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Daniel Richards - MENA Economist
Published Date: 21 September 2022
All eyes are on the FOMC meeting, from which we are due to hear the latest rates decision at 10pm tonight Dubai time. We expect a further 75bps hike to 3.25% at the upper bound, but what will be key to watch out for will be the new projections and the commentary from Chair Jerome Powell, with it looking increasingly likely that a signal of higher for longer will be given. After inflation came in hotter than anticipated at the latest print, the likelihood that the bank will slow down now is unlikely, and the tone from Fed officials prior to the blackout period was especially hawkish – as such there is even a fair chance of a further 75bps hike at the November meeting, although we will have a number of relevant data points to see before then. With this in mind, the projections for economic growth will likely be significantly weaker than they were in June.
US housing starts picked up in August, rising to 1.58mn, from 1.40mn the previous month. The 12.2% rise confounded expectations of an ongoing decline, but the applications to build measure dropped to an over two-year low of 1.52mn, likely reflecting the rise in mortgage costs as the Federal Reserve hikes interest rates. A further 75bps hike from the Fed tonight would likely further dampen the US housing market.
Canadian CPI inflation continued to decelerate in August as it dipped to 7.0% y/y, down from 7.6% in July and lower than the consensus projection of 7.3%. The slowdown, which was largely driven by lower petrol prices, will likely see the Bank of Canada ease off the pace of its rate hikes in subsequent meetings, although given inflation remains high, and core inflation remains well above the 2% target at 5.2% y/y, a further 50bps hike at the October meeting remains in play.
German PPI inflation came in hotter than expected in August, with the y/y measure at 45.8%, up from the 37.2% recorded in July and exceeding projections of a modest slowdown to 36.8%. Prices were up 7.9% m/m, compared to expectations of a far more modest 2.4% rise. Energy was a key driver (electricity prices were up 174.9% and natural gas 209.4%) but the rises were broad based, with fertilisers and nitrogen compounds up 108.8% and metallic steel up 20.9%. The upwards surprise in producers’ inflation will likely keep pressure on the CPI measure in the coming months also.
12:00 South Africa CPI inflation, August, % y/y. Forecast: 7.6%
22:00 US FOMC rate decision, upper bound. Forecast: 3.25%
US data continues to run hot and cold
Sterling falls to historic lows