Central banks will take center stage this week, with the Boj and Fed within hours of each other, then also the RBNZ and Norges all delivering policy decisions. Of the four however, the BoJ will likely steal the spotlight, especially as we expect no changes in policy from the other three.
Looking at the big picture this is what BofA expects from the various central bank announcements:
- BoJ: Policy innovations
We expect the BOJ to step up its support for getting inflation back to 2%, with a combination of policy innovations designed to sharpen monetary accommodation and bolster BOJ credibility most likely in our view. There is a risk, however, that the markets misinterpret some of the changes as a stealth tightening.
- Fed: On hold but cautiously hawkish
Although we expect no change in rates from the Fed, we expect there will be hawkish hints, keeping a hike this year on the table. We believe they could adopt an explicit balanced assessment of risks and generally sound upbeat on real activity. These indications, coupled with a shift lower in the dot plot but unchanged pace of tightening in 2017 and 2018, will likely be read as less accommodative by the market.
- RBNZ: On hold but further easing likely
We expect the RBNZ to remain on hold, after easing the OCR by 25bpts to 2.0% in August. While the RBNZ has explicitly stated that further easing is on the table to get the currency lower, we expect that the RBNZ will wait until its 10 November meeting when it updates its forecasts and releases its MPS to take action.
- Norges Bank: On hold but dovish
We expect Norges Bank to remain on hold this week but maintain a dovish tone, keeping the possibility for further cuts on the table, especially in the event of a downturn in the data or to counter rapid NOK strength.
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In other data
- In the US, all eyes will be on the Fed with little else on the data calendar other than housing data.
- A light week in the Eurozone, with PMIs the main data releases. We also hear from a number of ECB speakers including Draghi.
- In Australia and New Zealand, the RBNZ meeting will be the key focus but we also get minutes of the September RBA meeting.
- In Japan, the BOJ will be the main event, while in Canada, we get retail sales and inflation as well as a speech from Governor Poloz.
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Looking at specific events, it’s a fairly quiet start datawise today with nothing particularly interesting in Europe this morning and just the NAHB housing market index reading in the US to highlight.
Tomorrow we have PPI data for Germany in the morning, before we get the August housing starts and building permits data in the US in the afternoon.
The key day is of course Wednesday. During Asia time we’ll have the all important BoJ meeting, while the latest Japan trade data for August will also be released. In the UK we then get the latest public sector net borrowing data. That’s before we turn focus over to the Fed in the evening when we’ll get the outcome of the two-day FOMC meeting and also the latest economic projections from the committee members.
Kicking things off on Thursday will be France with September confidence indicators, while in the UK the CBI trends data for this month is released. In the US on Thursday there’s a bunch of second tier data including initial jobless claims, Chicago Fed national activity index, existing home sales, leading index and Kansas City Fed’s manufacturing survey. The Euro area consumer confidence reading (for September) also gets released on Thursday afternoon.
Friday is all about the PMI’s where we’ll firstly get the flash September manufacturing print in Japan, followed by the flash services, manufacturing and composite readings for the Euro area, Germany and France. The US will also release the flash manufacturing print. Away from that we get the final Q2 GDP revisions in France.
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The visual summary:
Finally, courtesy of Goldman, a detailed preview of all US-based events:
Monday, September 19
- 10:00 AM NAHB housing market index, September (consensus 60, last 60): The NAHB homebuilders’ index—which we have found to be a decent leading indicator of housing starts—edged up last month and remains near its post-crisis highs. Consensus expects the index to remain flat in September.
Tuesday, September 20
- 08:30 AM Housing starts, August (GS -3.0%, consensus -1.7%, last +2.1%): Building permits, August (consensus +1.8%, last -0.8%); We expect housing starts declined by 3.0% in August, following a 2.1% stronger-than-expected increase in July that was largely driven by gains in the multi-family segment. Housing starts have outpaced increases in building permits recently, implying a modest slowing in housing starts for August. Consensus expects new permits to rise 1.8% after a 0.8% decline in July.
Wednesday, September 21
- 2:00 PM FOMC statement, September 20-21 meeting: As noted in our FOMC preview, we do not expect the committee to raise rates at the September meeting. While guidance from the meeting and subsequent press conference is likely to tilt more hawkish, we anticipate the statement will be noncommittal about the prospects for a rate hike this year. Overall, we put the cumulative odds of a rate hike this year at 65%. In the Summary of Economic Projections (SEP), we look for: (1) a downward revision to 2016 GDP growth; (2) no change to the unemployment and core inflation projections; and (3) a lower projected median fed funds rate path for 2016 and 2017.
Thursday, September 22
- 08:30 AM Initial jobless claims, week ended September 17 (GS 260k, consensus 261k, last 260k); Continuing jobless claims, week ended September 10 (consensus 2,143k, last 2,143k); We expect initial jobless claims to remain in line with last week, when initial claims edged up to 260k. The largest increases were in California and Virginia, while the greatest declines were reported in Illinois and Pennsylvania.
- 9:00 AM FHFA house price index, July (consensus +0.3%, last +0.2%): Consensus expects a 0.3% gain in the FHFA house price index in July, which has risen 5.6% over the past year. Last month, FHFA home prices increased 0.2%, but at a slower pace than expected. The FHFA house price index has a wider geographic coverage than the S&P/Case-Shiller housing price index, but is based only on properties financed with conforming mortgages.
- 10:00 AM Existing home sales, August (consensus +1.1%, last -3.2%): Existing home sales are expected to recover modestly after a 3.2% decline in July, according to the consensus view. Existing home sales are an input into the brokers’ commissions component of residential investment in the GDP report.
- 10:00 AM Leading indicators, August (consensus flat, last +0.4%)
- 11:00 AM Kansas City Fed manufacturing index, September (last -4)
Friday, September 23
- 09:45 AM Markit Flash US Manufacturing PMI, September preliminary (consensus 52.0, last 52.0): Details from the Philly Fed and Empire State surveys showed mixed signals in September, following mostly softer reports from regional manufacturing surveys in August. We find that the flash Markit PMI does contain some predictive power for the ISM.
- 10:00 AM Atlanta Fed business inflation expectations, September (last +1.8%)
- 12:00 PM Fed Presidents Harker, Lockhart, and Mester speak: Federal Reserve Bank of Philadelphia President Patrick Harker (FOMC non-voter), Federal Reserve Bank of Atlanta President Dennis Lockhart (FOMC non-voter), and Federal Reserve Bank of Cleveland President Loretta Mester (FOMC voter) will participate in a panel on the “Fed’s Role in Our Communities” at a conference hosted by the Federal Reserve Bank of Philadelphia.
- 12:30 PM Fed President Kaplan (FOMC non-voter) speaks: Federal Reserve Bank of Dallas President Robert Kaplan will take part in a moderated Q&A at the Texas Oil and Gas Association Lone Star Energy Forum. Audience and media Q&A is expected. There will be no prepared text. Recently, President Kaplan has remarked that the case to raise interest rates has strengthened over the last several months, but “the path is going to be very shallow and very flat.”
Source: BofA, DB, Goldman
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