• MON: Canadian Election; Swedish Budget; Japan Market Holiday.
• TUE: RBA Minutes (Sep); BI Policy Decision; NHB Policy Decision; Riksbank Policy Decision.
• WED: FOMC Policy Decision; BoJ Policy Decision; PBoC LPR Setting; BCB Policy Decision.
• THU: BoE Policy Decision; SNB Policy Decision; Norges Bank Policy Decision; CBRT Policy Decision; SARB Policy Decision; EZ, UK, US Flash PMIs (Sep); New Zealand Trade Balance (Aug).
• FRI: Japanese CPI (Aug); German Ifo Survey (Sep).

NOTE: Previews are listed in day-order

CANADA ELECTION (MON): Canadians will return to the polls on September 20th, two-years earlier than the prior schedule indicated, following incumbent PM Trudeau calling for elections given his (initially) strong polling status. However, as the election campaign has progressed, the gap between Trudeau’s Liberals and the opposition Conservative Party, led by O’Toole, has closed and voting intentions were marginally in favour of the latter, but have since become too close to call. The September 9th/10th debates coincided with an uptick in polls for the Liberal party, however, several political analysts have said that the debates themselves added very little to the campaign. Polling is open for 12-hours, but this is staggered across Canada in an attempt to ensure results arrive at roughly the same time. Our full preview can be accessed here.

SWEDEN BUDGET (MON): Finance Minister Andersson has announced that the government will be reducing taxes for individuals within this budget, at a cost of SEK 10bln, while the budget itself will also include reforms totalling SEK 74bln (vs 2020’s SEK 100bln total). Prior to this announcement, the NIER said it was expecting unfinanced reforms in the region of SEK 40bln. The upcoming budget is likely to be a particularly expansionary given COVID-19 related requirements alongside the current political situation, where the minority government is in an unusual situation of putting forward a budget just ahead of the PM resigning in November. Under the Swedish system, the budget proposal with the most support in Parliament is the one that will be adopted, it does not have to attain a majority. As such, given the opposition Sweden Democrat party saying it will not support an alternative finance bill it appears as if the minority government’s proposal will receive the most support in parliament, though this remains far from certain.

RBA MINUTES: The RBA left its Cash Rate unchanged at 0.10% at its September meeting, as expected, and maintained its tapering plan with weekly purchases at AUD 4bln, while extending the purchase horizon through at least February (previously it was scheduled for mid-November). The central bank cited a delay in the economic recovery and the increased uncertainty associated with the Delta outbreak, adding that the setback to growth was expected to be only temporary, and Delta was only expected to delay – not derail – the recovery. The Board is further committed to maintaining highly supportive monetary conditions to achieve a return to full employment in Australia and inflation consistent with the target and it will not increase the cash rate until actual inflation is sustainably within the 2-3% target range. Since the September meeting, Governor Lowe has doubled down on the view that the OCR was unlikely to rise before 2024, stating that it was difficult for him to understand why markets were pricing in hikes in 2022 and 2023. Lowe also said that rates might increase in other countries, but domestic factors were different in Australia, and the Board judged fiscal policy was the best response to current Delta lockdowns, but added that it cannot keep buying bonds forever, and purchases were likely to stop sometime next year. Accordingly, although the minutes are not expected will be unlikely to cause any major tremors, they will still be eyed for any potential clues on the central bank’s future purchase intentions.

RIKSBANK POLICY DECISION (TUE): Sweden’s central bank is expected to keep its key policy rate on hold at 0.00%, in-line with its previously stated guidance. The main focus for this meeting will be the inflation narrative, given the significantly above forecast reading in August, and any discussion around the repo path. CPIF inflation rose to 2.4% Y/Y in August vs the Riksbank's expected 1.4%. However, at this stage it is perhaps too early to determine the extent that price increases are transitory; the ex-energy CPIF figure, for instance, while elevated is much more subdued than the headline release. While it appears that the upside is being driven by energy, analysts at SEB still look for the headline annualised measure to approach 3.0% towards end-2021. Overall, it is likely that the Riksbank will place further emphasis on monitoring inflation and working to determine how temporary it is; albeit the reading is unlikely to impact current policy, as has been emphasised by the July minutes, which said that above target inflation was not an argument for a less-expansionary monetary policy stance. Separately, the minutes also referred to a discussion among some members about the rate path, indicating that a potential hike at the end of the forecast period. The path is currently affixed at 0.00% for the entire horizon, but market pricing has lifted to imply just shy of 40bp tightening by mid-2024 in wake of the August inflation update. Finally, it is worth noting the differing views on the balance sheet between the Governor and other members; the Governor currently sees no reason to change balance sheet intentions, while influential members like Floden have intimated it could perhaps contract during 2022.

BOJ: The Bank of Japan is expected to keep its policy settings unchanged, with the bank rate to be left at -0.10% and QQE with Yield Curve Control to flexibly target 10yr JGB yields at 0.0%. Sources reports, however, have noted that the central bank is likely to warn of rising risks to output and to exports from Asian supply bottlenecks. The central bank has on several occasions said that it would not hesitate to take additional easing measures, if necessary, but has also suggested a lack of urgency with the view for the economy remaining in a severe state but picking up as a trend, and will likely recover although activity remains low compared to pre-pandemic levels. Governor Kuroda also sees the impact of COVID-19 waning amid further vaccination progress, and although inflationary pressures have been weaker domestically compared to US and Europe, he noted that underlying dynamics were not so weak. Recent data have been mixed: stronger than expected upward revisions to GDP for Q2, Retail Sales and Industrial Production topped forecasts, although Exports, Machinery Orders and Household Spending have disappointed, while Core CPI has remained negative for a year – this isn’t expected to spur action from the BoJ, which sees consumer inflation hovering around 0% before gradually accelerating. Another factor likely to keep the BoJ on the side lines this month is the looming LDP leadership election to replace PM Suga as President of Japan’s largest party, and who will also likely become the country’s next PM at this year’s general election to be held by late November. This leadership change is likely to bring about fresh spending measures, lessening the urgency for additional BoJ stimulus, and could also have future ramifications at the central bank as it would be up to the next government to either stick with or nominate a new person for the top job when BoJ Governor Kuroda’s second five-year term ends in April 2023.

FOMC POLICY DECISION (WED): After a soft August jobs report, and inflation data that undershot expectations, there is no pressure on the Fed to rush towards any taper announcement at the September 22nd FOMC meeting. Nevertheless, the market will be watching to see if the Fed tweaks its statement to provide "advanced notice" of its intentions to scale-back purchases at an upcoming meeting (likely in November or December), as Powell has said the Committee would do. In addition to any statement language changes, traders will be listening to the tone of Fed Chair Powell at his post-meeting press conference to see how explicit he is in providing this 'advanced notice', which traders will use to guesstimate whether the announcement will be forthcoming in November or December (a line of questioning Powell will likely deflect, framing any decision around economic progress and the pandemic). Markets have largely discounted a Q4 taper announcement, with implementation at the end of the year/beginning of next; the unknown is how the Fed will configure its taper in terms of its composition (proportional tapering of MBS and Treasuries is likely), and the timeline (the range at this point seems to be between 6-12 months, with the median view likely to be in the latter part of that range). The Fed will also publish updated economic projections, and focus will primarily fall on the 'dots' to see how many hikes the Committee is pencilling in over its forecast horizon. Currently, the median dot forecast from June sees not rate hikes in 2022 (seven of the 18 dots saw at least one rate hike) but sees two rate hikes in 2023 (only five officials see rates at current levels in 2023); in the first instance the market will judge the hawkish impulse by seeing how the balance has changed in the 2022 profile. The Fed's inflation forecasts will also be eyed to see the extent to which the Fed continues to see inflation as transitory. UBS says "that despite the weak August CPI data, it thinks inflation has probably surprised the Committee significantly to the upside due to the June and July reports," and therefore, it expects "a major upward revision in 2021 inflation and a slight one in 2022," The bank argues that it will be difficult for some of the Fed participants who rely on top-down forecasts of inflation, to revise downward or to leave unchanged their 2022 forecasts. "We think that the projection in 2024 will still be above target, which would be consistent with hikes in 2023."

BCB POLICY DECISION (WED): Money markets are pricing 46bps worth of tightening at next week’s COPOM, according to Reuters. However, some analysts are looking for a bigger move; Credit Suisse looks for the Selic to be lifted by 100bps to 6.25%, arguing that while inflation has become more challenging for the BCB, it is in line with the conditions laid out by the central bank in its previous meeting, which CS says lines up another 100bps rate hike, noting that the BCB chief Campos Neto also recently reiterated the central bank’s approach, consistent with the August meeting. CS will be looking to the communique for clues on the BCB’s next steps and believes that the central bank will indicate that its baseline is for another hike of a similar magnitude at the October confab, though any worsening of the economy may result in a re-evaluation. CS also expects the BCB to use more hawkish language given that inflation expectations for this year and next have risen recently (to 6.8% from 3.8% for this year, and to 8.0% from 4.0% for next year – both well above the BCB’s 3.75% and 3.5% respective targets). “The monetary authority is expected to highlight that several items have shown high inflation, core inflation gauges have stayed at a high level, and the balance of risks for inflation has become more challenging,” CS writes, “among the risks, the highlights are the water crisis and higher inflation expectations”; this may also result in the central bank raising its own inflation forecasts (currently 6.5% for this year, and 3.5% for next). CS expects the central bank to reiterate its commitment towards its inflation objectives and highlight that its strategy considers increasing the terminal Selic to a level higher than neutral.

PBOC LPR (WED): The LPRs are expected to be maintained, with the 1yr at 3.85% and 5yr at 4.65%, following the PBoC opting to stand pat on its MLF rate at 2.95%. This perception has also been backed by reports in Chinese press. That said, there have been calls for China to take easing policy steps given the slowdown in recent economic data and the outbreak of the Delta variant. To recap the data seen this month: Caixin Manufacturing and Services PMIs fell back into contraction, CPI fell short of expectations, whilst PPI continued to surge on the back of raw material prices and energy. Further, Industrial Production data came in sub-par and Retail Sales heavily missed forecasts. Although calls for policy easing have grown, Chinese press and sources earlier this year suggested that any easing will take place in the form of RRR or interest rate cuts and may be targeted in nature.

ECB TLTRO3. 9: The ninth (and penultimate) operation under the TLTRO3 programme is the first chance for banks to voluntarily repay TLTRO3 funds borrowed from operations 1-5. Banks informed the ECB that they would voluntarily repay EUR 79.24bln early from those operations, of the approximately EUR 1.7trln borrowed in total. UBS says that with EUR 2.2trln (of the available EUR ~3.2trln) already borrowed in the previous eight operations, it sees scope for a further EUR 250-300bln in net borrowing across the last two operations (in Sep and Dec, but skewed towards Dec). "We are sceptical there would be significant interest to repay and/or rollover their existing TLTRO loans," the bank writes, "Euro area excess liquidity at EUR 4.4trln should continue to build for now, but its trajectory post June 2022 would be a tug-of-war between additional QE purchases and voluntary repayments of TLTRO loans." UBS says that by December, banks would have complete visibility on their lending performance from October 2020 through December 2021 (which is the assessment window for banks to obtain the full -50bps sweetener from June 2021 to June 2022), and would thus give banks utmost certainty to book these loans at -1% for two quarters (March 2022 and June 2022). "Therefore, in September, we could see net take-up of around EUR 50-100bln with remaining taken-up in December," US writes, adding that if its estimates are correct, French and German banks would be the leading participants.

EZ FLASH PMIs (THU): Analysts expect flash PMI data for September to show the Eurozone aggregate services PMI unchanged at 59.0, the manufacturing PMI slipping by a point to 60.4, leaving the composite PMI little changed at 58.8 (from 59.0 in August). Regionally, the German metrics are likely to show manufacturing paring back to 61.4 from 62.6, Services easing to 60.4 from 60.8, leaving its composite at 59.5 from 60.0; the French metrics are likely to show manufacturing easing back to 57.0 from 57.5, and the services falling a touch to 56.0 from 56.3. The paring back of the surveys will likely underscore that Euro area growth is beginning to look exhausted after the bounce back seen as restrictions were lifted earlier, although the levels of the PMI surveys themselves remain elevated by historical standards. Looking at the manufacturing data specifically, RBC notes that "industrial production has consistently underperformed the headline manufacturing PMI in recent months, with the sector continuing to suffer from severe supply disruptions," and accordingly, it advises not to attach too much weight to the headline readings; "Instead, the suppliers’ delivery times sub-index should provide some insight into whether the tentative easing in supply disruptions witnessed in the July and August surveys continued into September," the bank writes.

UK FLASH PMIs (THU): Flash PMI data for September is expected to show manufacturing paring to 59.0 from 60.3, though services are seen rising to 55.5 from 55.0, leaving the composite a little higher at 55.1 from the prior 54.8. Analysts note that the services PMI stood at 62.9 in May, and has cooled since then, and given that the new orders component of the data declined last month, there is a risk it sets up for a lower-than-consensus outing; "Not only did the new orders index fall last month to its lowest level since the reopening process began in the spring, but labour shortages now also appear to be acting as a constraint on the sector's recovery," RBC writes. It is worth noting that the data is released a few hours before the BoE meeting, and as a result, there may be slightly less market attention on the PMIs.

BOE POLICY DECISION (THU): The September MPC meeting will feature new Chief Economist Huw Pill (likely hawkish) and new MPC member Catherine Mann (likely dovish). The focus will be on vote splits. The MPC is expected to vote 9-0 to hold rates at 0.1%, and is expected to vote 8-1 to maintain QE envelope at GBP 895bln, with Michael Saunders likely to dissent again. The vote tallies will be framed in the context of recent remarks from Governor Bailey, who suggested that, at the last meeting, the MPC were split 4-4 on whether the conditions for tightening policy had been met, though caveated that forward guidance at the time was a 'necessary but not sufficient' for tightening policy; analysts have noted that, in any case, this guidance was changed at the last gathering. Additionally, the Governor said that it was 'reasonable' to assume that there would be rate hikes in the future, and said stopping QE purchases would amount to tightening. HSBC says that "even if every single member believes the conditions had been met, that would not imply a rate rise is imminent; the guidance is that the conditions were a necessary requirement for tightening but not an automatic trigger," and it says that "the earliest any MPC member will start voting for rate rises is February when the situations on COVID-19, inflation and unemployment will be a little clearer."

SNB POLICY DECISION (THU): Current policy settings are expected to be maintained with the policy rate held at -0.75%. In June, the CHF currency level was deemed to be ‘highly valued’ and the SNB reiterated it will remain in the FX markets as necessary, depending on the overall currency situation. Going into the meeting, EUR/CHF was around the 1.08 mark and while we have been as low as 1.0696 since then, the cross is currently in-proximity to the level seen around the June meeting. However, the SNB appears to have been more actively intervening of late, as evidenced by domestic banks' sight deposit balances since the July meeting – though this appears to have ‘peaked’ around the end-August. Recent commentary from SNB’s Zurbruegg reiterated that the franc was highly valued, and he stressed that the SNB’s balance sheet could be expanded further, and will be maintained at levels as high as necessary. Additionally, Zurbruegg downplayed inflation pressure concerns, viewing them as temporary. This view was also echoed by the SNB’s Maechler, who does not think that there is a real risk of any inflation surge, and instead believes that the increase was a sign of the recovery. Elsewhere, housing remains in focus; Zurbruegg highlighted vulnerabilities around the domestic mortgage and real estate markets were at high levels, a view that chimes with the central bank’s June MPR which said “… the vulnerability of the mortgage and real estate markets has increased further,” and as such, participants will remain attentive to the reactivation of the countercyclical capital buffer. Note, Governor Jordan underwent a medical procedure late-August, and as such, deputy members Maechler and Zurbrugg are attending events in his place until he recovers; as it stands, it is unclear if the Governor will be partaking in his usual capacity at the September meeting.

NORGES POLICY DECISION (THU): Norway’s central bank is expected to commence the key policy rate lift off cycle from its current 0.00% level, likely via a 25bp hike, as has been alluded to after the June meeting. The August meeting noted that economic conditions were starting to normalise, suggesting the central bank would soon see it as appropriate to increase its policy rate. Since then, the most pertinent update has been the Q3 regional network report which highlighted that business sector activity had increased substantially, and higher output growth was seen across all sectors. However, the report noted that almost half of the survey participants were facing capacity constraints. Overall, the survey chimes with the existing guidance for a hike in September and other factors such as the employment report add to this narrative. As such, assuming the hike occurs, focus will then turn to the repo path; currently, this implies an end-year key rate of 0.28%, and the Governor has alluded to the potential for a second hike, likely in December. Therefore, traders will remain attentive to any further guidance, and then also for the repo path over the next year, which currently implies approximately one hike per quarter.

CBRT POLICY DECISION (THU): The CBRT is largely expected to hold its Weekly Repo Rate at 19.00%, according to 18 out of 19 analysts surveyed by Reuters; just one analyst is expecting a rate cut (of 100bps). Since the previous meeting, Turkish inflation surprised to the upside in August, rising to 19.25% Y/y (exp. 18.7%; vs CBRT target of 5%). Before this release, the recently appointed Governor reportedly told investors to expect inflation to enter a falling trend In Q4, adding that the policy stance will secure that slowdown. The CBRT’s own survey revised higher its year-end CPI forecast to 16.7% from the prior 16.3%, whilst the repo rate is seen at 14.73% (prev. 14.89%) and USD/TRY at 8.9184 (prev. 8.9431). Turkish President Erdogan meanwhile keeps the CBRT under pressure to cut rates due to his unorthodox view that easing will push inflation lower. “We will prevent excessive price increases on the shelves by placing inflation under control as soon as possible through lowering costs and fighting opportunists”, the Turkish President was quoted saying.

SARB POLICY DECISION (THU): South Africa's Reserve Bank is expected to hold its Repo Rate at the record low 3.50%, as inflation pressure has remained benign. Analysts see inflation averaging 4.4% this year and next, according to a Reuters poll, below the mid-point of the 3-6% target range. "We believe South Africa has managed to avoid the so-called 'second round' impacts of higher commodity prices into inflation and lower wage growth," BNP Paribas said, "our research highlights this to be the most important factor driving underlying price pressures in the economy," adding that "as a result, core inflation remains remarkably well behaved, and we see little impetus for this story changing anytime soon. Ahead, however, analysts are still of the view that the central bank will lift rates next year (25bps in January or March, followed by further hikes later in the year) to keep prices manageable.

NEW ZEALAND TRADE BALANCE (THU): The Kiwi trade metrics will not have much bearing from a monetary policy standpoint, with COVID the driving factor, and as the RBNZ is wholly expected to raise its OCR at the meeting on October 6th. Nonetheless, there are currently no expectations for the metrics. The prior release saw imports rise for vehicles, parts and accessories, alongside petroleum and mechanical machinery/equipment, while imports of precious metals and aircraft parts declined. On the export side, the prior release revealed rises in dairy, wood, meat and fish.

JAPANESE CPI (FRI): There are currently no forecasts for August CPI data, although the metrics themselves are unlikely to influence much price action as they will be released after the BoJ meeting, and ahead of Japan’s elections. The week saw commentary from BoJ Governor Kuroda, who suggested inflationary pressures have been lower in Japan vs the US and Europe, partially due to temporary factors such as the cut in mobile fees (the main drag on last month’s figures). The Governor also suggested that the underlying trend was positive. “We expect that the inflation rate will steadily go up and eventually reach the 2% target, although not before 2023," Kuroda said, whilst reaffirming the pledge to further relax policy if needed by cutting interest rates.