Markets Await Central Banks Decisions and CPI Data (16-20 September)

Next week's Federal Reserve interest rate decision is highly anticipated, with a 25 basis point cut expected by 57% of the market.

Next week, the Federal Reserve's interest rate decision in the US will be closely watched by the entire market. While the general expectation is for a 25 basis point cut with a 57% probability, the recent PPI and unemployment data, combined with signs of a weakening labor market, have raised questions about whether the cut might be increased to 50 basis points. The retail sales data will also provide a clue about the upcoming interest rate decision, serving as a key indicator before the Fed's announcement.

CPI data will be released on Wednesday, followed by the Bank of England's interest rate decision on Thursday. Although no rate cut is expected from the BoE, recent hourly wage and growth data that failed to meet expectations have introduced some uncertainty into the market. Despite this, leading indicators have provided positive signals for the economy, keeping expectations stable. The upcoming CPI data will be the final significant indicator that could influence expectations before the interest rate decision.

After last week's interest rate cut decision, CPI data will be released this week in Europe. Given that the ECB did not provide any hints about future rate cuts following their meeting, this data will be an important indicator for the market to estimate the timing and magnitude of the next potential rate cut.

Following last week’s disappointing GDP data, Japan’s interest rate decision is due this week. While the weak GDP figures may suggest a pause, rising import costs are likely to push inflation higher, a sentiment shared by many BoJ board members. Given their previous comments on continued rate hikes, the announcement could cause market volatility.