What to Watch Across Markets This Week: September 16, 2024

Upcoming Events for This Week

This week is the highlight of September, with the market anticipating key updates, including the U.S. Federal Funds Rate, the UK Official Bank Rate, and the Japanese Policy Rate. Let’s dive deeper into each for further insights.

Federal Fund Rate

This week begins with markets raising their expectations for the size of the next interest rate cut by the Federal Reserve at its next meeting on Wednesday, September 18, 2024 at 10:00 pm GMT+4 (Dubai time), compared to expectations last week, as expectations according to the Fed watch tool rose from 15% to 59%, based on the latest inflation data represented by the consumer and producer price indices, which provided good evidence that US inflation has declined to the rate close to the rate required by the Federal Reserve, which is 2%.

But before reaching the Federal Reserve's decision on the US interest rate, the markets will be with the retail sales index reading on Tuesday, September 17, 2024, at 4:30 pm GMT (Dubai time), which is expected to decline significantly to its lowest level since February 2024, and if it happens, will support expectations of the Federal Reserve reducing interest rates by a full half percentage point.

According to these expectations for the economic indicator of retail sales, and the current expectations for the Federal Reserve’s decision, the most suitable scenario for the stock market, according to analysts’ analysis, would be represented by a decision to reduce interest rates by half a percentage point.

Figure 1: U.S. Interest Rate, Monthly Time-Frame, trading view

Inflation and Official Bank Rate in the UK

The Office for National Statistics is due to release its Consumer Price Index (CPI) year-on-year data at 10:00 GMT+4 (Dubai time) on Wednesday, 18 September 2024.

The market expects the rate to rise above 2% for the first time in two months, with inflation projected to increase slightly to 2.2%.

The Bank of England (BOE) is due to release its official cash rate on Thursday at 3:00 PM GMT+4 (Dubai time). The market is expecting the rate to remain at 5.00%, indicating a rate cut. In its latest decision, the BoE cut interest rates by 25 basis points.

Japanese Policy Rate

The inflation index in Japan will be released on Friday 20 September,2024 at 3:30 am, an indicator that the Bank of Japan is watching very carefully, with expectations of continuing its successive increases from 2.7% to 2.8%. 

On the same day, after the inflation index released, the markets are waiting for the Bank of Japan meeting at 7 pm Dubai time, which is expected to keep interest rates at a 0.25%, noting that the Deputy Governor of the Bank of Japan had recently confirmed that the bank is open to raising interest rates to confront and control inflation.

European Inflation indicator 

The European Union inflation Index will be released on Wednesday 18 September,2024 at 1 pm Dubai time, with expectations of it remaining unchanged on an annual basis at 2.2 percent.