Week Ahead: Aggressive Tightening

Craig Erlam profile picture
Craig Erlam


  • The FOMC may consider a full-point rate hike but will likely settle on delivering its third consecutive 75 basis-point increase.
  • The BoE will meet on Thursday and it has a big decision to make.
  • The FX world is closely watching everything out of Japan.


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Many on Wall Street are watching the Fed’s rate hiking cycle and are getting nervous they will tip the economy into a recession. With scorching inflation, the FOMC may consider a full-point rate hike but will likely settle on delivering its third consecutive 75 basis-point increase. At Wednesday’s policy meeting, Fed Chair Jerome Powell will likely acknowledge downside risks to growth are here and unrelenting inflation is forcing them to maintain an aggressive pace of tightening. Inflation risks are still tilted to the upside and will likely keep the Fed from providing any hints that a “Fed put” is coming.


The ECB appears to be one of the few major central banks not holding a monetary policy meeting next week but that won’t keep them out of the headlines. Policymakers are scheduled to make regular appearances including Philip Lane on Saturday which may present some weekend risk.

On Friday, the flash PMIs could give an idea of how the economy is coping and whether it is heading for a recession in the fourth quarter, as some fear.


Monday is a bank holiday in the UK as the country pays its respects to Queen Elizabeth II on the day of her funeral.

After being pushed back a week due to the 10-day period of national mourning, the BoE will meet on Thursday and it has a big decision to make. Inflation is running extremely hot – although it did drop back below 10% last month – and while it has likely not yet peaked, the high should be much lower now that the new government has announced a cap on energy bills.

That may come as a relief to many but it could mean higher core inflation and interest rates further down the road. How the BoE responds to all of this without the aid of new economic projections is what will interest investors.

The week draws to a close with PMIs on Friday.


Markets continue to monitor the situation in Ukraine amid a strong counteroffensive that saw Russia concede a lot of ground while raising the prospect of defeat and waning support for Vladimir Putin.

The only economic release next week is PPI inflation on Wednesday.

South Africa

The SARB is expected to hike rates by another 75 basis points to 6.25% on Thursday as inflation continues to rise. The CPI is currently well above the 3-6% target range at 7.8% and the central bank will get an update on this the day before their decision, which could play a role in just how aggressive they’ll be this month.


One central bank that almost certainly won’t be raising interest rates next week is the CBRT. Last month, it unexpectedly cut rates by another 100 basis points to 13% despite inflation running at almost 80%. That has risen further since but the central bank will not be deterred. No change is expected from the CBRT next week but clearly, another rate cut should not be ruled out.


Inflation continues to run hot which makes a large rate hike on Thursday from the SNB highly likely. Markets are pricing in at least 75 basis points, maybe even 100, taking the policy rate out of negative territory for the first time since early 2015. The central bank loves to spring a surprise though, the biggest recently perhaps being that it’s waited until a scheduled meeting to act. We’ll see how bold it’s prepared to be on Thursday.


China is expected to keep rates unchanged at 3.65%, as the 1-year LPR (Loan Prime Rate) was just recently adjusted down from 3.7%. If the Chinese central bank unexpectedly adjusts rates to a lower level again, it may be detrimental to the yuan.

The PBOC’s fixings are must-watch events now that the yuan has weakened beyond the key 7 against the dollar.


Traders will pay close attention to the second quarter current account data. Expectations are for the current account deficit to widen from $13.4 billion to $30.36 billion. India has been weakening as trade balances balloon and foreign investment takes a big hit.

Australia & New Zealand

Traders are awaiting the release of the minutes of the RBA meeting next Tuesday and upcoming speeches by RBA’s Kearns and Bullock. The RBA seems poised to move forward with smaller rate hike moves, but traders will look to see if the latest round of RBA speak confirms the downward shift discussed by central bank chief Lowe.

It will be a busy week in New Zealand as a steady flow of economic data is accompanied by a couple of RBNZ speeches by Governor Orr and Deputy Governor Hawkesby. The big economic releases of the week are Wednesday’s credit card spending data and Thursday’s trade data.


The FX world is closely watching everything out of Japan. Traders are waiting to see if policymakers will intervene to provide some relief for the Japanese yen. What could complicate their decision is that Japan has a holiday on Monday.

The divergence between the Fed’s tightening cycle and the Bank of Japan’s steady approach continues to support the dollar against the yen. The BOJ is widely expected to keep rates on hold even as core inflation extends above the BOJ’s 2% target.


The focus for Singapore will be the August inflation report that should show pricing pressures remain intense. The year-over-year reading is expected to rise from 7.0% to 7.2%.

Economic Calendar

Saturday, Sept. 17: Economic Data/Events

  • Thousands pay their respects to Queen Elizabeth II at Westminster
  • European Central Bank chief economist Lane speaks at the Dublin Economics Workshop in Wexford, Ireland

Monday, Sept. 19: Economic Data/Events

  • World leaders attend Queen Elizabeth II’s funeral in Westminster Abbey in London
  • UK Bank Holiday
  • Japan Bank Holiday
  • New Zealand performance services index
  • RBA’s head of domestic markets Kearns delivers the keynote address at the Australian Financial Review Property Summit in Sydney
  • ECB’s de Guindos speaks at the annual Consejos Consultivos meeting

Tuesday, Sept. 20: Economic Data/Events

  • US housing Starts
  • Canada CPI
  • China loan prime rates
  • Japan CPI
  • Mexico international reserves
  • Spain trade
  • Sweden rate decision: Expected to raise rates by 75bp to 1.500%
  • UK Parliament in session
  • Annual UN General Assembly in New York
  • Dockworkers at the UK’s Port of Liverpool are expected to begin a two-week strike
  • Norges deputy central bank Governor Borsum speaks
  • German Economy Minister Habeck speaks at the congress of municipal energy suppliers
  • RBA releases minutes from its September policy meeting.
  • BOC Deputy Governor Beaudry delivers a lecture on “pandemic macroeconomics” at the University of Waterloo in Ontario

Wednesday, Sept. 21: Economic Data/Events

  • FOMC Policy Decision: Fed expected to raise rates by 75bps
  • US existing home sales
  • Argentina unemployment, trade
  • Australia leading index
  • New Zealand credit-card spending
  • South Africa CPI
  • Big-bank CEOs testify before the US House Financial Services Committee at a hearing titled, “Holding Megabanks Accountable.”
  • RBA Deputy Governor Michele Bullock speaks at a Bloomberg event in Sydney
  • ECB’s de Guindos to speak at Insurance Summit 2022 organized by Altamar CAM in Cologne, Germany
  • EIA crude oil inventory report

Thursday, Sept. 22: Economic Data/Events

  • US Conference Board leading index, initial jobless claims
  • China Swift global payments
  • Eurozone consumer confidence
  • BOJ rate decision: No changes expected with rates and 10-year yield target
  • Japan department store sales
  • New Zealand trade, consumer confidence
  • Norway rate decision: Expected to raise rates by 50bps to 2.25%
  • South Africa rate decision: Expected to raise rates by 75bps to 6.25%
  • Switzerland rate decision: Expected to raise rates by 75bps to 0.50%
  • Taiwan jobless rate, rate decision, money supply
  • Thailand trade
  • Turkey rate decision: Expected to cut rates by 100bps to 12.00%
  • UK BOE rate decision: Markets remain split between expectations for a half-point or a three-quarter-point hike.
  • US Treasury Secretary Janet Yellen addresses the Atlantic Festival in Washington.
  • The UN Security Council holds a meeting on Ukraine
  • BOE’s Tenreyro speaks at a seminar at the San Francisco Fed on “climate-change pledges, actions and outcomes.”

Friday, Sept. 23: Economic Data/Events

  • US Flash PMIs
  • Australia prelim PMI
  • Canada retail sales
  • European Flash PMIs: Eurozone, Germany, France, and the UK
  • Singapore CPI
  • Spain GDP
  • Taiwan industrial production
  • Thailand foreign reserves, forward contracts
  • Norway Central Bank Governor Wolden speaks

Sovereign Rating Updates

  • Germany (S&P)
  • Hungary (Moody’s)
  • Sweden (Moody’s)
  • European Union (DBRS)
  • Finland (DBRS)

Original Post

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

This article was written by

Craig Erlam profile picture
Based in London, England, Craig Erlam joined OANDA in 2015 as a Senior Market Analyst. With more than five years’ experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the BBC and The Telegraph, and he also appears regularly as a guest commentator on Bloomberg TV, CNBC, FOX Business and BNN. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.

Additional disclosure: © 2020 OANDA Business Information & Services Inc.

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