Diary: This Week Brought to You by the US Fed

By Glenn Dyer | More Articles by Glenn Dyer

The early fall meeting of the US Federal Reserve this week dominates global markets and policy thinking, along with the struggles by Chinese property giant Evergrande to survive its crushing $US304 billion debt burden.

While the Fed’s meeting is the big news, central banks elsewhere meet in the UK (where a warning of a rate rise could emerge), Norway (where a rate rise will emerge), Sweden and Switzerland.

Japan, Indonesia and the Philippines also see central bank monetary policy meetings in the coming week while in Australia the Reserve Bank releases minutes from its September board meeting.

As well there’s the early surveys of global manufacturing and service sector activity – China is not a part of that so the data my be a bit better with the US economy healthier than though a week ago.

So far as the Fed is concerned, economists do not expect any move to start the tapering of its quantitative easing bond buying – that will come at the November meeting according to Moody’s.

“We don’t expect the Fed to announce its tapering plans at this meeting. It likely will wait until November to do so. Still, the Fed could strengthen its forward guidance around those monthly asset purchases by noting that a reduction could occur soon.

“This would set the stage for a formal announcement in November and tapering starting in December,” Moody’s economists wrote at the weekend.

The Fed meeting also sees the release of the latest forecasts, led by the so-called Dot Plot which gives an indication where Fed members think interest rates will be in the near to medium term.

Fed chair Jerome Powell also gives a media conference where he is likely to be questioned about share buying activities by at least two of the central bank’s regional branches in Boston and Dallas.

Shane Oliver says “Perhaps the main risk (from the meeting) is that the Fed’s dot plot of officials’ interest rate expectations may see the median dot move to a rate hike in 2022.

On the data front there’s housing starts (out Tuesday) and new home sales (on Friday). Business conditions PMIs for September (Thursday) may rise slightly as Delta fears have faded a bit.

There a couple of quarterly earnings releases – the most important coming from fright giant, Fed Ex, Adobe, home builder, Lennar, cheap retailer, Costco and Nike the sportswear and shoes giant.

Fed chair Powell speaks on Friday.

In Europe there’s the central bank meetings. Moody’s says it is not expecting any surprises from the governing councils of the Swedish, Norwegian, Swiss or British central banks.

“Policy rates will be left unchanged in Switzerland, Sweden and the UK, while we are expecting a modest rate hike in Norway from 0% to 0.25% because recovery there is more advanced than in other economies in the region,” Moody’s said.

Early eurozone business conditions activity surveys for September on Thursday are likely to have remained strong, according to Dr Oliver.

In Asia, the Bank of Japan on Wednesday is expected to leave monetary policy unchanged and to remain dovish. Japanese inflation data (out Friday) is expected to remain weak.

Japanese share prices are at or near 30-year highs with a looming change in leadership of the government.

In Australia, Dr Oliver says it’s hard to see tomorrow’s minutes from the last RBA meeting adding anything new after RBA Governor Lowes speech explaining RBA views.

Early September Business conditions PMIs on Thursday for September are expected to improve slightly reflecting reopening optimism and the Australian Bureau of Statistics will release payroll jobs and June quarter household wealth data (also Thursday).


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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