Macroeconomics: The Day Ahead for 22 September

  • Hawkish Fed messaging digested as central bank super Thursday looms; focus on BoE, ECB and Norges Bank along with SARB; modest data run features French Business Confidence, US weekly jobless claims and Existing Home Sales; smattering of central bank speakers; US 10-yr TIPS and earnings from Costco
  • BoE set for further 50 bps rate hike as it tries to balance high inflation against weak economy, focus on comments on fiscal vs monetary policy balance
  • SNB set for further sharp hike, to re-emphasize commitment to strong CHF

EVENTS PREVIEW

As has been well flagged, today is Central Bank Thursday, with BoJ, BSP and Bank Indonesia rate  decisions to absorb, while there are the SNB, Norges Bank, BoE, TCMB, CBC Taiwan, SARB, CBE and BCP decisions to get through ahead. The day’s statistical schedule is light with French Business Confidence to digest ahead of Mexico’s mid-month CPI and US weekly jobless claims, Q2 Current Account and KC Fed Manufacturing survey. The ECB publishes its monthly Bulletin; BoE’s Tenreyro and ECB’s Schnabel speak, while the US sells 10-yr TIPS, and Costco publishes earnings. The message from the Fed meeting was indisputably hawkish, perhaps above all the very tight clustering of the ‘dot plot’ and Powell signalling that downturn signals are unlikely to deter the FOMC, and thus leaves markets needing to err on the side of pricing more rate hikes than may actually materialize.

Switzerland’s SNB is expected to move rates back in to positive territory for the first time in more than 10 years, with a 75 bps hike to 0.50%. It will again emphasize the need for a strong CHF to combat imported inflation pressures. Meanwhile in Norway, the rise in Underlying (core) CPI to a record 4.7% y/y in August has cemented expectations of a further 50 bps hike to 2.25% as Norges Bank plays catch up, with a very steep fall in the latest Regions Survey 6-mth Outlook index to -0.16 (lowest since 2009) leaning heavily against a more aggressive hike.

– U.K. – BoE rate decision –

Friday’s UK Retail Sales served as a poignant reminder of why the BoE’s MPC has been less willing to adopt an aggressive policy tightening stance than many of its G7 peers, even if it is still expected to hike rates 50 bps to 2.25% (highest since end 2008). The question is whether the statement offers any hints on how fiscal policy changes might influence the BoE’s rate path, though the BoE may not be given advance details of Friday’s ‘fiscal event’, in what one might term a patronizing and contemptuous display of behaviour that is so typical of the UK’s political fraternity. The other question will be what is said about the active QT that it provisionally set to start next month.

Turkey’s TCMB is expected to hold rates at 13.0% after last month’s unexpected 100 bps cut, despite inflation running at 80.2% y/y, and stronger than expected Q2 GDP (7.6% y/y), though leading indicators suggest Q3 will see quite a sharp loss of momentum, and this may prompt a further cut in Q4. But for the moment, TCMB seems to be more focussed on politically dictated macro-prudential measures in its seemingly vain and futile attempt at ‘Lira-ization’, which will likely fail without a change in government.

Last but least South Africa’s SARB is seen hiking a further 75 bps to 6.25%, with inflation continuing to head higher (headline 7.8% and core 4.6% y/y), and a weak ZAR adding to pressure going forward (and offsetting the benefit of lower energy prices), with SARB governor Kganyago also noting that it is still too early to call a peak in inflation.

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Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.

ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.                  

A subsidiary of Archer Daniels Midland Company.

© 2021 ADM Investor Services International Limited.

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