(Reuters) - The world's top central banks dominate the agenda next week with indications abounding that the aggressive pace of rate hikes might slow, but not yet fade away given price pressures.
China publishes key economic data as Beijing loosens some of its strict COVID-19 shackles, while PMIs will provide a health check for the global economy.
Here's a look at the week ahead in markets from Lewis Krauskopf in New York, Kevin Buckland in Tokyo, Dhara Ranasinghe, Naomi Rovnick and Amanda Cooper in London.
1/TWICE THE FUN
Investors will be fed a huge helping of year-end U.S. news when Tuesday's release of November consumer inflation data is followed by the Federal Reserve's last rate decision of 2022 on Wednesday.
October's CPI report showed prices rose less-than-expected at 0.4% from the month before, with signs of slowing inflation boosting equities and knocking the dollar. November's reading is expected at 0.3%. But recent strong U.S. jobs data rekindled inflation fears.
Over to the Fed, where Chair Jerome Powell will hold his last news conference of the year after recent comments that it was time to slow the pace of coming rate rises. Traders are pricing in a 50-basis point (bps) hike - a step down from recent three-quarter percentage point increases. The focus may instead turn to signals for how high the Fed will ultimately raise rates next year.
Inflation and fed in focus https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/movakkmkxva/chart.png
2/ SUPER THURSDAY
It's super Thursday in Europe, where central banks in the euro area, Britain, Switzerland and Norway all meet.
Latest inflation numbers have raised hopes that euro zone pressures are finally abating and markets feel confident that after two straight back-to-back 75 bps hikes, the ECB will deliver a 50 bps rate move on Dec. 15.
Don't expect the ECB to sound dovish - pipeline price pressures remain strong and President Christine Lagarde will be careful not to give the impression policy makers are taking their eye off the ball.
It's the same story elsewhere, with Switzerland and Norway also expected to jack up borrowing costs again. The pace of aggressive rate hikes from big central banks is slowing but the fight against inflation is not over yet.
Race to hike rates https://www.reuters.com/graphics/GLOBAL-MARKETS/THEMES/lgvdkkmoapo/chart.png
3/ HIKING INTO A RECESSION
Britain's grim economic situation is unlikely to stop the Bank of England from raising borrowing costs again on Thursday. Economists polled by Reuters expect the central bank to raise its key rate by 0.5 percentage points to 3.5% despite a looming recession the BoE expects to last well into 2024.
Surging energy and food costs propelled consumer price inflation to a 41-year high of 11.1% in the year to October. Wednesday's UK inflation data may hint at price rises having peaked, following trends in the eurozone and the U.S.
Still, the BoE is likely to resist ending monetary tightening just yet with inflation still well above its 2% target. Swaps markets imply UK interest rates will hit 4.6% by next September and will end 2023 at 4.5%.
Bank of England's fight against rampant inflation https://www.reuters.com/graphics/GLOBAL-MARKETS/xmpjkkgndvr/chart.png
4/CHINA LOOSENS COVID COLLAR
After three years of suffocating coronavirus curbs, China can finally breath a little easier. New measures include home quarantine for the COVID-positive instead of isolation centers and no more testing for domestic travel, just in time for a trip to Shanghai's reopened Disneyland.
Wednesday's long-awaited shift has residents, who a week ago were protesting in the streets, now rejoicing on social media. Investors are more sedate. The Hang Seng had its worst day in more than a month that day, selling the fact after a multi-week rally. The yuan is back on the stronger side of the key 7 per dollar mark, but peaked on Monday.
The weakest trade data for 2-1/2 years gave reason for caution, pointing not just to the effects of COVID lockdowns but weaker international demand. Retail and factory data due Thursday could make for further gloomy reading.
Chinese economy loses steam https://www.reuters.com/graphics/CHINA-ECONOMY/znpnbbdnypl/chart.png
A year of the worst inflation in a generation is drawing to a close. With the energy prices now well off the year's highs, businesses and households are getting some respite from eye-watering high inflationary pressures.
But that's unlikely to be enough to avoid a sixth straight month of contraction in business activity in December across some of the world's largest economies. Anything from the manufacturing sector to hospitality has seen demand slump and input prices soar.
S&P Global's flash composite PMI output indices for the United States, Britain, Germany, France and the wider euro zone are expected to show some mild improvement, but activity in all five regions is expected to have declined again. Japan is also on the docket - its manufacturing November PMI staged the sharpest contraction in two years.
Global economic activity flashes red https://www.reuters.com/graphics/GLOBAL-ECONOMY/PMI/jnpwyenyxpw/chart.png
(Compiled by Karin Strohecker, Graphics by Sumanta Sen, Kripa Jayaram, Pasit Kongkunakornkul and Vincent Flasseur; Editing by Kim Coghill)