The Week Ahead: Makerfield by-election to set scene for political turmoil while BoE, Fed set hold fire on rate hikes as BoJ pulls trigger

Central banks get top billing this week with the Federal Reserve, Bank of England, Reserve Bank of Australia, Swiss National Bank and Bank of Japan all in action. The Federal Reserve is expected to leave interest rates steady but it could drop its easing bias from the statement, while the Bank of England is also likely to leave interest rates on hold this week amid clear signs of stagflation. The RBA will also leave rates unchanged while the Bank of Japan is widely expected to raise rates.

Wrestling for top billing in UK markets is the Makerfield by-election with Labour’s Andy Burnham leading the polls and set to challenge Keir Starmer for the leadership of the party and the country. Gilt markets are likely to move.

Meanwhile, Scotland get their campaign underway against Haiti on Saturday (Sunday 2am BST) and Donald Trump turns 80 on Sunday, 14 June.

Here’s the key events to watch over the next week.

Monday, 15 June

The G7 leaders summit kicks off in France with the focus on how to safely reopen the Strait of Hormuz. If a peace deal between the US and Iran holds there is scope for European nations to participate in protecting shipping.

Fresh from raising interest rates, European Central Bank boss Christine Lagarde is due to speak at an even in Frankfurt alongside Bundesbank president Joachim Nagel. Otherwise it’s a pretty light calendar for economic data – just Eurozone and US industrial production figures and the Empire State manufacturing index.

Tuesday, 16 June

Two central banks, two decisions. The RBA is widely expected to leave rates on hold at 4.35%. The BoJ meanwhile is expected to raise interest rates to 1% - a level not seen since 1995. The weak yen, which has pushed 160 against the dollar, and higher inflation suggest it’s a done deal. Wholesale inflation hit 6.3% in May, the highest since March 2023, largely due to the effects of the Iran war.

Wednesday, 17 June

The Fed is set to leave interest rates on hold this week but we could get some signals about what is to come next. For starters, the FOMC could drop its easing bias from its statement. We don’t know exactly how mew chair Kevin Warsh is going to run things but do know that inflation is rising and the labour market remains incredibly robust. Complicating the picture for the Fed, inflation is on the rise: US PPI came in at 1.1% on the month, putting the 12-month inflation rate at 6.5%, while CPI inflation rose to 4.2% year-on-year, its highest in three years. All eyes will be on Warsh as he holds his first post-meeting press conference.

Ahead of the Fed, CPI inflation data for the UK will be released, providing some context to the Bank of England meeting this week.

Thursday, 18 June

On to the Bank of England, which should be set to leave interest rates on hold. At the last meeting there was sense that a majority of policymakers were keen to look through any temporary rise in inflation linked to the US-Iran war because the economy and labour market are under so much pressure. Latest GDP figures showing a contraction in April underline the stagflationary backdrop. UK unemployment data is released in the morning ahead of the rate decision and is likely to set the tone.

Elsewhere, the Swiss National Bank is expected to leave its benchmark interest rate at zero, while the Philly Fed manufacturing index and weekly unemployment claims data are the main economic events from the US to watch.

The Makerfield by-election takes place – with polls indicating Labour’s Andy Burnham likely to triumph, leading to a leadership challenge and period of political uncertainty that could unnerve gilt markets.

Friday, 19 June

The week rounds out with the focus on the UK political scene as the result of the Makerfield by-election is confirmed. UK retail sales data is also due out and it’s a holiday in the US. China, Hong Kong and Taiwan will also be closed for the Dragonboat festival.