· Thursday brings the much anticipated FOMC rate decision, with analysts split in their forecasts as to whether the central bank will hike rates after recent volatility in global markets
· A number of other events take place this week including rate decisions from the BoJ and SNB as well as releases of the German ZEW survey and the latest UK inflation & employment data
The week may kick off with reduced volumes as a result of the Rosh Hashanah holiday, the Jewish New Year, on Monday and Tuesday, however the second half of the week will see one of the most talked about Fed rate decisions for years. The FOMC rate decision is scheduled to be announced on Thursday, with many suggesting this is the closest the Fed have been to ending 7 years of zero rates. Interestingly there is a clear divergence between the view of analysts and the view of market participants, with CME Fed Watch showing markets currently pricing in just a 23% chance of a rate hike, while surveyed analysts have been relatively evenly split.
The focus appears to be a question of how `data dependent` the FOMC truly are, with the central bank stating a number of times that this is how the decision will be made. Data over the past few months out of the US has been fairly good, however some suggest the committee will find it hard to ignore the ongoing issues in China, as well as the ensuing global market volatility . Analysts at BNP have suggested Thursday’s meeting will have a dovish tone and the Fed will likely keep rates on hold, with the central bank likely to suggest that the global growth outlook has darkened and the outlook for inflation more uncertain, while analysts at Credit Suisse suggest that a hike in October or December is more likely. It is worth noting from a fixed income perspective that the aforementioned Jewish holiday at the beginning of the week, combined with uncertainty around the FOMC rate decision is likely to see a decline in corporate issuance after last week saw 34 separate issuers price USD 54.11bln in 65 tranches.
In terms of other events to look out for next week, the SNB will announce their latest policy decision, although analysts are relatively unanimous in expecting no major changes from the central bank. The BoJ will also announce their latest policy decision , although once again no major changes are expected here with Japanese LDP lawmaker Yamamoto calling for the BoJ to ease further at their October 30th meeting instead. Finally, other notable data releases come in the form of the German ZEW survey and latest UK inflation data, with analysts at Nordea suggesting UK CPI Y/Y may fall for the month of August to -0.2% (Prev. +0.1%).