Making a point: Powell speaks during a town hall meeting at the Fed Board Building in Washington. Investors will be scrutinising any reaction from data to be released by him and Lagarde. — AP
WASHINGTON: Policymakers from here to Frankfurt head into the final quarter of 2023 with tentative grounds for optimism that their fight against inflation is making progress.
With Federal Reserve (Fed) chairman Jerome Powell and his European Central Bank (ECB) counterpart Christine Lagarde both due to speak in the coming week, investors will scrutinise any reaction from them to a transatlantic double whammy of data that offered hints of cheer.
Last Friday’s reports showed eurozone core inflation, which strips out volatile elements such as energy, running at the slowest pace in a year, and hours later, the Fed’s preferred measure of underlying price growth was revealed to have risen the least since 2020.
With a government shutdown averted on Saturday, US central bankers are set to see another round of that data series, as well as other inflation numbers, before their decision on Nov 1.
The numbers released so far could allow them to start building a case to refrain from a November rate hike.
The ECB will only have a fuller version of the September inflation number to go on before its Oct 26 gathering, with both the report for October and the estimate of third-quarter growth scheduled for after the meeting.
A further increase in borrowing costs isn’t currently anticipated in October, and last Friday’s report may start to undermine any push for an ECB hike in December.
Powell will join Philadelphia Fed president Patrick Harker for a round-table discussion with workers and small business leaders.
Regional Fed presidents Loretta Mester, Raphael Bostic and Mary Daly are also scheduled to speak in the coming week.
Lagarde, the ECB president, will deliver the welcome address tomorrow at a conference hosted by her institution.
Vice-president Luis de Guindos will speak in Cyprus tomorrow, and other speakers for the week include chief economist Philip Lane and central bank chiefs from Germany and France.
Bloomberg Economics senior economist David Powell said: “The ECB has probably finished raising interest rates.
“Numerous measures of underlying price increases are falling, surveys are pointing to a deterioration in activity, and credit extension is weaker than it was in the depths of the euro crisis. However, the ECB will still need a long time to have sufficient confidence to lower rates.”
Elsewhere, several central-bank decisions are due around the world, with rates likely to be unchanged from Australia to India.
This week’s economic data includes a pair of high-profile reports on the state of employment.
August’s job openings and labour turnover survey report today and September’s non-farm payrolls on Friday are expected to show a markedly looser labour market.
The ratio of job openings to unemployed persons, a key barometer of job-market tightness for the Fed, probably declined to 1.4, according to Bloomberg Economics.
Hiring likely came down last month after the summer’s temporary bump in the leisure and hospitality sector from Taylor Swift and Beyonce concert tours. Private-sector numbers will also be in focus.
The Institute for Supply Management’s (ISM) manufacturing index is expected to show an 11th straight month of contraction.
The ISM’s index of services activity, due tomorrow, is seen showing slightly slower growth.
Also tomorrow, data from the ADP Research Institute are projected to show moderating growth in private-sector employment.
Looking north, Bank of Canada deputy governor Nicolas Vincent will speak to Montreal’s Chamber of Commerce as the central bank weighs a recent inflation uptick against the backdrop of a slowing economy.
Jobs data for September will provide an important guidepost for the bank after the August report blew past expectations with double the anticipated employment gains and wage growth at 5.2% on the year.
Meanwhile, China is set for a week-long holiday, a break that may be a litmus test for consumption showing how much people are willing to travel and spend.
Ahead of that, Saturday’s purchasing managers’ index (PMI) data showed manufacturing activity returned to expansion for the first time in six months, another sign that parts of the economy are finding their footing again.
South Korean trade numbers on Sunday showed a slump in exports eased further in September, a positive sign that global trade is regaining ground. PMI figures are still to come from Indonesia, Malaysia, Thailand and Vietnam.
Today, the Reserve Bank of Australia meets for the first time under new governor Michele Bullock, with central bankers expected to hold rates steady. The board may discuss the possibility of some form of quantitative tightening.
That will be followed by New Zealand’s central bank rate decision tomorrow. Analysts forecast no change there or from the Reserve Bank of India on Friday. Thailand, the Philippines, South Korea and Taiwan will release inflation figures during the week.
Tankan data from the Bank of Japan (BoJ) will indicate the latest state of corporate confidence, while Japanese wage data at the end of the week could have implications for monetary policy depending on how much pay growth continues to lag inflation, a key point of concern for the BoJ.
In the United Kingdom, the Bank of England’s Decision Maker Panel survey will be released on Thursday, informing officials on cost pressures in the economy.
Policymakers scheduled to speak in the coming week include Catherine Mann and deputy governor Ben Broadbent.
Industrial data may draw attention in the eurozone, with German exports and orders due towards the end of the week. French production numbers will be published on Thursday. — Bloomberg
