The oil shock has pushed inflation above target almost everywhere, while growth is slowing in Europe. This week the Federal Reserve, the European Central Bank and the Bank of Japan all decide, and the UK presents its Budget. The question running through all four: protect against inflation, or protect growth?
What’s expected. Reports suggest a low-key Budget. The government’s cushion against its own borrowing rules is expected to shrink, from £23.6bn to about £15bn.
Why it matters. Gilt yields are near their highest since 2008. Bond investors will judge whether the plan keeps borrowing on a credible path. If not, yields rise and the cost of the debt rises with them.
What’s expected. A hold at 3.75–4.00% is expected: 94 of 100 economists polled by Reuters say so. Watch for dissents in favour of a rise.
Why it matters. The Fed raised rates in September. Inflation is pushed up by oil, but a tech sell-off has made markets nervous. Its tone will move Treasury yields, the dollar and borrowing costs worldwide.
What’s expected. Growth of about 3% at an annual rate is expected, up from 2.2%. PCE inflation, the Fed’s preferred measure, is expected at 3.6%, with core at 3.1%.
Why it matters. Strong growth with rising inflation would make a December rate rise more likely. A weak reading would tell the Fed the oil shock is starting to bite.
What’s expected. No change to the 2.50% deposit rate is expected. Questions at the press conference are likely to focus on French bond yields.
Why it matters. Euro area inflation is 3.8%, but business activity is at a four-month low. The ECB faces the classic oil-shock dilemma, and France’s widening spread adds a second worry.
What’s expected. Tokyo’s inflation was 2.7% in September. It comes out a few hours before the Bank of Japan decides, and is an early guide to the national figure.
Why it matters. Another high reading would support the case for a further rate rise in December.
What’s expected. A hold at 1.25% is expected after September’s rise. Markets see December as the more likely date for the next one.
Why it matters. Japan’s core inflation is back above 2%, driven by services rather than energy. The new forecasts will show whether the bank thinks that will last. A higher rate would also support the weak yen.
What’s expected. Business surveys point to growth of about 0.3% on the quarter. France’s figures are expected to be weak.
Why it matters. This is the first hard evidence of how much the oil shock is slowing Europe, the day after the ECB decides.
What’s expected. The manufacturing and services PMIs. A reading above 50 means activity is growing.
Why it matters. The first look at how China’s economy is coping with expensive oil and weaker demand from Europe.
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