A slow start on Monday and then it gets busier on the economic calendar from Tuesday until the end of the week as data and central banks updates will start flowing. All eyes will be on the Fed’s meeting to get more clarity about the US monetary policy through the central bank’s economic projections, and where the FOMC members see interest rates could be by the end of this year and 2023.
The higher-than-expected US inflation data of August released last week provided a strong reason for investors to think that the Fed would be more aggressive in its war against inflation therefore, the market started to price in further rate hikes
. Major US stock indices and the gold price closed in the red on Friday erasing the previous week’s gains. The central banks’ race to hike rates leaned major economies toward recession and weighed on oil prices.
Economic data highlights
Monday 19th of September
Tuesday 20th of September
- USD - NAHB Housing Market Index (SEP)
- JPY - Inflation Rate (AUG)
- RBA Meeting Minutes
Wednesday 21st of September
- CAD - Inflation Rate (AUG)
- USD- Housing Starts (AUG)
Thursday 22nd of September
- FOMC Economic Projections
- Fed Interest Rate Decision
- Fed Press Conference
Friday 23rd of September
- BoJ Interest Rate Decision
- BoE Interest Rate Decision
- EUR- Consumer Confidence Flash (SEP)
- USD - CB Leading Index (AUG)
- AUD- S&P Global Manufacturing & Services PMI Flash (SEP)
- EUR- S&P Global Manufacturing & Services PMI Flash (SEP)
- GBP- S&P Global Manufacturing & Services PMI Flash (SEP)
- USD- S&P Global Manufacturing & Services PMI Flash (SEP)
The core CPI accelerated in August from 5.9% to 6.3% and led investors to believe that the Fed would keep its tight monetary policy. Therefore, the Fed is likely to deliver a 75bp rate hike in the upcoming meeting on Wednesday.
Investors will wait for the Fed chair’s press conference and the central bank’s projections for the US economy. The main message we could get from Powell’s speech is the FOMC commitment to bringing inflation levels down to their target at 2% and that any rate hike in the coming meetings would be data-dependent.
That said, the Fed could send a hawkish message as the dot plot may reflect the market pricing of a 4.25-4.50% rate by the end of 2022. The Fed may change the US GPD and PCE inflation projections released in June 2022.
Other Central Banks Meetings
The RBA will release its minutes from the September meeting. Investors will look for more clarity on the pace of tightening the Australian monetary policy, given Governor’s Lowe recent speech that hinted a bit of a slowdown could come soon.
As per the Bank of England meeting, the double-digit inflation figure of July at 10.1% increases the pressure on the central bank to continue its contractionary monetary policy. The MPC members could hike interest rates by 50 bp, even though some members could vote for a 75 bp given the British Pound price decline against the US dollar and due to other central banks’ aggressive policies like the EBC which hiked interest rates by 75bp, while the Fed is expected to hike interest rates by 75 bp for the third time in its upcoming meeting.
As per the Bank of Japan, investors will focus on this meeting to see how the central bank could justify keeping its ultra-easy policy in a very inflationary environment.
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