There’s a certain funeral in London later today and a spate of central bank meetings and decisions set to dominate what will be another volatile week in markets after last week’s big selloff.
A public holiday in Australia this Thursday; a delayed Bank of England meeting, also on Thursday, which will see a rate rise.
A few hours before that we will see another interest rate rise from the US Federal Reserve.
There may also be one from Switzerland’s central bank but none from Japan on Friday.
Tomorrow sees the release of minutes from the Reserve Bank of Australia’s October meeting which did lift the cash rate by 0.50%.
A couple of other Asian central banks also meet this week.
Friday also sees the release of early activity statements for manufacturing and services from the US, Europe, Japan, Australia and several other major economies.
The Fed meeting and decision – a rate rise of 0.75% – is the dominant event this week and will take the federal funds rate to the range of 3.0% to 3.25%.
The Fed will also update its Summary of Economic Projections, which includes the so-called dot-plot which shows where Fed members think interest rates are heading in the next three years.
The new projections will provide the first look at what Fed officials expect for the economy (inflation, employment and growth) and interest rates in 2025 when current market pricing has the central bank starting to cut rates.
Headline inflation may have peaked at 9.1% in June (falling to 8.3% in August) and inflation expectations have fallen, but as the AMP’s chief economist, Shane Oliver pointed out at the weekend that “guidance from Powell and other Fed officials has been hawkish and still very high inflation along with strong labour market conditions have firmed the case for another 0.75% hike.”
“Guidance is likely to remain hawkish and the dot plot of Fed officials interest rate expectations is likely to move up to show a range of 4-4.25% by year end. This would imply some slowing in the pace of hikes across the November and December meetings.
There will also be new data on housing starts and existing-home sales. Initial claims for unemployment insurance benefits take on added importance as the new data includes the September payroll reference period. Claims in the week to September 10 fell to their lowest level since May.
Dr Oliver said the Bank of Japan (Thursday) is likely to leave its ultra-easy monetary policy unchanged reflecting ongoing very low inflation, particularly outside of food and energy.
Japanese August inflation data (Tuesday) is likely to show a rise in headline CPI inflation to 2.9% year on year but with core inflation around 1.4% year on year. Business conditions PMIs for September (Friday) will also be released.
In Australia, the minutes from the last RBA Board meeting will be out tomorrow and will repeat that the central bank expects to raise interest rates further but is also considering slowing the pace of hikes depending on the flow of economic data. Governor, Philip Lowe appeared to suggest that on Friday in an appearance before the House of Representatives
“Speeches by RBA officials Kearns (Monday) and Bullock (Wednesday) will also be watched with the latter likely to reflect on lessons learned from the RBA’s period of unorthodox monetary policy. On the data front, business conditions PMIs for September (Friday) are likely to remain subdued at around August’s reading of 50.2 for the composite,” Dr Oliver wrote in his weekend note.
There’s a handful of 2021-22 results out this week – Premier Investments, Brickworks, Washington H Soul Pattinson and New Hope (which will report a massive profit thanks to record thermal coal prices).
The other big central bank decision will come from the Bank of England’s meeting that was postponed for a week because of the death of QE 11. An increase of 0.50% is forecast, taking the bank’s key rate to 2.25%.
Central bankers also meet in Indonesia and the Philippines.
