October begins with optimistic data in the global fight against inflation – 10/02/2023 – Market

Economic policymakers from Washington to Frankfurt enter the last quarter of 2023 with reason to be optimistic that the fight against inflation is paying off.

Attentive to this week’s speeches by the presidents of the Fed (Federal Reserve, the US Central Bank), Jerome Powell, and the president of the ECB (European Central Bank), Christine Lagarde, investors will analyze any reaction from them to a global double whammy of data that offered signs of optimism.

Friday’s reports showed that underlying euro zone inflation – which excludes volatile elements such as energy – is at its slowest pace in a year, and hours later it was reported that US inflation was at its lowest. monthly increase since 2020.

With a US government shutdown averted on Saturday, central banks around the world are about to see another round of this data series, as well as other inflation numbers, ahead of the Fed’s decision on November 1. The numbers released so far may allow them to start building a case to end the series of interest rate increases.

The ECB will only have a more complete version of the September inflation number before its meeting on October 26th. The October report and third-quarter growth estimate are scheduled for after the meeting.

An interest rate hike is not expected in October, and Friday’s report could begin to undermine any momentum for an ECB hike in December.

Powell will join Philadelphia Federal Reserve President Patrick Harker for a meeting with workers and small business leaders on Monday. The ECB will hold a conference starting on Wednesday.

“The ECB has probably ended its rate hike. Numerous measures of underlying price growth are falling, surveys point to a significant deterioration in activity and credit extension is weaker than at the height of the euro crisis. However, the The ECB will still need a long time to have enough confidence to cut rates,” said David Powell, senior economist at Bloomberg.

Elsewhere, several central bank decisions are expected, with rates likely unchanged from Australia to India.

United States and Canada

This week’s economic data includes employment reports. The ratio of job openings to unemployed people – a key indicator of labor market tension for the Fed – has likely fallen to 1.4, according to Bloomberg Economics.

The contraction likely slowed sharply last month due to the number of temporary jobs created in the leisure sector due to Taylor Swift and Beyoncé concerts.

Bank of Canada Deputy Governor Nicolas Vincent will speak at the Montreal Chamber of Commerce as the central bank assesses a recent rise in inflation amid a slowing economy.

September’s employment data will be a reference for the bank after the August report exceeded expectations with an increase in the number of jobs and also economic growth.

Asia

China will resume activities after last week’s national holiday. On Sunday (1st), data from the Caixin survey showed that industrial activity returned to growth after six months, another sign that parts of the economy are recovering.

This week’s South Korean trade figures will show whether the sector is regaining ground globally. On Monday (2), it will be the turn of Indonesia, Malaysia, Thailand and Vietnam to release data on the economy.

On Tuesday (3), the Reserve Bank of Australia meets for the first time under the management of Michele Bullock, with the expectation that the institution will keep rates stable. The central banks of New Zealand and India meet on Wednesday (4) and Friday (6), respectively, but analysts do not expect interest rate changes. Thailand, the Philippines, South Korea and Taiwan will release inflation data during the week.

Bank of Japan data on Monday will indicate the current state of business confidence in the country, while Japanese wage data later in the week could have implications for monetary policy depending on how much wage growth lags inflation, a key point of concern for the BOJ.

Europe, Middle East and Africa

In the United Kingdom, a Bank of England survey will be released on Thursday (5), informing about cost pressures in the economy. Industrial data could draw attention in the eurozone, with German exports and orders expected later in the week. French production figures will be published on Thursday.

Swiss inflation could approach the central bank’s 2% limit in a report due on Tuesday.

In the Nordic countries, Sweden’s Riksbank will on Monday reveal the minutes of its recent decision to raise rates and maintain the possibility of a further hike.

Iceland’s central bank will decide on Wednesday whether to extend Western Europe’s longest monetary tightening cycle. Some creditors see room for an increase of 0.25 percentage points.

On the same day, Poland’s central bank may cut borrowing costs again at its last policy meeting before a parliamentary election. Romania’s central bank is expected to keep interest rates at 7% on Thursday as inflation remains close to 10%.

On Friday, the National Bank of Serbia may keep its rate at 6.5% for the third month in a row, at a time when inflation is decreasing.

In Africa, Kenya’s central bank is likely to leave its rate unchanged at 10.5% on Tuesday.

South America

Chile’s GDP data for August, which will be released on Monday, could show that the economy stumbled in August after a better-than-expected result in July.

Likewise, the September consumer prices report will likely show that inflation slowed for the tenth consecutive month, more than enough to keep the Central Bank of Chile on track for a third consecutive rate cut in October from the current rate of 9.5%.

Peru’s central bank is expected to extend its easing cycle with a 0.25 percentage point cut, the second in a row, which should take interest rates to 7.25%. Annual inflation slowed less than expected in August to 5.58%, although bank chief Julio Velarde expects it to fall to 3.8% by the end of the year.

In Colombia, the minutes of Friday’s central bank meeting and September’s inflation data should help consolidate bets that the Banco de la República will end the series of interest rate hikes.