- Because the figures aren’t adjusted for inflation, the data suggest demand for merchandise slowed in the third quarter.
- Meanwhile, China is being hit by a rebound in Covid-19 cases following the week-long National Day holiday, just as the country’s top leaders gather in Beijing for a meeting with President Xi Jinping.
- That may offer insights into whether officials see a risk of renewed turmoil that already plagued pension funds following Britain’s mini-budget.
The warning of a potential $4 trillion loss in global economic production reverberates in the ears of the top financial officials from around the world as they convene in Washington in the coming days as reported by TOI.
Looming risk
That’s the Germany-sized hole in the growth outlook through 2026 that International Monetary Fund chief Kristalina Georgieva identified last week as a looming risk.
She’ll play host as central bankers, finance ministers and others confront the fallout on the global economy of rampant inflation, aggressive monetary policy tightening, rising debt and the biggest ground war in Europe since World War II.
That the IMF and World Bank annual meetings will be fully in-person for the first time since the outbreak of Covid-19 in early 2020, showing progress in bringing the pandemic to heel, will be of limited comfort given other headaches.
Yet certain elements, such as the emerging-market havoc wreaked by Federal Reserve interest-rate hikes in the early 1980s, chime with the present predicament.
Here’s a quick look at some issues officials will grapple with: Elsewhere this week, faster core inflation reading in the US, UK financial stability news, a South Korean rate hike and the Nobel Prize for economics will be among the highlights.
US Economy
The consumer price index will be the main event this coming week in the US. The Labor Department’s report will provide Fed officials with an overview of how inflationary pressures are changing following a series of significant interest-rate rises on Thursday.
According to economists, the CPI increased 8.1% in September compared to the same month last year, slowing down from the previous month’s 8.3% annual increase as energy costs stabilised. The so-called core CPI, which excludes food and fuel, is still increasing, with an anticipated annual growth of 6.5% compared to 6.3% in August.
This would be the highest improvement in the core measure since 1982, demonstrating persistent inflation and setting the stage for the Fed to raise interest rates for a fourth consecutive meeting in November by 75 basis points.
A number of US central bankers, including vice chair Lael Brainard and regional Fed presidents Loretta Mester, Charles Evans, and James Bullard, will address investors in the upcoming week. On Wednesday, the Fed’s September meeting’s minutes will be made public.
Data on the prices paid to US producers is another type of information. As commodity prices decline amid worries about a worldwide economic recession, the so-called wholesale inflation has begun to moderate.
Retail sales statistics will mark the culmination of the week. According to economists, a rise in auto sales will help September’s economic growth remain modest. The value of retail sales, when autos are excluded, is projected to decrease for a second month. The lack of an inflation adjustment means that the data indicate a third-quarter slowdown in merchandise demand.
Asia
Rhee Chang-Yong, the governor of the Bank of Korea, might make a small U-turn over the pace of rate increases. Although he resumed his customary quarter-point step in August, many economists anticipate that he would choose to make a move twice that size on Wednesday as the Fed’s quick tightening puts pressure on the won.
The State Bank of Pakistan is anticipated to hold the benchmark rate constant for a third meeting, while the Monetary Authority of Singapore is anticipated to tighten it for a fifth consecutive meeting.
After switching to smaller rises, Assistant Governor Luci Ellis might provide insight into the Reserve Bank of Australia’s most recent policy considerations.
The movements of the yen are still being closely watched, therefore Bank of Japan Governor Haruhiko Kuroda and Finance Minister Shunichi Suzuki will be in Washington for the IMF meetings.
Following the week-long National Day holiday, China is experiencing a comeback in Covid-19 cases, which coincides with the gathering in Beijing of the nation’s senior officials for a summit with President Xi Jinping.
Europe, the Middle East, Africa
The announcement of the economics Nobel Prize on Monday marks the beginning of the week. In order to add a sixth category to the existing prizes for physics, chemistry, medicine, peace, and literature, Sweden’s Riksbank launched the award in 1968. In 2021, three academics from the United States were recognised for their efforts in transforming empirical research through experiments that drew on real-world scenarios.
On Wednesday, the Financial Policy Committee of the Bank of England will be under the spotlight, which is a surefire indication that the UK is dealing with serious problems.
The panel will make public the minutes of its most recent meeting. The group was in charge of intervening urgently to stop a bond market spiral last month. That could reveal whether officials believe there is a chance that the turmoil that already affected pension funds in the wake of Britain’s mini-budget could return. It might also cover the effects of a sudden rise in mortgage rates.
Several officials, many of whom will appear at or close to the IMF meetings, are scheduled to speak in the upcoming week, including BOE Governor Andrew Bailey.
Similar to that, a number of other European politicians will give speeches in Washington or the surrounding area. Both Thomas Jordan, president of the Swiss National Bank, and Christine Lagarde, president of the European Central Bank, are slated to make speeches.
The UK will have the biggest news in terms of European data. Reports on employment and growth may provide a more complete picture of how the British economy is faring in the face of rising rates and high inflation.
On Wednesday, industrial production in the eurozone is expected to have partially recovered in August following a significantly larger loss the previous month.
The remainder of the region will emphasise data on inflation. On Tuesday, the rate of price growth in Hungary could approach 20%, while on Thursday, the main indicator for Sweden is anticipated to rise above 9%. Reports on inflation will also be released for Israel and Egypt.
Further south, for a third consecutive month, Ghana’s gauge of price increase is anticipated to exceed three times the central bank’s 10% target.
Latin America
The week begins with the carefully awaited weekly Focus poll of market expectations from the Brazilian central bank. For 14 weeks in a row, analysts have raised their 2022 GDP forecast to 2.7% while lowering their 2022 inflation forecasts to 5.74%.
The data released on Tuesday will probably confirm this increasingly upbeat view of consumer prices in Brazil: analysts anticipate that price increases will have slowed down for a third consecutive month in September, leaving the yearly pace at just above 7% — significantly five percentage points below April’s peak of 12.13%.
The central bank of Chile is almost certain to continue its record-breaking tightening cycle as the country’s inflation is approaching a three-decade high, potentially raising the key rate by 50 basis points to an all-time high of 11.25%. Next bank meeting will be in December.
Mexico’s Banxico will publish the minutes of its meeting on September 29 where officials increased the benchmark rate to a record 9.25% on Thursday. Many analysts predict that before policymakers decide their work is through, there will still be 125 to 175 basis points of tightening.
Argentina is anticipated to announce September year-over-year inflation on Friday, bringing the week to a close. This figure is predicted to be close to Turkey’s record high of 83.45% for the Group of 20 countries. The central bank of Argentina questioned analysts who predict a year-end rate of 100.3%.
Did you subscribe to our daily Newsletter?
It’s Free! Click here to Subscribe
Source: TOI
