World adapts to Fed’s rate order in 36-hour sequence
Starting with the Federal Reserve on Wednesday and ending with the Bank of Japan two days later, monetary policy will be determined at key meetings across half of the Group of 20.
Advanced-economy central banks, accounting for six of the 10 most-traded currencies, may draw particular focus as global policymakers adapt to the theme US officials set out at Jackson Hole in August: that rates are likely to stay higher for longer.
All evidence suggests inflation isn’t fully tamed across much of the world, and the ongoing rise in crude oil prices is stoking worries of yet more pressure.
So no-one will dare to declare that their job is done, even amid the prospect that central banks in countries from the UK to Switzerland on Thursday could open the door to a pause, as happened last week in the euro zone.
Setting the tone for all of them will be new projections from the Paris-based OECD on Tuesday. With weak demand from China depressing global trade, and the outlines of a stagflationary scenario forming in Europe, the apparent resilience of the US economy could prove the only bright spot.
That backdrop may prompt the Fed itself to keep rates on hold, but maybe pencil in another increase for later this year.
What Bloomberg Economics Says:
“We think the FOMC will strike a balanced tone at its Sept.
19-20 meeting by skipping a rate hike, but keeping further tightening on the table, lest financial conditions ease.” —Stuart Paul, economist.
US and Canada
Aside from the Fed it’s a relatively quiet week in the US. Housing starts data on Tuesday, initial jobless numbers on Thursday and the latest purchasing manager indexes for manufacturing and services will be the key releases.
In Canada, headline inflation for August could tick higher
