Central banks from much of the Group of Seven face a pivotal week as mounting inflation risks heap pressure on them to raise interest rates.
Three decisions, starting with the Federal Reserve on Sept 16 and followed on successive days by peers in Britain and Japan, may recast the global monetary policy landscape for the rest of 2026 and beyond.
The US will be most closely watched in the wake of a higher-than-expected core inflation reading on Sept 11. That stoked investor bets that Fed Chairman Kevin Warsh and his colleagues will raise their benchmark rate, probably in defiance of President Donald Trump’s wishes.
A Bank of England rate increase on Sept 17 isn’t anticipated, but with three officials having favoured such a move at the late-July meeting, and with price risks simmering, the prospect of shifting towards a hike as soon as November can’t be excluded.
The Bank of Japan, meanwhile, is widely predicted to raise its key rate at the end of the week after a raft of supportive data, including the nation’s biggest jump in wages in nearly three decades.
With oil emphatically above US$100 a barrel again and the Middle East war apparently reigniting, any hope among policymakers for a respite in global price pressures seems faint for now.
After European Central Bank officials tightened on Sept 10, the second such move since the outbreak of the Iran conflict, investors may well end the week with the picture of an increasingly synchronized hawkish policy stance across the G-7 coming into clearer focus.
The club’s other institution, the Bank of Canada, is moving that way too. Minutes of its decision earlier in September, when officials kept rates steady but emphasised inflation concerns, will be published on Sept 16.
Elsewhere, Chinese industrial data, inflation numbers from Britain and Canada to India and Japan, and a probable rate cut in Brazil will be among the highlights.
US and Canada
Warsh said in August that the Fed would “have work to do” if it couldn’t “be confident that underlying inflation is moving to our objective, clearly and at sufficient speed.” The Sept 11 inflation data offered no such comfort. Investors and economists now see it as a near certainty the US central bank will raise interest rates for the first time in three years.
Support for such a move had been building at the Fed, even before the latest figures. In July, three officials dissented against the decision to hold rates steady and instead would have preferred to hike. Policymakers on Sept 16 will also release updated projections for economic growth, inflation and the outlook for rates.
The week’s US data docket includes retail sales, which are expected to rebound in August, as well as fresh figures on housing starts and industrial production.
Asia
The main focus of the week will be China’s August data dump on Sept 15, set to provide the most comprehensive official look at what happened in the economy there last month.
Forecasts show that economists don’t expect much of a pickup from July, when the economy slowed almost across the board. As has been the case all year, Chinese production and exports of AI-related tech products have expanded rapidly, but the rest of the economy is in a funk.
India’s August inflation data, due on Sept 14, will be watched to gauge if price pressures are broadening, which could offer clues on how soon the RBI may raise rates. On the same day, the Pakistan central bank will announce its rate decision, with economists expecting a hold.
The BOJ’s probable hike on Sept 18 would be its second of the year. That would take the policy rate to 1.25 per cent, the highest level since 1995, and maybe provide more support to the yen, which has risen in recent weeks.
The same morning, the government will report national consumer price data for August, with inflation forecast to have risen 2 per cent from a year earlier.
India, Japan and New Zealand will all report August trade data in the coming week, with Japan’s imports and exports expected to have continued the rapid growth they’ve shown all year when the data is released on Sept 16.
New Zealand on Sept 17 reports second-quarter gross domestic product growth, with the economy forecast to have expanded more slowly than in the first quarter.
That will be the last GDP release before the national election in November, and may be a factor for voters as they decide whether to re-elect Prime Minister Christopher Luxon. Sri Lanka will also report GDP on Sept 15. BLOOMBERG
