This Week 19 – 23 September 2022
The Federal Reserve, the Bank of England, and the Bank of Japan will be among the major central banks making interest rate decisions this week. Inflation rates for Japan and Canada, the Ifo Business Climate for Germany, and US housing data will also be highlighted. Investors will finally be anticipating flash PMI manufacturing and services data for the US, UK, Euro Area, France, Germany, Australia, and Japan.
The most significant development will be the Federal Reserve’s interest rate decision. Expectations for a third consecutive 0.75 percentage point rate hike, which would raise the fed funds rate to a target range of 3% to 3.25%, were solidified by a hotter-than-expected US inflation figure and indications that the employment market is still strong. Though less likely, indications that inflation was entrenching themselves led to anticipation that a full percentage point increase would be possible. For further information on the housing market, investors will also closely monitor building permits and existing home sales data. The US S&P Global PMI for September is one of the additional publications on the US calendar. It will be fascinating to watch how the Brazilian central bank decides to set its interest rate.
With a cumulative 165 bps increase since December of last year, the Bank of England may boost the main rate by 75 basis points (bps) on Thursday, the largest since the 1992 exchange rate crisis. In August, the UK’s annual inflation rate unexpectedly decreased for the first time since December 2021, although it is likely to pick back up in the next weeks. The markets anticipate that flash September PMIs will show that industrial production declined for a second month, albeit at a lesser pace, and services activity stagnated. At the same time, additional statistics are pointing to an approaching recession in the nation. Additionally, Gfk consumer confidence, CBI distributive transactions, and public sector net borrowing will be watched by investors.
In other parts of Europe, the Swiss National Bank is planning to raise its policy rate by 75 basis points, which will result in the first positive change in borrowing costs since 2011. The Turkish, Swedish, and Norwegian central banks will also make monetary policy decisions. The manufacturing and services sectors are projected to continue to deteriorate in September, according to flash PMIs for the Eurozone, Germany, and France. Consumer sentiment is also expected to decline across the 19-bloc. There will also be information on the current account and construction production for the Euro Area, producer prices in Germany, final Q2 GDP growth for Spain and the Netherlands, the balance of trade in Switzerland, and consumer surveys in Turkey.
In Australia, the RBA will release meeting minutes from earlier this month, providing details on what led to the central bank’s fourth straight 50 bps rate increase. Investors are also anticipating the September flash PMI data. Releases in the nearby New Zealand include the August international trade statistics and the services PMI.
The August CPI report and the Bank of Japan’s decision on monetary policy start off a significant week of releases in Asia for Japan. Investors will be on the lookout for any steps taken to preserve the yen despite its continuous decline, even though the short-term interest rate is anticipated to stay at -0.1%. In China, the PBoC will carry out its policy decision after it cut its Loan Prime Rates for the second time this year last month. Borrowing costs are also set to rise for Indonesia and the Philippines, in addition to multiple central banks that tend to follow the decision by the Federal Reserve. In the meantime, investors await fresh CPI releases from Malaysia and Singapore, and trade data from Thailand.