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Looking Ahead: Fed is the Focus This Week…



The Fed is set to cut interest rates this week and may still not be done delivering monetary stimulus to the economy yet this year.

Having already reduced their benchmark in July to 2.0%-2.25%, Chairman Powell and colleagues will pare another 25 bpts Wednesday to support the slowing economy, according to a survey of economists.

Among the Key questions that will be asked of Chairman Powell is whether he’s preparing for more than the “mid-cycle” adjustment he previously claimed was underway.

For now, economists think he will act again this year before leaving the target range at 1.5%-1.75% for an extended period.

Also worth watching is how many policy makers will dissent after regional Fed Presidents Eric Rosengren and Esther George voted in July in favor of keeping rates on hold. Let’s see.

The Fed will be followed Thursday by the Bank of Japan as it comes under pressure from investors to follow its US and Euroarea counterparts in loosening monetary policy more.

Also meeting are the central banks of Brazil, South Africa, Norway, Switzerland and the UK.

We cannot forget the investors will have a sharp eye on the US-China trade tensions after last week’s notice that The Trump Administration officials had discussed offering China a limited trade agreement that would delay and even roll back some US tariffs.

In the US and Canada this week

The FOMC officials start meeting Tuesday before issuing their decision on Wednesday with Chairman Powell addressing reporters in a PC afterward.

With talks with China set to restart in October, there will be monitoring of Twitter and local Chinese media for signs relations between the 2 sides are improving.

There are housing starts numbers Wednesday morning and jobless claims Thursday. Thursday will also see the release of current account data for the Q-2.

In Canada, the election campaign will enter a 2nd week.

In Asia this week

The Bank of Japan meets Thursday although pressure from markets to add to its stimulus has weakened as investors take a less dim view of the economic outlook and the trade dispute. That leaves most economists expecting the BOJ to keep policy on hold as it conserves its tooling. Still, a surprise Fed decision or concerns over the economic hit of a looming sales tax hike could still prompt the central bank to act.

Monday early brings a lot data from China that will indicate how its already slowing economy is faring. We see industrial production remaining under pressure after slumping to a 17-year low of 4.8% in July, while there are few signs retail sales picked up in August. Fixed asset investment is also seen as sluggish.

On Tuesday, the Reserve Bank of Australia (RBA) releases minutes of its latest meeting at which it signaled its in no hurry to ease again. And Indonesia’s central bank is expected to take a pause after 2 back to back rate cuts.

Have a terrific week.

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