The ECB is ready to deepen the global easing of monetary policy with interest rate cuts that it did not expect – news from the world

Given the shorter-than-usual delay of just five weeks and little new data, officials appear to be disregarding recent warnings about persistent inflationary pressures and responding mainly to survey data showing a contraction in the private sector economy.

Such reports have moved the needle for financial markets and added momentum to a widely expected interest rate cut after policymakers largely supported the change in interest rates.

The change was sudden. In a September 12 decision, officials all but ruled out reductions in October. A few days later, Slovak central bank governor Peter Kazmir announced that “we will almost certainly have to wait until December” for another move, as “very little new information will be available” until October 17.

He is currently the only voice publicly opposing Thursday's move, though other hawks may join him behind the scenes.

Looking ahead, economists now believe the ECB will accelerate monetary easing to limit borrowing costs to a level that will no longer cause the economy to contract by the end of 2025, according to a Bloomberg survey.

Elsewhere, Chinese data may show that the economy is still off target, other central banks from Southeast Asia to Chile will make decisions on interest rates, and UK inflation may eventually fall below 2%. The Nobel Prize in Economics will be announced on Monday in Stockholm.

USA and Canada

Reports from the USA will provide an insight into how dynamic consumers, producers and house building companies were in the last quarter of the year. Figures released on Thursday are forecast to show continued growth in retail sales, making consumer shopping habits more resilient.

The Atlanta Fed forecast now projects a faster pace of private consumption spending, underpinning strong economic growth in the third quarter.

At the same time, the Fed report released on Thursday is expected to show reduced production at factories, illustrating the struggling manufacturing sector. Home construction starts the next day will likely mean cooler housing construction.

The impact of Hurricane Helen on September economic data is likely to be moderate as Hurricane Helen makes landfall later in the month. However, Helen and Hurricane Milton are expected to skew the October numbers.

Fed officials who will speak next week include Christopher Waller, Neil Kashkari and Mary Daly.

Heading north, the Bank of Canada will see core inflation cool further in September data, after the policy rate finally met its 2% target in August.

However, the small positive surprise will not throw policymakers off their easing course as they said they expect some bumps on the road to a sustained return to the target.

Asia

China has been in the spotlight all week, culminating on Friday with growth data that could show the economy is still growing below its 5% target for this year.

The result will show why the authorities began aggressively easing monetary policy at the end of last month and presented another salvo of support on Saturday.

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

The week started with Sunday's data showing China's inflation problems became more pronounced in September, with consumer prices still low and gate prices continuing to decline.

Elsewhere, the Monetary Authority of Singapore issued its policy statement on Monday, while in Southeast Asia, there was a flurry of central bank action on Wednesday.

In Manila, Banco Sentral ng Pilipinas is forecast to cut its benchmark and fixed overnight deposit rates by a quarter, while the Bank of Thailand and Bank of Indonesia are likely to maintain their policy settings.

Japan's September consumer prices rose faster than the Bank of Japan's target for the 27th straight month, and Australia received employment data on Thursday that could reflect further tightening of monetary policy.

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

Europe, Middle East, Africa

Apart from the ECB's decision, the main topic of discussion may be Great Britain, due to the publication of data on wages, inflation and retail sales.

Bank of England Governor Andrew Bailey has indicated he may be open to a more aggressive approach to monetary easing, and the figures provide insight into whether the consumer price situation has become favorable enough to allow this.

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

Meanwhile, the UK is hosting a major investment summit aimed at showcasing the country as an attractive destination for international companies and money managers.

In the euro zone, Germany's ZEW investor survey comes after the country's government came to terms with its new forecast, acknowledging that Europe's largest economy is likely to contract this year.

In Italy, attention is likely to be on fiscal issues, including budget allocations by Tuesday evening under an EU deadline. Possible rating updates from Fitch Ratings and S&P Global Ratings in Italy are scheduled for Friday after the market close.

The region's economic problems are likely to be raised at the EU leaders' summit in Brussels on Thursday and Friday, with competitiveness a key topic.

Looking south, inflation in Israel, already above the official target of 1-3%, is expected to accelerate on Tuesday as the country becomes embroiled in a multi-faceted conflict. Analysts predicted an increase in the interest rate in September to 3.7% from 3.6% a month earlier.

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

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

In Namibia, the central bank is set to cut its key interest rate, currently 7.5%, by 25 basis points on Wednesday, similar to last month's cut in South Africa. The Namibian dollar is pegged to the rand, which means monetary policy is often based on the actions of the South African Reserve Bank.

On Thursday, Turkey's central bank is likely to keep the interest rate at 50% for the seventh consecutive meeting. Inflation fell to 49% in September from 75% in May, but officials will want to see a further decline before considering easing. Some analysts believe that policymakers will hold off on cuts until 2025.

In Egypt, the central bank may keep the interest rate at 27.25% after data showed inflation accelerated for a second straight month in September. Goldman Sachs is one of the banks that currently forecast a delay in reducing loan costs until the beginning of next year

Latin America

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

Among Latin America's other major central banks, monetary easing in Peru was largely in line with expectations, while measures in Brazil, Colombia and Mexico were much more modest than consensus estimates for mid-2023.

In other central bank news, the monetary authorities of Chile, Brazil and Colombia will release multi-faceted expectations surveys. In addition to economists and analysts, Chile also conducted a survey of traders selected for Monday.

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

Also on Tuesday, Colombia released August readings for industrial production, industrial production and retail sales. All the prints from July were black, which was the first such procedure in 17 months.

GDP readings from Brazil, Colombia and Peru may show that all three economies are struggling in July after finishing well in the first half of the year.

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