(Bloomberg) — U.S. inflation likely moderated late in the third quarter, reassuring a Federal Reserve that is shifting its policy focus more toward protecting the labor market.
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The consumer price index is forecast to rise 0.1% in September, its smallest gain in three months. Compared to a year ago, the CPI likely rose 2.3%, the sixth consecutive slowdown and the most moderate since the beginning of 2021. The Bureau of Labor Statistics will release its CPI report on Thursday.
The indicator excluding the volatile food and energy categories, which provides a better view of core inflation, is forecast to rise 0.2% from the previous month and 3.2% from September 2023.
In the wake of surprisingly strong job growth for September reported on Friday, the gradual slowdown in inflation suggests policymakers will opt for a smaller interest rate cut at their next meeting on Nov. 6-7.
Fed Chair Jerome Powell has said projections issued by officials along with their September rate decision point to quarter-point rate cuts in the final two meetings of the year.
The CPI and producer price index are used to report the Federal Reserve’s preferred measure of inflation, the personal consumption expenditures price index, which will be released later this month.
What Bloomberg Economics says:
“We expect a moderate headline CPI in September, albeit a stronger core reading. When applied to PCE inflation (the Fed’s preferred pricing indicator), core inflation likely grew at a pace consistent with the 2% target. Overall, we don’t think the report will do much to influence the FOMC’s confidence that inflation is in a lasting downward trend.”
—Anna Wong, Stuart Paul, Eliza Winger, Estelle Ou and Chris G. Collins, economists. For the full analysis, click here
Friday’s report on producer prices – an indicator of inflation pressures facing businesses – is also expected to show more moderate inflation. The same day, the University of Michigan releases its preliminary consumer confidence index for October. The Federal Reserve will also release minutes from the central bank’s September meeting on Wednesday.
Neel Kashkari, Alberto Musalem, Adriana Kugler, Raphael Bostic and Lorie Logan are among the Fed officials who will speak next week.
In Canada, officials will release the final employment report ahead of the Bank of Canada’s next rate decision, a crucial input for Governor Tiff Macklem, who hopes to see further easing of the labor market. The central bank will also publish surveys on business and consumer expectations about economic growth and inflation.
Elsewhere, central banks from New Zealand to South Korea may cut rates, France will reveal its budget and the European Central Bank will release minutes of its September monetary policy meeting.
Click here to see what happened last week and below you’ll find a summary of what’s coming up for the global economy.
Asia
It’s a big week for monetary policy in Asia, with two central banks likely to cut rates and another getting closer to doing so.
The Reserve Bank of New Zealand is expected to follow its August pivot to an easing cycle by cutting rates by half a percentage point, to 4.75%, when the board meets on Wednesday, as weakness in data on payrolls generate concerns in the labor market.
The Bank of Korea will likely cut its benchmark index by a quarter point on Friday after inflation slowed to the slowest pace in more than three years, and the decision will depend on whether conditions in the housing market have cooled as much. enough.
The Reserve Bank of India is seen keeping its repo rate and cash reserve ratio stable, with many economists expecting a quarter-point cut in the repo rate by the end of the year. And Kazakhstan’s central bank will decide on Friday whether to resume its easing campaign.
On Tuesday, the Reserve Bank of Australia releases minutes from its September meeting that may shed light on the deliberations that led to its hawkish stance, and RBA No. 2 Andrew Hauser speaks on the same day.
Japan obtains wage statistics and household spending data, both of which are of interest to the newly installed government ahead of general elections at the end of the month.
Singapore becomes the first Asian nation to report third-quarter gross domestic product, sometime between Thursday and Monday, with the consensus estimate calling for an acceleration in year-over-year growth.
Consumer inflation data will be released in Thailand and Taiwan, while the Philippines and Taiwan will release trade figures.
Europe, Middle East, Africa
Germany’s manufacturing woes will be in focus with the release of factory orders on Monday and industrial production on Tuesday, followed by the government’s economic forecasts on Wednesday.
Officials are about to give up hope of achieving any expansion this year, according to people familiar with the matter.
In France, Prime Minister Michel Barnier’s government will present its 2025 budget bill on Thursday, at a time when the country is struggling to control its deficit. Fitch Ratings has scheduled the possible publication of an assessment on the country for after the market closes on Friday.
For the European Central Bank, Wednesday is the last day for officials to speak publicly about monetary policy before a blackout period begins ahead of the Oct. 17 decision, in which a rate cut appears all but certain.
Chief economist Philip Lane, Bundesbank president Joachim Nagel and Bank of France governor Francois Villeroy de Galhau are among those making appearances. An account of the previous meeting will be published on Thursday and will provide possible clues about the upcoming sentencing.
Meanwhile, in the UK, following remarks by Bank of England Governor Andrew Bailey opening the door to more aggressive easing, Friday’s GDP data will signal the health of the economy in August.
Two Riksbank officials are scheduled to speak after the Swedish central bank delivered a third rate cut in September. Sweden’s monthly growth indicator will be published on Thursday.
To the south, authorities in Egypt expect inflation to resume its slowdown in September after a slight acceleration the previous month. The latest reading was 26%, slightly below the central bank’s base rate of 27.25%.
Three decisions by central banks in the region are planned:
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On Tuesday, Kenya’s monetary policy committee will reduce its key interest rate for the second consecutive meeting by a quarter point, to 12.25%. Inflation is expected to remain below its 5% target in the near term after slowing to a 12-year low in September.
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On Wednesday, Israeli officials are likely to keep their rate back at 4.5%, even as their peers begin or continue easing cycles. The war against Hamas in Gaza and escalating conflicts with Hezbollah and Iran are weighing on the shekel, which is near its lowest level in two months. Moody’s and S&P recently downgraded the country’s credit rating.
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Serbia’s central bank will make its monthly decision on Thursday, possibly continuing monetary easing after a quarter-point cut in September.
Latin America
By the end of the week, third-quarter consumer price data for Latin America’s five big inflation-targeting economies will be in the books.
Lower readings can be expected in Chile, Colombia and Mexico, while the unmistakable warming of Brazil’s economy and prices likely continued into September. The four central banks aim for 3% inflation.
In Brazil, aside from the central bank’s expectations survey released on Monday, the August retail sales report may show a slight cooling from what has been a brisk set of readings for 2024.
The minutes of the September 26 Banxico meeting will be the highlight of Mexico. The authorities took a dovish tone in the forward guidance of their post-decision statement, after a second consecutive 25 basis point rate cut to 10.5%.
In Peru, month-on-month deflation in September and a lower-than-target annual figure of 1.78% are likely to give the green light to a third consecutive reduction in the central bank rate from the current 5.25%.
After quickly curbing overheated increases in consumer prices, Argentine President Javier Milei’s fight against inflation appears stalled, with successive monthly figures close to 4%. Economists surveyed by the central bank see a modest slowdown ahead under the current policy mix.
–With help from Robert Jameson, Laura Dhillon Kane, Piotr Skolimowski, Monique Vanek and Paul Wallace.
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