Barring a surprise, the European Central Bank looks ready to deliver a second hike this week. After a long summer break, policymakers return with fresh quarterly forecasts and a harder question to answer: do they hint at another step before 2024 is out?
Price pressures are still sticky. Headline inflation in the euro area sped up to 3.3% in August, clearly above the 2% goal, even as the core gauge cooled more than expected. That mix, combined with the region's reliance on imported energy and the backdrop of higher fuel costs and ongoing Middle East hostilities/), keeps the bias toward caution. Officials still carry scars from criticism that they were late to the 2022 cost-of-living surge.
The discussion over a potential third hike is tight. Lithuania's Gediminas Simkus has floated that a September move alone would fall short. Germany's Joachim Nagel has offered few hints. Markets have largely penciled in a December increase, and the chorus of forecasters expecting that outcome has grown in recent days as JPMorgan, Societe Generale and BNP Paribas shifted to call for another hike.
Another quarter-point increase would reinforce the ECB's standing as the G7's most hawkish central bank. What matters most on Thursday is how openly officials point to December. Bloomberg Economics' David Powell and Simona Delle Chiaie put it plainly: the Governing Council has already flagged this week's move, so guidance on the next step will draw the spotlight.
With oil volatility back and gas prices jumping, hawks will press for December. The counterweight is tighter financial conditions and only limited signs that the energy shock is feeding through indirectly.
In short, the bar for a third hike is not impossibly high, but it is higher than it was this summer.
In the US, whether the Fed feels compelled to lift rates at its Sept. 15-16 meeting may hinge on the inflation prints. Economists expect August CPI to rise 0.4% month over month, partly on pricier gasoline. Core CPI, which strips out food and energy, is seen up a milder 0.2%. That pace would pull the annual core rate down to 2.4%, the smallest increase since 2021.
Thursday brings producer prices, where forecasters see both headline and core PPI picking up in August. Those readings are expected to capture more of the near-term price effects tied to the war in Iran and supply-chain snags. Also Thursday, the National Association of Realtors is projected to show a third straight drop in existing-home sales as housing contends with costly mortgages, high prices and thin inventory.
North of the border, Canada's counter-tariffs on the US kick in Tuesday. The open question is whether President Donald Trump answers with fresh measures that escalate tensions further. There is no sign of talks resuming.
Asia's data pulse centers on inflation. China's consumer prices are forecast to quicken to 0.9% year over year in August, with factory-gate prices seen rising 3.7% - a tentative positive for demand. Thailand and Taiwan also report inflation.
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Japan is expected to nudge its second-quarter GDP estimate up a bit following stronger-than-anticipated capital spending, and will also release July wage data that illuminate real incomes after a June revision showed the biggest gain in five years. Australia will issue September readings on consumer sentiment and August figures on business confidence, the latter remaining below zero for six consecutive months. Singapore posts July retail sales Monday, and both China and Taiwan are due to release trade data.
New Zealand reports second-quarter manufacturing activity on Tuesday and follows up with August's manufacturing PMI later in the week. That gauge has stayed below the expansion threshold for 13 straight months.
There are no rate decisions in Asia this week, but plenty of central bankers are talking. On Thursday, Bank of Japan policy board member Kazuyuki Masu will speak to business leaders, marking the BOJ's last planned public remarks ahead of a widely anticipated rate increase on Sept. 18. Markets will parse whether he leans with or against those expectations. RBA Assistant Governor Sarah Hunter, RBA Deputy Governor Andrew Hauser, and RBNZ Assistant Governor Karen Silk are also on the speaking circuit.
Europe has a busy slate of growth markers. Germany's July industrial production and exports arrive Monday and Tuesday and could reinforce signs of a broader recovery after a strong factory orders print on Friday. France reports July industrial output Wednesday.
Euro-zone data Monday update the second-quarter growth picture, which was initially put at 0.4%. The UK reports July GDP on Friday, its first read on the current quarter and on the early stretch of Prime Minister Andy Burnham's tenure. That same day brings the Bank of England's survey on inflation attitudes, and Governor Andrew Bailey appears Tuesday before the UK Parliament's Treasury Committee.
Nordic inflation will guide rate expectations. Sweden's preliminary August reading lands Monday as the Riksbank debates if a hike will be necessary later in the fall. Last month, Governor Erik Thedeen said the next move "needs to be a raise," though the timetable is still unclear as growth firms and, at that point, inflation risks linked to the Iran war seemed to be receding.
In Norway, core inflation likely crept back above 3% after dipping below that mark for two months. A softer print would tilt the Norges Bank toward delaying tightening expected this month, perhaps acting closer to year end.
Further south, South Africa's data Tuesday are projected to show a 0.1% contraction in the second quarter, breaking a six-quarter growth streak, as the war in Iran and pre-election uncertainty weighed on investment while mining and manufacturing output fell. Poland's central bank is expected to hold rates steady for a sixth consecutive meeting on Wednesday.
If the ECB lifts again this week and hints at December, borrowing costs in Europe likely stay higher for longer, which can ripple into everything from mortgage resets to corporate financing. In the US, a softer core CPI and the PPI read on Thursday will shape how confident the Fed feels about staying put later this month. And the run of inflation and growth checks from China to the Nordics will influence how synchronized - or not - global policy looks this fall.
Keep an eye on a few simple markers: euro-area inflation at 3.3%, the 0.4% and 0.2% monthly US CPI and core readings, and whether Europe's data keep pointing to a firmer growth base. Those are the numbers most likely to move rates, currencies and, by extension, your day-to-day financial costs.
