Central banks will meet and decide the fate of interest rates around the world this week.
The Fed’s US tapering plans remain the key question and recent data suggests caution may be warranted: the US economy created the fewest jobs in seven months in August and consumer prices increased at their slowest pace in six months.
The Bank of England is unlikely to change policy but with consumer price growth at a 9-year high in August, traders are pricing a rate rise next May. The BoE may signal at its Thursday meeting whether or not it still views inflation as transitory.
Canadian Prime Minister Justin Trudeau gambled in calling an early election but opinion polls indicate it may backfire. The prospect of a deadlock that hampers Ottawa’s response to COVID-19 is causing some anxiety – Canada’s dollar has shed 1% since Trudeau called the vote in mid-August (two years before schedule) and stocks are near three-week lows.
The British public’s expectations for inflation rose last month but remained within levels seen since the start of the COVID-19 pandemic, despite a recent jump in headline inflation, a Bank of England survey showed. Inflation expectations for the year ahead rose to 2.7% in August from 2.4% in May, according to the survey, which was conducted by market research firm Kantar. They have kept in a range of 2.4% to 2.9% since the onset of the COVID-19 pandemic.
The White House warned on Friday that a failure by the US Congress to extend the debt limit could plunge the economy into a recession and could lead to cuts in critical state services.
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