Heavyweight week is coming! US PCE data with speeches from Federal Reserve officials taking turns, multiple central banks may join the rate cut wave

According to the Wisdom Financial APP, this week, the global financial markets will see many important data and major events.

The Fed's favorite price indicators slowing down and strong consumer demand will support the Fed's decision to cut interest rates significantly and Fed Chairman Powell's view that the economy remains strong.

Economists expect the U.S. August PCE price index, scheduled to be released on Friday, to rise by only 0.1% month-on-month for the second time in three months. This inflation indicator may rise by 2.3% year-on-year, the smallest annual increase since early 2021, slightly above the Fed's 2% target.

The slowdown in inflation compared to the same period last year reflects the decline in energy and food prices, as well as the slowing of core costs. Economists expect the PCE price index excluding food and fuel to rise by 0.2% for the third consecutive month.

The easing of inflation pressures earlier this year provided enough confidence for Fed policymakers to cut rates by 50 basis points on September 18. This was the first rate cut in over four years, representing a shift in Fed policy to avoid deterioration in the labor market.

Investors will focus on speeches by several Fed officials in the coming week. On Thursday, Fed Chairman Powell pre-recorded a video for an event's opening remarks. In addition, Fed Vice Chair Michelle Bowman, Adriana Kugler, Lisa Cook, as well as regional Fed Presidents Raphael Bostic and Austan Goolsbee, will attend various events.

August inflation data will be released along with personal spending and income data, with economists predicting a significant increase in U.S. household spending. Continued growth in consumer spending helps increase the likelihood of continued economic expansion.

Other closely watched U.S. economic data include August new home sales, second-quarter Gross Domestic Product (GDP), weekly initial jobless claims, and August durable goods orders.

Canada's GDP data for July and preliminary data for August are expected to show weak growth in the third quarter, possibly below the Bank of Canada's annualized growth forecast of 2.8%. Meanwhile, Bank of Canada Governor Tiff Macklem will speak at a banking conference in Toronto.

In addition, the Organization for Economic Cooperation and Development (OECD) will release new economic forecasts on Wednesday, and the Swiss and Swedish central banks may cut interest rates, while the Reserve Bank of Australia is expected to keep rates unchanged.

Several central banks will announce interest rate decisions this week

The following are the major events that the financial markets will see this week:

Asia

The market expects the Reserve Bank of Australia to keep the cash rate unchanged at 4.35% on Tuesday, with a focus on whether RBA Governor Michele Bullock will maintain her hawkish tone, as strong employment data has led traders to reduce bets on a rate cut in December Bloomberg Economics still believes that the Reserve Bank of Australia may ease monetary policy in the fourth quarter. Australian authorities will have to wait until Wednesday to see if inflation in August has cooled for the third consecutive month.

Australian Treasurer Jim Chalmers said on Sunday that he expects the upcoming data to show encouraging progress in Australia's fight against inflation, but he acknowledges that the Reserve Bank of Australia may not be ready to cut interest rates this week.

Other countries that have released the latest inflation data include Malaysia and Singapore, with expectations that the price increases in these two countries will slow down in August.

Japan will release new inflation data on Friday, with market expectations that Tokyo's CPI in September will exceed the Bank of Japan's target of 2%.

Australia and India will release the Purchasing Managers' Index (PMI) for September on Monday, followed by Japan the next day.

Europe, Middle East, Africa

Four central banks in Europe will announce interest rate decisions, with investors questioning whether policymakers are interested in following the Fed's footsteps in cutting rates by 50 basis points.

The Swiss National Bank will announce its interest rate decision on Thursday. While most economists expect a 25 basis point rate cut, observers believe that with the continued strength of the Swiss franc, the possibility of the Swiss National Bank cutting rates by 50 basis points has increased following the significant rate cut by the US. This will be the last meeting for Swiss National Bank President Thomas Jordan, whose term ends at the end of this month.

The Swedish central bank will announce its interest rate decision on Wednesday. The market expects the bank to cut rates by 25 basis points for the third time this year, bringing the rate to 3.25%, and outlining a path for further rate cuts.

The current guidance is to raise rates two to three times by 2024 - including on Wednesday. Policymakers at the Swedish central bank discussed a 50 basis point rate cut at the meeting last month, but most economists believe that the bank is more likely to wait until November to take more significant rate cut measures.

Meanwhile, in Eastern Europe, it is expected that the Hungarian central bank will cut rates by 25 basis points on Tuesday and the Czech central bank will do the same on Thursday.

The Eurozone and the UK will release the preliminary PMI for September on Monday, reflecting the state of private sector activity at the end of the third quarter.

With the focus on the weak German economy, the Ifo Business Confidence Index to be released on Tuesday will be a key point of interest, and on the same day, German Central Bank President Joachim Nagel will speak on the economy. German economic institutions will release new forecasts on Thursday.

Data from France will be closely watched by investors and the country's new Finance Minister Antoine Armand. The PMI index of the Eurozone's second largest economy received a boost from the Olympics in August, but this effect is expected to fade this month. Consumer confidence index will also be released.

Investors will also focus on the inflation data for France and Spain in September to be released on Friday, which will indicate the overall inflation results for the Eurozone to be released next week. Economists predict that the inflation rates in these two countries will fall below 2%.

In addition to Nagel, six Eurozone policymakers plan to speak, including European Central Bank President Christine Lagarde, Chief Economist Philip Lane, and the new Governor of the Bank of Spain Jose Luis Escriva In Africa, the Central Bank of Nigeria may pause its tightening policy on Tuesday, while the Central Bank of Morocco may keep its interest rate at 2.75%. Lesotho in southern Africa may maintain its borrowing cost at 7.75% due to persistent high inflation.

Latin America

The focus will be on the minutes of the September interest rate meeting and quarterly inflation report of the Central Bank of Brazil.

Following a 25 basis point rate hike to 10.75% on September 18 by the Central Bank of Brazil, the minutes may provide a more detailed policy roadmap. The market expects the Central Bank of Brazil to raise its forecasts for inflation, key interest rates, and GDP growth.

Employment data to be released this week may show that the Brazilian labor market remains at historically tight levels, while mid-month inflation rates may have stalled near the top of the Central Bank of Brazil's target range.

Argentina is expected to release proxy GDP data for July, which may support the view that the Argentine economy has passed the lowest point of 2024 and is beginning to recover in the second half of the year.

In Mexico, a slowdown in domestic demand may lead to another soft retail sales data, and mid-month inflation data is unlikely to provide sufficient reason for policymakers to cut interest rates or keep them unchanged at the upcoming meeting of the Central Bank of Mexico in a few days.

The market expects Mexico to cut rates by 25 basis points to 10.5%, but some analysts believe there may be a 50 basis point cut to align with the Federal Reserve