Global economy ahead: All eyes on the US Fed

The US Federal Reserve takes centre stage in the coming week, eclipsing industry data from China, another grim inflation reading from the Eurozone and rate decisions in Japan and Switzerland.

Guessing whether the Fed hikes rates on Thursday or opts for a later date, perhaps December, is something of a futile exercise because even the rate setters appear to be wavering and the decision will probably come down to the wire.

An unexpected drop in the jobless rate to 5.1% and an upward revision in second quarter growth to 3.7% support calls for a hike as the labour market tightens and utilisation is at its best level since the global financial crisis.

China’s slowdown is likely to be a key worry for the Fed and a 14% drop in Chinese imports over the past year, the 10th straight monthly drop, along with an annual factory gate price deflation of almost 6 percent, does not help rate hike arguments.

In Europe, the key item will be final August Eurozone inflation data due on Wednesday, likely supplying another arguments for the European Central Bank to beef up quantitative easing.

The Bank of Japan announces its rate decision on Tuesday and Governor Haruhiko Kuroda is expected to offer a bleaker view on overseas economies and may lower its assessment on the country’s exports next week.

The Swiss National Bank is also expected to keep policy steady but markets expect the bank to say that it was ready to cut the deposit rate even further into negative territory if necessary.

 Article adapted from News24