Week ahead: FOMC minutes out, more cuts likely in New Zealand

The upcoming week brings another batch of economic data from the world’s largest economies, as well as insights into central bank’s recent policy decisions. Two of the U.S. Federal Reserve’s key figures, Neel Kashkari and Raphael Bostic, are due to kick off the week with speeches on Monday.

Investors will also be focused on the release of minutes from the U.S. Federal Reserve’s recent meeting, as well as the Australian central bank’s Sept. 24 decision to keep rates on hold.

The Reserve Bank of New Zealand is widely expected to cut rates at its meeting on Tuesday, with markets split on whether it will go for a 25 or 50-basis-point cut. Fresh US inflation and PPI readings, as well as UK GDP data and a final CPI print from Germany are also due out.

Here are the week’s key events:

Monday, October 7th: RBA meeting minutes, Fed’s Bostic, Kashkari speak

Monday gets off to a fairly slow start, with markets likely processing the impact of the previous week’s nonfarm payrolls report. Atlanta and Minneapolis Fed presidents Raphael Bostic and Neel Kashkari are due to speak, likely offering some insight into the U.S. central bank’s moves before the end of the year.

The Australian central bank (RBA) will also be releasing the minutes from its latest policy decision today — it kept rates steady at a 12-year high of 4.35% on Sept. 24, adding that cuts were unlikely in the near term as the bank tries to reel inflation back down to its target range of 2-3%. The RBA did slightly soften its hawkish stance, saying tightening was not discussed. The IMF backed the move as “appropriate”.

Australia’s inflation rate came within the RBA’s target in August, easing from 3.5% in July to 2.7% — the first time it had done so since August 2021. A Reuters poll of economists saw the RBA’s next cut coming in Q1 2025.

Tuesday, October 8th: RBNZ interest rate decision

At its previous meeting in August, the Reserve Bank of New Zealand (RBNZ) slashed its benchmark rate for the first time since March 2020 and pointed to more cuts in the coming months — a sharp dovish lean that led to a sell-off in the kiwi dollar.

The decision to cut rates by 25 basis points to 5.25%, nearly a year ahead of the New Zealand central bank’s own forecast, caught some investors off guard and has led to speculation of a more aggressive easing cycle that could continue through the end of 2025.

Markets are currently split on whether the RBNZ will go with a 25bps or 50bps cut in October — the Bank of New Zealand (BNZ), one of the country’s big four lenders, recently said it’s leaning towards the latter. "We have long argued the Reserve Bank has been slow to cut rates in the face of an imploding economy, weakening labour market and a return of inflation to target,” commented Stephen Toplis, BNZ’s Head of Research.

Earnings: PepsiCo

Wednesday, October 9th: FOMC meeting minutes

On Oct. 9, the U.S. Federal Open Markets Committee (FOMC) will release minutes from its latest meeting, offering extra insight into the Fed’s economic outlook and upcoming interest rate decisions. In a recent speech, Fed Chair Jerome Powell pushed back against expectations of another “jumbo” 50-basis-point rate cut in November. He said he expects two more cuts this year, totalling 50 basis points, "if the economy performs as expected," though the Fed could cut faster — or slower — if needed.

The Federal Reserve previously cut rates by 50 basis points at its Sept. 17-18 meeting, dropping its policy rate from a 20-year high of 5.25%-5.50%, where it had held steady for 14 months, to the current range of 4.75%-5.00%.

Thursday, October 10th: US inflation report, initial jobless claims

Markets will likely be glued to the U.S. CPI data for September due out today. Inflation in the U.S. dropped to its lowest level since Feb. 2021 in August, reinforcing the Fed’s outsized 50-basis-point move.

A softer-than-expected reading could boost expectations of another “jumbo” cut — despite Powell’s recent comments — but that could be outweighed by the initial jobless claims figures due out on the same day. The U.S. economy’s resilience could make it harder for the Fed to deliver another large cut.

Friday, October 11th: UK GDP, German CPI, US PPI

On Oct. 11, the UK will release its GDP estimate for August. Britain’s economy grew more slowly than expected (0.5% vs. 0.6% expected) in Q2, but there were positive signs from household signs and business investment that could encourage chancellor Rachel Reevs as she prepares the Autumn Budget, due out on Oct. 30.

Elsewhere, Germany's inflation figures for Sept. 2024 are expected to show a year-on-year increase of 1.6% — the lowest inflation rate since early 2021. The data, which will be confirmed on Friday, reflects a continued trend of slowing price increases, particularly driven by a sharp decline in energy prices, which dropped by 7%. The drop has helped the European Central Bank’s doves build their case for another interest rate cut next month.

The US Producer Price Index (PPI) out today will be the last piece of key data out of the U.S. this week.

Aside from the economic data, investors will be looking to the earnings figures from J.P. Morgan and Wells Fargo.

Earnings: J.P. Morgan (JPM), Wells Fargo&Co (WFC)

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