Fed leads global 500 basis point attack on inflation: Eco Week

(Bloomberg) – The U.S. Federal Reserve and a number of its global counterparts will launch a swift attack on inflation over the coming week as their commitment to containing consumer prices grows ever more resolute.

Three days of central bank decisions are expected to result in interest rate hikes totaling more than 500 basis points combined, with the potential for a bigger tally if officials opt for more aggressiveness.

Sweden’s Riksbank will launch the assault on Tuesday, with policymakers expecting according to economists to accelerate the tightening with a 75 basis point move.

That’s just a prelude to the main event, when U.S. officials are expected to hike borrowing costs by the same amount on Wednesday to keep pressure on a resurgence in inflation. After another Consumer Price Index report beat forecasts, some investors even bet on a gigantic 100 basis point hike.

Thursday will see the most widespread action. Central banks in the Philippines, Indonesia and Taiwan are all expected to raise rates. The focus then shifts to Europe, with hikes of half a point or more forecast by the Swiss National Bank, Norges Bank and Bank of England. Further south, the South Africa Reserve Bank will continue its efforts with a move of 75 basis points expected, and Egypt could also act.

However, three major central banks will likely be absent from the hike. On Wednesday, Brazilian policymakers could take a breather after a series of unprecedented increases over the past 18 months.

The next day, Bank of Japan officials will likely persist with an unchanged stance even as they worry about yen weakness. Then, their Turkish counterparts will likely continue their unorthodox approach of keeping rates low, despite inflation above 80%.

What Bloomberg Economics says…

“In a busy week for monetary policy, we expect the Fed to hike 75 basis points and the Bank of England 50 basis points. Next week’s calendar also includes decisions from central banks around the world. Japan, Sweden, Turkey, Brazil, Indonesia and the Philippines, as well as an update on PBOC prime lending rates.

–Tom Orlik, Chief Economist. For a full overview, click here

Elsewhere in the coming week, US housing data, a budget announcement from the new UK government and inflation data from Japan will also attract investors’ attention.

Click here to see what happened last week and below is our summary of what is happening in the global economy.

American economy

With all eyes on the Fed’s decision and Chairman Jerome Powell’s press conference, the timing of economic data will provide clues to the impact of central bank tightening so far this year.

Reports on August housing starts and sales of previously owned homes are due out on Tuesday and Wednesday, respectively. The median projection for purchases of existing properties predicts a seventh consecutive monthly decline.

The weekly jobless claims and S&P Global manufacturing and services surveys for September will complete a relatively quiet week of data.

  • For more, read the full week of Bloomberg Economics for the US

Asia

The BOJ board will make its policy decision on Thursday amid speculation that Japan is set to intervene in currency markets as the yen tests 145 to the dollar.

Governor Haruhiko Kuroda is expected to remain firm in keeping policy unchanged, although he is likely to end his Covid support loan program, which could pave the way for an adjustment in forward guidance.

Thursday will feature a central bank marathon in Asia, with Indonesia, the Philippines and Taiwan all setting policy, and the Hong Kong Monetary Authority reacting to the Fed’s overnight move.

Below, the Reserve Bank of Australia’s Jonathan Kearns will speak on house rates and prices on Monday, while RBA Deputy Governor Michele Bullock speaks to Bloomberg on Wednesday at an exclusive event .

On the data front, Japan’s national inflation data released on Tuesday is expected to continue to rise. South Korea’s early trade data released on Wednesday will continue to provide insight into the slowing pace of the global economy. And Singapore releases inflation data on Friday.

  • For more, read the full Asia Week Ahead from Bloomberg Economics

Europe, Middle East, Africa

As the UK takes national leave on Monday for the funeral of Queen Elizabeth II, monetary policy activities will resume as usual on Thursday in a decision delayed by a week to allow for mourning.

The BOE meeting will be the first opportunity for officials to react to the changed outlook created by new Prime Minister Liz Truss’s efforts to contain the cost of living crisis, and the pound’s plunge to its lowest since 1985. Economists predict at least a half-point rate hike as officials grapple with inflation that remains uncomfortably high.

The following day, the new Chancellor of the Exchequer, Kwasi Kwarteng, will host a ‘tax event’ at which he is expected to confirm his intention to reverse a recent increase in National Insurance – a payroll tax – and provide more details of the Truss support program.

The SNB could hike rates by 0.75 percentage points in its quarterly decision on Thursday, an aggressive move to match the eurozone’s increase, even though inflation in Switzerland is well below that of the rest of the world. Europe. Norway’s central bank will likely rise half an hour later as well, maintaining an accelerated pace after core consumer prices clearly beat its forecast.

Earlier in the week, alongside a rate hike expected by Sweden’s Riksbank, investors will focus on the extent to which policymakers plan to accelerate future tightening plans amid growing evidence that the Nordic’s largest economy heading for a recession in 2023.

In the euro region, speeches by European Central Bank Vice-President Luis de Guindos and Bundesbank chief Joachim Nagel could attract investors’ attention, as well as the first round of director surveys. purchase for September, scheduled for Friday.

Looking south, data from Ghana on Tuesday is likely to show economic growth slowed to 3% in the second quarter due to rising rates and a crash in the cedi that pushed prices further up. already on the rise.

Meanwhile, on Wednesday, a report in South Africa is expected to show that inflation eased in August after petrol prices fell, although the rate is still expected to remain above the 6% cap of the central bank.

Concerns about further rand weakness and a disanchoring of price expectations will be the focus of the SARB’s monetary policy committee on Thursday. Forward rate agreements starting in a month – used to speculate on borrowing costs – fully forecast a 75 basis point increase, with a probability of a larger move of 100 basis points at 82%.

Turkey is expected to leave rates unchanged on Thursday after a sharp cut in August, although a slowing economy and the looming elections next year mean more stimulus remains on the agenda .

Egypt will likely raise interest rates on the same day as inflationary pressures build and the pound continues its gradual decline.

  • For more, read Bloomberg Economics’ full week for EMEA

Latin America

The Brazilian central bank’s prized survey of economists kicks off the week, with a firm eye on 2023 and beyond. Later Monday, Colombia reports economic activity in July, likely showing some cooling between May and June.

Next, Argentina’s second-quarter production numbers could show surprising strength given the political and trade turmoil rocking South America’s second-largest economy.

The highlight in Chile will be the minutes of the September 6 central bank meeting, where policymakers accelerated the tightening with a bigger-than-expected hike of 100 basis points to push the policy rate to a record high. 10.75%.

Expect Mexico’s mid-month consumer price readings to edge up ever so slightly from 8.77%, suggesting Banxico’s third-quarter inflation spike may have arrived.

Brazil’s central bank is expected to keep its key rate unchanged at 13.75% after a record 12 consecutive 2% hikes in March 2021. Traders see less than a 50% chance of another hike in the coming months, and it is possible that Brazil – among the first to start tightening globally in March 2021 – will also become among the first to finish.

  • For more, read the full Latin America Week Ahead from Bloomberg Economics

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