions between Saudi arabia and the UAE, delegates indicate little appetite to resume production hikes, and these tensions are largely viewed as inconsequential to overall OPEC+ cohesion.
Key Economic Data Releases to Watch
the economic calendar is packed with crucial data releases in the coming days.
monday brings the European Epiphany holiday, impacting trading in Italy, alongside UK mortgage approvals and the US ISM Manufacturing PMI for December, which eased to 51.8 – the weakest reading in five months, signaling weakening momentum. Final PMIs for both the UK and Eurozone will also be released.
Tuesday continues with the European Epiphany holiday and features French and German preliminary HICP (inflation) data, alongside final PMIs for the eurozone and UK.
Wednesday is a particularly busy day, with Australian CPI data, German retail sales and unemployment figures, Chinese FX reserves, Eurozone flash HICP (investec expects a dip to 2.0% Y/Y), US ADP employment numbers, ISM Services PMI, and JOLTS job openings all scheduled for release. The ISM Services PMI showed a slowdown in December, with the business activity index falling to a six-month low.
Thursday will see the release of the SNB minutes, which will be closely watched for detail around inflation forecasts and the potential for a return to negative interest rates. Additional data includes German industrial orders, Swedish flash CPIF, Swiss CPI, Eurozone producer prices, US weekly jobless claims, and Chinese trade balance figures.
Friday concludes the week with German industrial production, Norwegian CPI, Eurozone retail sales, the crucial US Nonfarm Payrolls (NFP) report (expectations are for 55k jobs added, with unemployment expected to fall to 4.5%), Canadian jobs data, and the preliminary University of Michigan consumer sentiment index for January. The Canadian jobs report will be scrutinized to see if the recent strength continues, with markets currently pricing in a 76% probability of a 25bps rate hike by year-end.
Global Inflationary Pressures and Central Bank Responses
Across the globe, central banks are navigating a delicate balance between controlling inflation and supporting economic growth. Australian CPI remains above the RBA’s target band,prompting policymakers to signal a willingness to reconsider rate moves if inflation doesn’t subside. The Eurozone is seeing disinflation driven by lower fuel prices, but services inflation remains a concern for the ECB. In Switzerland, the SNB has cut it’s 2026 inflation projection, but Chairman Schlegel has indicated that a lower CPI outlook doesn’t necessarily make a return to negative interest rates more likely. Similarly, Norges Bank expects to ease policy rates over 2026, but Governor Bache has cautioned against anticipating cuts in the near term.
China’s inflation remains subdued, with consumer inflation at 0.7% Y/Y in November and factory-gate prices continuing to decline, highlighting persistent deflationary pressures.
These upcoming data releases and central bank decisions will be pivotal in shaping the global economic outlook for 2026, demanding careful monitoring from investors and policymakers alike.
