The ECB is ready to deepen global easing with interest rate cuts that world news did not expect

With a shorter-than-usual gap of just five weeks between decisions, and little new data available, authorities appear to be ignoring recent warnings about persistent inflationary pressures to respond primarily to survey data pointing to a contraction in the private sector economy. .

Such reports influenced financial markets and added momentum for a widely expected cut, after policymakers largely supported the rate change.

The change was sudden. In the September 12 decision, authorities all but ruled out an October cut. Days later, the governor of the Slovak central bank, Peter Kazmir, announced that “it is almost certain that we will have to wait until December” for another measure, because “very little new information” would be available until October 17th.

He is now the only voice publicly arguing against Thursday's measure, although other hawks may join him behind the scenes.

As for what happens next, economists now think the ECB will accelerate its easing to reduce borrowing costs to levels that no longer contract the economy by the end of 2025, according to a Bloomberg survey.

Elsewhere in the world, Chinese data may show that the economy continues to miss its target, other central banks from Southeast Asia to Chile will make rate decisions and UK inflation may finally ease below 2%. The Nobel Prize for Economics will be announced in Stockholm on Monday.

USA and Canada

Reports from the US will give an idea of ​​the dynamism of consumers, manufacturers and homebuilders in the last quarter of the year. Data released on Thursday is expected to show steady growth in retail sales, making consumers' spending habits resilient.

The Atlanta Fed's GDPNow forecast currently points to a faster pace of private consumption spending, supporting strong economic growth in the third quarter.

At the same time, a Fed report on Thursday is expected to show a decrease in industrial production that paints a picture of a struggling manufacturing sector. And housing starts the next day will likely indicate cooler residential construction.

Hurricane Helen's impact on September's economic data will likely be moderate, as landfall occurs at the end of the month. However, Helen and Hurricane Milton are expected to skew the October data.

Fed officials speaking next week include Christopher Waller, Neil Kashkari and Mary Daly.

Turning north, the Bank of Canada will see a further cooling of underlying inflation in September data, after the headline rate finally reached its 2% target in August.

However, a small positive surprise will not divert policymakers from the path of easing, as they said they expect some obstacles on the way to a sustainable return to the target.

Asia

China has been in the spotlight all week, culminating in growth figures on Friday that could show the economy is still expanding below the 5% target for the year.

The result will underscore why authorities adopted aggressive easing measures late last month and delivered another salvo of support on Saturday.

Beijing will release several monthly figures, including industrial production and retail sales for September, along with third-quarter gross domestic product data. Real estate investment likely fell by double digits for the fifth month in a row.

The week began with Sunday's figures showing that China's inflation problems became more pronounced in September, with consumer prices still weak and factory prices continuing to fall.

Elsewhere in the world, the Monetary Authority of Singapore issued its policy statement on Monday, while Southeast Asia received a flurry of central bank actions on Wednesday.

In Manila, the Banco Sentral ng Pilipinas is expected to reduce benchmark rates and overnight deposit facility standing rates by a quarter point, while the Bank of Thailand and Bank Indonesia are expected to maintain their policy settings stable.

Consumer prices in Japan for September were seen rising faster than the Bank of Japan's target for the 27th consecutive month, and Australia receives labor figures on Thursday that could reflect the continued tightening.

Singapore's growth likely accelerated in the third quarter, according to consensus estimates from Monday's data. China, Japan, Indonesia, India, Singapore and Malaysia have trade data, and New Zealand will release third-quarter consumer price figures.

Europe, Middle East, Africa

Along with the ECB's decision, the UK could prove to be a key focus, with data on wages, inflation and retail sales set to be released.

Bank of England Governor Andrew Bailey has indicated that he may be open to a more aggressive approach to easing, with the figures providing an idea of ​​whether the consumer price outlook has become benign enough to allow this.

Economists expect September inflation data to weaken below the 2% target for the first time since April 2021.

Meanwhile, the UK hosts a major investment summit to showcase the country as an attractive destination for multinational companies and money managers.

In the euro zone, the ZEW survey of German investors comes at a time when the country's government accepts its new forecasts, recognizing that Europe's largest economy will likely contract this year.

Fiscal issues are likely to draw attention in Italy, including budget allocations leading up to Tuesday night's EU deadline. Both Fitch Ratings and S&P Global Ratings are scheduled for potential upgrades in Italy after the market closes on Friday.

The region's economic difficulties are expected to feature at the EU leaders' summit in Brussels on Thursday and Friday, with competitiveness at the top of the agenda.

Looking south in Israel on Tuesday, inflation, already above the official target of 1% to 3%, is expected to accelerate as the country becomes embroiled in a multifaceted conflict. Analysts had expected the rate to rise to 3.7% in September from 3.6% the previous month.

In South Africa, the Reserve Bank will release its biennial monetary policy review, which will provide guidance on the outlook for inflation and rates. Governor Lesetza Kogniago will speak at the event.

Investors in Nigeria will be watching to see if annual inflation eases in September, even as higher fuel costs and devastating floods put pressure on prices. Inflation is currently at 32.2%.

In Namibia, the central bank is expected to cut its key interest rate, now at 7.5%, by 25 basis points on Wednesday, in line with South Africa's cut last month. The Namibian dollar is pegged to the rand, meaning that monetary policy is often guided by the actions of the Central Bank of South Africa.

In Türkiye on Thursday, the central bank will likely keep its rate at 50% for the seventh meeting in a row. Inflation fell to 49% in September, against 75% in May, but authorities will want to see it fall further before considering easing. Some analysts think policymakers will delay the cuts until 2025.

In Egypt, the central bank may maintain its rate at 27.25%, after data showed that inflation accelerated for the second consecutive month in September. Goldman Sachs is among the banks now forecasting a delay in reducing borrowing costs until early next year

Latin America

At Chile's rate meeting, expected inflation data could lead to a quarter-point rate cut to 5.25%. This would increase the central bank's easing cycle to 600 basis points, with the possibility of a further reduction of 75 basis points by the end of 2025.

Among other major Latin American central banks, easing in Peru largely tracked expectations, while measures in Brazil, Colombia and Mexico turned out to be much more modest than consensus estimates for mid-2023.

In other central bank news, monetary authorities in Chile, Brazil and Colombia will release multifaceted expectations surveys. Alongside economists and analysts, Chile also carried out a survey of traders called up for Monday.

Unemployment in Peru's capital rose to 6.1% in August and could rise again to the September reading expected on Tuesday, but remains near post-pandemic lows as the economy continues to create jobs.

Also on Tuesday, Colombia released August readings on industrial production, industrial production and retail sales. The July prints were all black, the first such scan in 17 months.

Approximate GDP readings for Brazil, Colombia and Peru may show that the three economies are facing headwinds in July, after having closed the first half of the year on a high.

(Update on the UK Investment Summit in the EMEA section.)