Macroeconomics: The Day Ahead for 22 September

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.