Monday starts quietly, with no major economic releases scheduled for the FX market. On Tuesday, the focus in the U.S. will be on the Richmond manufacturing index and the CB consumer confidence report.
Wednesday’s highlights include Australia’s inflation data, along with the Bank of Canada and FOMC monetary policy announcements.
On Thursday, attention will turn to the Bank of Japan’s monetary policy decision, followed by the European Central Bank’s policy announcement for the Eurozone. In the U.S., the advance GDP price index q/q will also be released.
Friday brings Japan’s Tokyo core CPI y/y, Canada’s monthly GDP, and several key U.S. indicators including the core PCE price index m/m, employment cost index q/q, personal income m/m, and personal spending m/m.
The consensus for U.S. consumer confidence is 93.9, slightly below the prior reading of 94.2.
Confidence continues to weaken amid challenging economic conditions, and the ongoing U.S. government shutdown is further weighing on sentiment. In addition, continued softening in the labor market is adding to the downward pressure on consumer outlook.
In Australia, the consensus for CPI q/q is 1.1% versus the prior 0.7%, for CPI y/y is 3.1% versus 3.0%, and for trimmed mean CPI q/q is 0.8% versus 0.6%.
A stronger quarterly CPI increase is expected. While electricity prices fell more than anticipated, strength across other categories supports the view that inflationary pressures remain broad-based.
August’s monthly CPI provided mixed signals, reinforcing the need to wait for the full Q3 release to get a clearer picture of underlying inflation trends. Westpac’s near-term projection for the September monthly indicator sits at 0.2% m/m and 3.1% y/y.
Analysts expect the trimmed mean CPI to rise by about 0.8% in Q3, broadly in line with market expectations. Housing-related components, particularly rents and new dwelling costs, both running near 1% for the quarter, are likely to keep core inflation elevated.
Westpac’s detailed estimate of 0.846% points to a slight upside risk if housing proves stronger than expected. Meanwhile, for the RBA’s estimate of annual core inflation to reach 2.6%, the quarterly pace would have to be 0.6% for the last two quarters.
At this week’s meeting, the Bank of Canada is widely expected to deliver a 25 bps rate cut, lowering its policy rate to 2.50%.
Recent data suggest that inflationary pressures have eased and that the broader economy continues to soften. The labor market shows signs of stabilization, with employment rising by 60.4K in the latest report, though the unemployment rate remains elevated at 7.1%.
Some analysts believe the BoC could choose to pause this week to assess additional data before committing to further easing, but most indicators point to room for the Bank to cut rates without reigniting inflation. While inflation remains slightly above the 2% target, RBC analysts note that a 25 bps reduction is unlikely to add significant upward pressure on prices.
The latest Business Outlook Survey showed a modest decline in inflation expectations, reinforcing the case for additional monetary easing. Nonetheless, the BoC faces a delicate balancing act: with core inflation still sticky, a more aggressive pace of cuts could be difficult to justify unless economic conditions deteriorate further.
Adding to the challenge, ongoing U.S. tariffs continue to weigh on Canada’s manufacturing and wholesale sectors, both of which are expected to show contraction in August’s GDP data. While this weakness supports the case for more stimulus, fiscal policy may also need to shoulder part of the burden. The upcoming federal budget on November 4 is expected to feature significant deficit spending aimed at supporting growth next year.
At this week’s meeting, the Federal Reserve is expected to deliver a 25 bps rate cut. Despite the ongoing U.S. government shutdown, last Friday’s inflation data was released and remains a source of concern.
Headline inflation rose to 3.0%, while core CPI held at 3.0%. However, the three-month annualized rate of 3.6% indicates that price momentum picked up in the third quarter. Tariff-related cost pressures continue to feed through to goods prices, complicating the Fed’s efforts to return inflation to its 2% target.
The labor market also shows signs of softening, with the unemployment rate expected to rise to 4.3%. Jobless claims have remained stable, but consumer sentiment regarding hiring conditions has weakened, reinforcing the view that labor demand is easing.
On the balance sheet front, the Fed appears to be nearing the end of its quantitative tightening program. Chair Powell recently indicated that reserve levels may soon be sufficient, suggesting QT could conclude as early as the October meeting, though December remains the more likely time for an official announcement, according to Wells Fargo analysts.
Traders will be closely watching Powell’s comments for any hints about the policy outlook. While no major changes are expected in the post-meeting statement, Powell is likely to reiterate that policy is moving closer to neutral as the Fed continues balancing the trade-off between controlling inflation and supporting employment.
The BoJ is widely expected to keep its policy rate unchanged at 0.50% at this week’s meeting.
With no major policy shift anticipated, traders will focus on any hints of potential changes in the near future, particularly in light of Prime Minister Sanae Takaichi’s cautious stance toward tighter monetary policy. Rising trade tensions between China and the U.S. also add uncertainty to the external environment, Wells Fargo analysts said.
Economic data for 2025 paints a mixed picture. Business confidence remains strong and overall growth steady, but inflation continues to exceed the BoJ’s target. Meanwhile, slower wage gains make the case for additional rate hikes less compelling.
Analysts currently expect a 25 bps increase to 0.75% in December, though the move could be delayed into 2026 if political developments or weaker wage trends sway the central bank’s decision.
At this week’s meeting, the ECB is expected to keep rates on hold. Recent economic data remain mixed, with GDP rising modestly by 0.1% q/q, supported mainly by inventories, government spending and household consumption.
Inflation, while still above the ECB’s 2% target, continues to show signs of easing. Analysts generally expect the Bank to maintain its current policy stance through the end of the year.
The focus at this meeting will be on whether the ECB provides any guidance on potential rate cuts later in the year, as well as on the details of the updated staff forecasts.
This article was written by Gina Constantin at investinglive.com.