Key events to watch in the week ahead: 16 – 22 September 2024

This week’s overview

Wall Street looks set to round off the week with five straight day of gains, in what seems to be a strong overturn of the early-September jitters. Tech stocks regained ground, while some slight persistence in US inflation read failed to dent the risk rally much, as the broader inflation trend remains on the downside while US policymakers has not put a more aggressive 50 basis point (bp) rate cut off the table just yet for the upcoming meeting.

Looking into the new week, here are four key events to watch.

19 September 2024 (Thursday, 2am SGT): US Federal Reserve (Fed) interest rate decision

At its last meeting in July, the Fed kept rates unchanged at 5.25%-5.50% as widely expected. Following a run of cooler inflation data, Fed Chair Powell sounded dovish. He indicated that the Fed's confidence level is increasing, that inflation is returning to target and laid the groundwork for a September rate cut.

With the committee's concerns shifting from inflation to the cooling labour market, the debate ahead of next week's meeting revolves around how big the Fed's first-rate cut will be. Following firmer core consumer price index (CPI) data this week, the rates market appeared comfortable with a 25 bp rate cut.

However, the debate took another twist at the end of this week after a news report on Thursday night suggested that Fed members were still undecided about cutting rates by 25 bp or 50 bp.

Reflecting this uncertainty, the rates market is currently pricing in 35 bp of rate cuts for September and 115 bp of cumulative rate cuts for year-end. Watch for the Fed’s dots (SEP) to show a shift to three 25 bp rate cuts this year from one and for the Fed chair to signal the size and magnitude of additional rate cuts will be based on the incoming data.

19 September 2024 (Thursday, 9.30am SGT): Australia’s employment change

Last month (July), the Australian economy added 58.2k jobs, stronger than the 25k the market expected. The unemployment rate increased to 4.2% in July, from 4.1% to the highest since November 2021, as the participation rate surged to a record high of 67.1% from 66.9%.

The July labour force report confirmed that the labour market remains tight and cooling more gradually than many had expected. However, with the participation rate or supply rising to a record level, the Reserve Bank of Australia (RBA) will have more time to keep rates on hold and watch how the data develops.

This month (August), the preliminary expectation is for the Australian economy to add 25k jobs and for the unemployment rate to remain at 4.2%. Ahead of the data, the Australian interest rates market is pricing in 20 bp of RBA rate cuts before year-end with a cumulative 82 bp of rate cuts priced by May 2025.

19 September 2024 (Thursday, 7pm SGT): Bank of England (BoE)’s interest rate decision

Back in July, the BoE voted by a slim majority of 5–4 to reduce its bank rate by 0.25 bp to 5%. Thereafter, annual inflation rate in the UK ticked higher to 2.2% in July 2024 from the 2% in June, although it came in slightly below the projected 2.3%.

Its statement also signalled less urgency for further easing, guiding that monetary policies will need to “continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further”.

Ahead, expectations are for the central bank to keep rates unchanged at the upcoming meeting at 5% (80% probability). However, broad consensus is leaning towards a 25 bp cut in November and another 25 bp cut in December. This will have to be validated by lower inflation print or a significant weakening in the labour market ahead. Policymakers’ guidance will be on watch, sticking to its previous guidance for rates to stay restrictive for longer may see some pulling back in dovish bets.

20 September 2024 (Friday, 7.30am SGT): Japan’s CPI, Bank of Japan (BoJ) interest rate decision

The BoJ is expected to keep rates unchanged at 0.25% next week, following a higher-than-expected 15 bp raise in short-term policy target back in July. A back-to-back hike may seem overly aggressive for now, especially with fingers pointing to the hawkish BoJ for exacerbating the global market turmoil in early August.

That said, higher-than-expected Japan's inflation and wage growth over the past month seem to have offered the BoJ more confidence that a virtuous wage-price cycle will keep inflation above 2%, which should pave the way for further policy normalisation ahead.

Markets are looking for the central bank to raise rates further by 10 bp in December this year. The inflation data release before the meeting will be on watch to validate such pricing. Expectations are for core inflation to tick higher to 2.8% from 2.7% prior, which will mark the 29th consecutive month of above-target inflation. An upside inflation surprise may potentially trigger more hawkish bets to price for an earlier timeline of rate hike.