For Canada next week, the economic focus will be how inflation and shopping trends “ended 2017 and handed off to 2018,” says Derek Holt, vice-president and head of Capital Markets Economics at Scotiabank, in his week ahead report.

Coming toward the end of the week, the information will “be used to firm up expectations for December and Q4 GDP growth,” he says.

His call for headline CPI inflation, coming on Feb. 23, is that it’s “likely to decelerate in year-ago terms.” He’s cautious on that call, though, due to early-year inflation trends in past years.

Meanwhile, he says, “Retail sales have been on a stellar run again,” so the question will be whether they can keep up that pace in December’s estimate, which comes on Thursday. Holt expects income growth to be the main driver of any sales increases.

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What to watch globally

There will be little data risk in the U.S., says Holt, and what risk there is will only come from “existing home sales during January, on Wednesday, while a lot of debt will be taken down in bond markets.”

Markets will also be scrutinizing the minutes of the January 30–31 Fed Open Market Committee (FOMC) meeting, which will be released on Wednesday.

In particular, Holt says, “the FOMC insert[ed] the word ‘further’ in front of ‘gradual’ in the January 31st FOMC statement” in reference to monetary policy adjustments and increases to the federal funds rate. That could be a sign that the Fed committee “was preparing the way for a possible upward revision to the dot plot that could raise the median projected fed funds target rate.” Alternatively, markets could be reading too much into the committee’s language.

Internationally, Colombia’s central bank will make an announcement on Feb. 23. There will also be inflation data from Japan, and growth and inflation metrics from across the Eurozone and U.K.

Read the full report.

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