On Wednesday, the minutes of the US Fed meeting held on 19-20 September will be published, at which the FOMC members left rates unchanged in the range of 5.25-5.5%. The next Fed meeting takes place from 31 October to 1 November and the money market is currently pricing in only a 16% chance of a Fed-indicated next rate hike (the latest so-called dot plot with individual FOMC members' expectations suggesting a final hike), despite Friday's stronger-than-expected September labour market report.
An argument for stability may also be made by the strong rise in the yield on the 10-year US Treasury note, which serves as a closely watched benchmark rate from which the required rate of return on other assets is derived. These have shot above 4.8% this year, the highest since 2007.
The US dollar is also strengthening, and uncertainty is being brought by strikes by US auto unions and the threat of a federal government shutdown in mid-November if US lawmakers do not agree to further raise the debt ceiling.
On Thursday, the minutes of the European Central Bank's 13-14 September meeting will be published, at which the Governing Council raised rates by 0.25pps, taking the main refinancing rate to 4.5%.
According to Bloomberg, although the ECB's statement that the current level of rates for a sufficient period of time should contribute to a substantial return of inflation to target indicated that the rate hike cycle was over, later leaks to the media suggested that several "hawkish" members of the board (placing more emphasis on inflation than on economic growth or the labor market) could be heading for one more hike in December if wages continue to rise and inflation is more persistent. This has been helped by several statements from central bankers in the northern states.
For the record, the minutes of the Czech National Bank's September 27 meeting were published last week. Even according to Tomáš Holub, "a move towards lower interest rates for the rest of this year would make sense," among other reasons, because waiting until the February meeting could necessitate a subsequent more drastic cut, which could trigger an adverse reaction in the exchange rate.
Consumer prices - month-on-month decline in the Czech Republic in September?
On Tuesday, consumer prices in the Czech Republic will be published. On a year-on-year basis, inflation is expected to slow to 7.5%, while on a month-on-month basis the price level is expected to fall by as much as 0.2%. Final German inflation figures for September will be published on Wednesday.
On Thursday, the CPI report will be published in the United States. On a year-on-year basis, headline and core inflation should slow, but on a month-on-month basis, core inflation for the second month should remain at 0.3% according to economists, implying an annualized rate of 3-4%, well above the 2% target. According to economists at Bloomberg Economics, after three months, core goods prices should rise month-on-month, driven by used car prices. In contrast, for U.S. producer prices, core month-on-month growth should remain at 0.2%. Fuel and transportation prices should continue to contribute to PPI growth, albeit less strongly than in previous months, according to Bloomberg Economics.
Anemic price growth in China
The opposite inflation problem is being addressed by China, whose statisticians will report on Friday. Economists expect consumer prices (CPI) for September to rise 0.2% year-on-year after a 0.1% rise in August, and producer prices (PPI) to fall 2.4% after a 3.0% decline the previous month.
Jobless claims, gas and oil inventories, US consumer confidence, eurozone industry
Weekly welfare claims will be released on Thursday - new claims are expected to rise from 207k to 210k, gas and oil inventories.
Also on Friday, the US will release the preliminary reading of the University of Michigan consumer confidence index for October, which is expected to fall to 67.0pts from 68.1pts previously.
Eurozone industrial production will also be published, which is expected to show a 3.4% year-on-year decline in August after a 2.2% drop in July, or 0.1% month-on-month growth after a 1.1% decline.