All eyes on Warsh as rate-hike fever spreads across G-7 central banks
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US Federal Reserve chairman Kevin Warsh will be closely watched in the wake of a higher-than-expected core inflation reading on Sept 11.
PHOTO: REUTERS
- Central banks in the G-7, including the US Federal Reserve, Bank of England, and Bank of Japan, face pressure to raise interest rates due to rising inflation and global risks.
- The US Fed is likely to hike rates following unexpected inflation data, while Japan may raise rates to 1.25%, the highest since 1995, supporting the yen.
- Key economic data from China, India, New Zealand, and others will influence future monetary policies and economic outlooks amid ongoing global price pressures and geopolitical tensions.
AI generated
Central banks from much of the Group of Seven face a pivotal week as mounting inflation risks heap pressure on them to raise interest rates.
Three decisions, starting with the US Federal Reserve on Sept 16 and followed on successive days by peers in Britain and Japan, may recast the global monetary policy landscape for the rest of 2026 and beyond.
The US will be most closely watched in the wake of a higher-than-expected core inflation reading on Sept 11. That stoked investor bets that Fed chairman Kevin Warsh and his colleagues will raise their benchmark rate, probably in defiance of President Donald Trump’s wishes.
A Bank of England rate increase on Sept 17 is not anticipated, but with three officials favouring such a move at the late-July meeting, and with price risks simmering, the prospect of shifting towards a hike as soon as November cannot be excluded.
The Bank of Japan (BOJ), meanwhile, is widely predicted to raise its key rate at the end of the week after a raft of supportive data, including the nation’s biggest jump in wages in nearly three decades.
With oil emphatically above US$100 a barrel again and the Middle East war apparently reigniting, any hope for a respite in global price pressures seems faint for now.
After European Central Bank officials tightened on Sept 10, the second such move since the outbreak of the Iran conflict, investors may well see an increasingly synchronised hawkish policy stance across the G-7 coming into clearer focus.
The club’s other institution, the Bank of Canada, is moving that way too. Minutes of its decision earlier in September, when officials kept rates steady but emphasised inflation concerns, will be published on Sept 16.
Elsewhere, Chinese industrial data, inflation numbers from Britain and Canada to India and Japan, and a probable rate cut in Brazil, will be among the highlights.
US and Canada
Warsh said in August that the Fed would “have work to do” if it could not “be confident that underlying inflation is moving to our objective, clearly and at sufficient speed”.
The Sept 11 inflation data offered no such comfort. Investors and economists now see it as a near certainty the US central bank will raise interest rates for the first time in three years.
Support for such a move had been building at the Fed, even before the latest figures. In July, three officials dissented against the decision to hold rates steady and instead would have preferred to hike.
Policymakers will release on Sept 16 updated projections for economic growth, inflation and the outlook for rates.
The US data docket includes retail sales, which are expected to rebound in August, as well as fresh figures on housing starts and industrial production.
Asia
The main focus will be China’s August data dump on Sept 15, set to provide the most comprehensive official look at what happened in the economy there.
Forecasts show that economists do not expect much of a pickup from July, when the economy slowed almost across the board.
As has been the case all year, Chinese production and exports of artificial intelligence-related tech products have expanded rapidly, but the rest of the economy is in a funk.
India’s August inflation data, due on Sept 14, will be watched to gauge if price pressures are broadening, which could offer clues on how soon the Reserve Bank of India may raise rates. On the same day, the Pakistan central bank will announce its rate decision, with economists expecting a hold.
The BOJ’s probable hike on Sept 18 would be its second of 2026.
That would take the policy rate to 1.25 per cent, the highest level since 1995, and maybe provide more support to the yen, which has risen in recent weeks. The same morning, the government will report national consumer price data for August, with inflation forecast to have risen 2 per cent from a year earlier.
India, Japan and New Zealand will all be reporting August trade data, with Japan’s imports and exports expected to have continued the rapid growth they have shown all year when the data is released on Sept 16.
New Zealand on Sept 17 reports second-quarter gross domestic product growth, with the economy forecast to have expanded more slowly than in the first quarter.
That will be the last GDP release before the national election in November, and may be a factor for voters as they decide whether to re-elect Prime Minister Christopher Luxon. Sri Lanka will also report its GDP on Sept 15. BLOOMBERG
