Key events in developed markets next week

Due to the artificial bounce in activity in September, we believe the UK will narrowly avoid entering a technical recession in the fourth quarter of 2022. For Sweden, we expect the Riksbank to hike by 50 basis points next Thursday, due to persistent core inflation and uplifts in wage growth.

US: Eyes on Jerome Powell's appearance at the Economic Club

After last week’s excitement, it is a much quieter week for US data and events. With activity data softening and inflation cooling, the market remains unconvinced about the Federal Reserve’s desire to raise interest rates a “couple more times” as outlined by Fed Chair Jerome Powell this week. A recession appears to be the base case with expectations of policy easing in the second half of the year, which is putting downward pressure on the dollar and US Treasury yields. This is going someway to undermining the effectiveness of the Federal Reserve’s rate hikes at the short end of the curve as it battles to ensure inflation is eradicated from the system.

Consequently, the highlight for the week could be Powell’s appearance at the Economic Club of Washington. If he fails to push back meaningfully against the market reaction, the implication would be that the Fed itself is relaxed with what the market is doing, which risks it pushing further in the direction of pricing future interest rate cuts. Several other Fed officials are scheduled to speak during the week.

In terms of data, it is largely second-tier releases although the trade balance could be interesting. It has narrowed sharply through 2022, contributing positively to GDP growth in the second half of the year, but this appears to be unsustainable. It was driven by falling imports rather than rising exports and we see a strong chance that this partially unwinds in December. Meanwhile, the Conference Board measure of consumer confidence is expected to improve given the rally in equity markets and the fall in gasoline prices with a strong jobs market continuing to provide a firm underpinning for now.

UK: Narrowly escapes late 2022 recession

An artificial bounce in activity after the Queen’s funeral last September suggests the economy will narrowly avoid entering a technical recession in the fourth quarter. Nevertheless, we expect a modest contraction in the first quarter of this year and probably the second, meaning recession is still the base case. It is however likely to be very mild by historical standards, not least because the recent fall in gas prices now means the government can probably cancel April’s planned increase in household energy bills – and indeed they’ll probably have fallen from the current £2,500 annual average to £2,000 by the summer.

Sweden: Riksbank to hike by 50bp, but the peak isn’t far off

The Swedish economy is not looking great. GDP fell by half a percent in the fourth quarter, while house prices are down 15% on last February’s peak. For now though, the Riksbank is more worried about core inflation which has continued to climb. Important pay negotiations are due to conclude in a matter of weeks, and all signs point to an uplift in wage growth across wide areas of the economy. With new Governor Erik Thedeen warning against recent SEK weakness, and the Riksbank saying in the past that it wants to stay ahead of the ECB in its tightening cycle, we expect a 50bp rate hike next week. Nevertheless, with the housing market under pressure, we think we’re nearing the top for Swedish rates. We expect one further 25bp hike in April, marking the top of the cycle.

Key events in developed markets next week

Source: Refinitiv, ING

Read the original analysis: Key events in developed markets next week

A 50bp hike by the Fed is firmly expected. With concerns over the recent steep falls in treasury yields and the dollar, we are likely to end up at a higher ultimate interest rate than the bank indicated back in September. For the ECB, we think the risk of a 75bp hike has increased – still, we expect a 50bp hike, supported by hawkish communication as a compromise.

US: A hawkish Fed message will likely fall on deaf ears

Markets are firmly expecting the Federal Reserve to opt for a 50bp hike at the 14 December Federal Open Market Committee (FOMC) meeting after already implementing 375bp of rate hikes, including consecutive 75bp moves at the previous four meetings. The central bank has been at pains to point out that despite smaller individual steps, we are likely to end up at a higher ultimate interest rate than the central bank indicated was likely back in September. Its forecasts are likely to show the Fed funds rate rising above 5% with potential slight upward revisions to near-term GDP and inflation and a lower unemployment rate to justify this.

Officials have been suggesting they may not cut rates until 2024 and we suspect Fed Chair Jerome Powell will echo this sentiment. Nonetheless, this “hawkish” rhetoric is likely the result of concern that the recent steep falls in Treasury yields and the dollar, coupled with a narrowing of credit spreads, is loosening financial condition – the exact opposite of what the Fed wants to see as it battles to get inflation lower. In terms of our view, we continue to expect a final 50bp rate hike in February, but with recession risks mounting, which will dampen inflation pressures further, we look for rate cuts from the third quarter of next year.

Ahead of that announcement, we will have consumer price inflation data. The surprisingly soft core CPI print was the catalyst for the recent moves lower in Treasury yields and the dollar, and a second consecutive low reading would reinforce the market conviction that rate cuts are going to be on the agenda for the second half of 2023. This means Powell will have to battle hard with his commentary in the post-FOMC press conference to prevent financial conditions from loosening too much before inflation is defeated.

UK: Hectic data week proceeds key Bank of England decision

There’s probably just about enough in the latest UK data and recent Autumn Statement for the Bank of England to pivot back to a 50bp rate hike at its meeting next Thursday. Inflation looks like it has peaked, although BoE hawks will be keeping a close eye on the data due a day prior to its announcement. Headline CPI is likely to dip, however core could be more sticky, and last month’s data saw core services inflation come in slightly higher than the bank had forecast in November. Jobs data has also hinted at persistent labour shortages, which will keep the pressure on wage growth. Still, Chancellor Jeremy Hunt probably did enough last month to lower concerns that the BoE and the Treasury are working at cross-purposes, even if the fiscal tightening announced won’t have a huge bearing on the economy, relative to the Bank’s forecasts released last month. We expect a 50bp hike next week, and another 50bp hike in February, which is likely to mark the peak of this tightening cycle.

Eurozone: Another jumbo rate hike has become more likely in recent days

Macro data since the European Central Bank's October meeting has shown resilience in the eurozone economy in the third quarter but also confirmed a further cooling of the economy in the last few months of the year. The drop in headline inflation, as little as it says about the impact of the rate hikes so far, could at least take away some of the urgency to continue with jumbo rate hikes.

At the same time, the ECB seems to be increasingly concerned that the fiscal stimulus and support measures announced could extend the inflationary pressure. ECB Executive Board Member Isabel Schnabel has been one of the more influential voices to watch, definitely since the summer with her Jackson Hole speech. Judging from her recent comments that “incoming data so far suggest that the room for slowing down the pace of interest rate adjustments remains limited, even as we are approaching estimates of the 'neutral' rate”, 75bp is clearly still on the table.

We think that the risk of a 75bp rate hike at next week’s ECB meeting has clearly increased. Next to the rate hike, the ECB is likely to set out some general principles of how it plans to reduce its bond holdings. We expect the ECB to eventually reduce its reinvestments of bond purchases but to refrain from outright selling of bonds.

Besides the ECB, industrial data for the eurozone are out on Wednesday. Don’t expect anything that will influence the governing council meeting too much. While a tick down in production is to be expected, the fact that industry has outperformed recent expectations is likely to uphold. The Friday data are just as interesting as the PMI will show how the economy is faring at the end of the fourth quarter. Expect it to continue to signal a contraction, but just how deep is the question relevant for markets and policymakers. Finally, trade-in goods data are also out on Friday and will provide a clue on how the trade deficit is faring, which is very important for euro fair value.

Key events in developed markets next week

Source: Refinitiv, ING

Read the original analysis: Key events in developed markets next week 

The Bank of Canada's policy meeting will be the highlight of next week, and it's a very close call on whether to expect a 25bp or 50bp hike. For now, we favour the latter given robust third-quarter GDP data, ongoing elevated inflation readings and a tight jobs market.

US: Recession fears remain elevated

We are rapidly heading towards the 14 December FOMC meeting where a 50bp interest rate hike looks likely after four consecutive 75bp moves. Nonetheless, the Federal Reserve will not be pleased with the recent sharp falls in Treasury yields and the dollar, which are loosening financial conditions and undermining the Fed’s efforts to beat inflation down. Consequently, we are likely to see strong messaging in the press conference and the accompanying forecast update that the rate rises are not finished and that the policy rate is set to stay high for a prolonged period of time. Markets are likely to remain sceptical given that recession fears remain elevated. Softening consumer confidence, weaker ISM services and a relatively subdued PPI report are unlikely to do the Fed many favours next week in this regard.

Canada: Favour 50bp however a very close call

In Canada, the highlight will be the central bank policy meeting for which both markets and economists are split down the middle on whether it will be a 25bp or 50bp hike. We favour the latter given a robust 3Q GDP outcome, the tight jobs market and the ongoing elevated inflation readings. But we acknowledge there are signs of softening in the economy. The housing market is looking vulnerable and Canadian households are more exposed to higher rates than elsewhere due to high borrowing levels so we recognise this is a very close call. We are getting very close to the peak though, which we think will be 4.5% in 1Q 2023.

Key events in developed markets next week

Source: Refinitiv, ING'

Read the original analysis: Key events in developed markets next week

With the UK's Autumn Statement out of the way, attention turns back to the economic data which are deteriorating – UK PMIs are likely to re-emphasise the worsening condition and that a recession is coming. In Sweden, the Riksbank is expected to hike by 75bp next week, raising the policy rate to 2.5%.

US: Ongoing weakness in housing data

Thanksgiving means a holiday-shortened week in the US with the focus set to remain on the outlook for Federal Reserve policy. Market pricing has switched markedly since the surprisingly soft October CPI print but Federal Reserve officials continue to suggest there is more work to be done to ensure the inflation front is defeated. Indeed, we continue to hear comments suggesting the risk of doing too little outweighs the consequences of doing too much in terms of interest rate increases. Expect more next week.

Data-wise we are looking at ongoing weakness in housing data, but durable goods orders should rise given firm Boeing aircraft orders. Nonetheless, it is doubtful this will be market moving in any meaningful way. The November jobs report on 2 December and the November CPI print on 13 December are the big releases to watch.

UK: Focus switches back to the data and Bank of England

The key takeaway from the UK’s Autumn Statement was that much of the anticipated fiscal pain has been pushed back until after the next election. Chancellor Jeremy Hunt has calculated that calmer financial markets and the announcement of certain tax rises mean he can push back some of the tougher spending decisions, without sparking a fresh crisis of confidence in UK assets. No doubt the Treasury is banking on less aggressive Bank of England rate hikes to lower future debt interest projections, giving scope to water down some of the cuts further down the line. Read more about the Budget announcements here. 

With the fiscal event out of the way, attention turns back to the economic data which is clearly deteriorating. Next week’s PMIs are likely to re-emphasise that more companies are seeing conditions worsen than improve right now, the latest sign that a recession is coming. There’s also the question of whether the Bank of England will pivot back to a 50bp rate hike in December, and we think it will, despite some mildly hawkish inflation data in recent days. We’ll hear from a couple of rate-setters next week to help shape expectations ahead of that meeting in a few weeks' time.

Sweden: Riksbank expected to hike by 75bp

Back in September, the Riksbank hiked the policy rate by a full percentage point but signalled that it expected to pivot back to a 50bp rate hike in November. Since then, core inflation has exceeded the central bank’s forecasts by half a percentage point, while the jobs market has remained relatively tight. Given that the ECB has continued with its 75bp rate hikes – and the Riksbank has been vocal about staying out in front of the eurozone’s interest rate policy – we expect further aggressive tightening by Swedish policymakers next week. Remember this is the Riksbank’s last meeting before February, and we therefore expect a 75bp hike on Thursday. We’d expect the new interest rate projection published alongside the decision to pencil in at least another 25bp worth of tightening early next year, but ultimately there are limits to how far it can go given the fragile housing market.

Key events in developed markets next week

Source: Refinitiv, ING

Read the original analysis: Key events in developed markets next week 

After four consecutive 75bp hikes, the Federal Reserve will likely look to slow the pace of rate hikes from December. The key US data release next week is month-on-month core CPI, which we expect to be 0.5%. Other releases of note include consumer credit and confidence data, however these are shadowed by the mid-term elections on Tuesday..

US: Mid-term elections in focus

Federal Reserve chair Jerome Powell has successfully brought the market on board with the notion that while the central bank will likely look to slow the pace of rate hikes from December after four consecutive 75bp moves, the terminal interest rate will likely end up being higher than what it signalled back in September. Nonetheless, this will depend on the data flow. If inflation and job numbers continue to come in on the strong side it may be that officials end up doing a fifth 75bp. Given this uncertainty, markets are currently pricing around 58bp for the December meeting and 42bp for February, with a final 25bp hike coming at some point in the second quarter.

Next week’s data will be important, but not critical in determining the path forward. The key release is the consumer price index with the focus within that being the month-on-month core (ex-food and energy) number. Over the past six months, we have had one 0.7%, four 0.6% and one 0.3% print. We need to see numbers closer to 0.2% to bring the annual rate down toward the 2% target over time. The consensus right now is for 0.5% next week, which is also our prediction. There is a second bite of the cherry ahead of the December FOMC meeting on 14 December given November CPI is published on 13 December. Nonetheless, if we get a downside surprise we could see markets looking to price in a greater chance of a 50bp December hike and possibly a slightly lower terminal rate.

Other data includes consumer credit and consumer confidence along with small business optimism. However, these will be overlooked given the mid-term elections on Tuesday. Opinion polling appears to show momentum is building for Republican party candidates with a majority in both the House and the Senate now looking like the most likely outcome. We have written up a scenario analysis of the possible outcomes, but essentially if the Republicans gain control of Congress, President Joe Biden’s ability to pass legislation will be severely curtailed. Indeed, there is far less probability of any fiscal support for the economy through the recession than if the Democrats retained control of Congress given Republicans will look to block it. Consequently, if the Democrats lose then it is more likely that we will see interest rate cuts in the second half of 2023 to provide the stimulus to help the economy rebound, rather than if they win where fiscal policy would likely do more of the heavy-lifting and interest rates stay higher for longer to offset any inflation impulse.

Key events in developed markets next week

Read the original analysis: Key events in developed markets next week

All eyes will be on the European Central Bank meeting next week. We think a 75bp hike looks like a done deal. The PMI survey on Monday will also be closely watched, providing clues on whether the eurozone economy has contracted even further. For the Bank of Canada, we expect a similar 75bp rate hike, given the upside surprise in inflation.

US: The Fed cannot slow the pace of hikes yet

There are lots of important numbers out for the US next week, but none are likely to change the market's forecast for a 75bp interest rate hike on 2 November. 3Q GDP is likely to show positive growth after the “technical” recession experienced in the first half of the year. Those two consecutive quarters of negative growth were primarily caused by volatility in trade and inventories, which should both contribute positively to the 3Q data. Consumer spending is under pressure though while residential investment will be a major drag on growth. We are forecasting a sub-consensus 1.7% annualised rate of GDP growth.

We will also get the Fed’s favoured measure of inflation, the core personal consumer expenditure deflator. This is expected to broadly match what happened to core CPI so we look for the annual rate to rise to 5.2% from 4.9%. With the economy growing and inflation heading in the wrong direction, the Fed cannot slow the pace of hikes just yet.

Also, look out for durable goods orders – Boeing had a decent month so there should be a rise in the headline rate although ex-transportation, orders will likely be softer. We should also pay close attention to consumer confidence and house prices. The surge in mortgage rates and collapse in mortgage applications for home purchases has resulted in falling home sales. With housing supply also on the rise, we expect to see prices fall for a second month in a row. Over the longer term, this should help to get broader inflation measures lower given the relationship with the rental components that go into the CPI.

Canada: A 75bp hike is the most likely outcome

In Canada, the central bank is under pressure to hike rates a further 75bp given the upside surprise in inflation. Job creation has also returned and consumer activity is holding up so we agree that 75bp is the most likely outcome having previously forecast a 50bp hike.

UK: Markets looking for clarity on fiscal plans and government stability

The ruling Conservative Party has said it will fast-track plans to get a new leader in place by next Friday – and potentially even by Monday if only one candidate makes it through the MP selection round. Candidates have until Monday at 2pm to clear the hurdle of 100 MP nominations to make it onto the ballot paper, before Conservative MPs vote on the outcome. With only a week to go until the Medium Term Fiscal Plan on 31 October, there's inevitably a question of whether this is enough time for a new prime minister to rubber stamp Chancellor Jeremy Hunt's plans for debt sustainability. Investors are – probably rightly – assuming that Hunt will remain in position under a new leader. But the bigger question is whether the Conservative Party can unite behind a new leader and whether a more stable political backdrop can emerge – because if it can't, then not only is there uncertainty surrounding future budget plans, but also whether we're moving closer to an early election.

Eurozone: ECB to hike by 75bp again amid ongoing inflation concern

The hawks have clearly convinced the few doves left of the necessity to go big on rate hikes again. Contrary to the run-up to the July and September meetings, there hasn’t been any publicly debated controversy on the size of the rate hike. In fact, European Central Bank President Christine Lagarde seems to have succeeded in disciplining a sometimes very heterogeneously vocal club.

To this end, it is hard to see how the ECB cannot move again by 75bp at next week’s meeting. As the 75bp rate hike looks like a done deal, all eyes will also be on other, more open, issues: excess liquidity, quantitative tightening and the terminal interest rate.

Besides the ECB, which will be the key focal point for eurozone investors, we’re looking at the survey gauges of the economy next week. The PMIs on Monday will be critical to determine whether the eurozone economy has slid further into contraction or whether an uptick has occurred. There is not much evidence on the latter in our view, but Monday will provide more clarity on how the eurozone economy is performing in October.

Key events in developed markets next week

Source: Refinitiv, ING

Read the original analysis: Key events in developed markets next week

US house prices fell for the first time in more than 10 years in July – we expect the market will slow further with declines in both existing home sales and house starts. For the UK, we see headline and core inflation rates edging higher. However, we believe we are now very close to the peak, given government's decision to cap household energy bills.

US: Housing market showing weakness

The latest job and inflation readings have cemented expectations of a 75bp hike from the Federal Reserve on 2 November and heightened the chances of a fifth consecutive 75bp hike in December. However, we still favour the Fed slowing the pace of hikes to 50bp on 14 December given the intensifying economic headwinds that should allow inflation to fall quickly through 2023. The housing market is going to be a key factor in this. House prices fell for the first time in more than 10 years in July as the surge in mortgage rates prompted a collapse in housing demand. Things have got much worse since then with mortgage applications for home purchases at the lowest level since the housing bear market of 2010-13. With more supply coming on the market, the challenge to sell homes is going to increase, which will weigh further on prices and lead to another sharp fall in home builder sentiment this week. Homebuilding looks set to slow further with existing home sales declining too.

This is bad news for construction, confidence, job creation and retail sales tied to housing transactions such as building supplies, furniture, home furnishings and household appliances. However, it may well help to get inflation lower more quickly and allow the Fed to reverse course on its aggressive interest rate increases next year. Shelter accounts for a third of the inflation basket by weight, and historically the shelter series lags behind movements in house prices by around 12-14 months. Over the past couple of weeks, rent.com, apartments.com and CoStar Group have all been reporting rent price falls in major cities so this could imply a quicker transmission. We will see how this develops, but with surveys suggesting corporate pricing and vehicle prices are showing signs of softening, we think the risks are skewed toward inflation falling more quickly through 2023 than the consensus.

UK: Fiscal U-turn in focus as Bank of England intervention ends

Markets have been buoyed by reports that the UK government is preparing a major U-turn on its tax cut plans, which were announced in September and brought widespread disruption to UK bond markets. On paper, the resumption of the planned hike in corporation tax – if done in full – coupled with a revenue cap/windfall tax on renewable and perhaps nuclear energy producers, could materially reduce the government’s borrowing requirement over the next couple of years. But with the Bank of England (BoE) ending its temporary bond-buying scheme, investors will need to see these press reports crystalise into concrete and far-reaching plans this weekend to avoid a renewed sell-off in gilts next week. Further volatility is likely in either case, and we still think there’s a fair chance the BoE will at the very least need to further postpone its plans to start selling bonds later this month – not least because of the challenging environment created by ongoing Fed tightening. Further bond buying also shouldn’t be ruled out.

All of this will also help determine just how aggressively the BoE will need to hike rates in early November. By that point we’ll have had the government’s Medium-Term Fiscal Plan (ie the full extent of any U-turns) and depending on whether we see a renewed period of sterling weakness between now and then, there’s a chance the BoE may be able to get away with a 75bp hike rather than the 100bp move we’ve been pencilling in. Next week’s CPI data is unlikely to be the main decider here, but for what it’s worth we see both the headline and core rates edging higher. However, we think we are now very close to the peak, given the government’s decision to cap household energy bills.

Key events in developed markets next week

Source: Refinitiv, ING

Read the original analysis: Key events in developed markets next week

Next week is packed with central bank meetings. The Fed is likely to match the European Central Bank in hiking rates by 75bp, while the Bank of England and Norges Bank are expected to make 50bp moves.

US: 75bp is our favoured call, however there's a chance for the Fed to go even further

All eyes will be on the Federal Reserve meeting next Wednesday. The market was favouring a 75bp hike ahead of the August CPI report, but the much higher-than-expected inflation print has seen the market price in a 20% chance that the Fed will go over and above that by opting for 100bp. A 75bp hike is still our favoured call, but we acknowledge the risk that with inflation proving to be stickier than we had suspected, the subsequent meetings in November and December could see more aggressive action from the Fed than we are currently pencilling in. While the geopolitical backdrop, the China slowdown story, the potential for energy rationing in Europe, the strong dollar and fragile-looking domestic equity and housing markets argue for a more moderate path of tightening in the coming months, if inflation momentum doesn’t slow the bank will hike by a further 75bp in November and possibly 50bp in December. The message from the Fed next week is likely to emphasise data dependency, but its updated economic forecasts are likely to show the end-2022 Fed funds rate at 4.125% rather than 3.4% (July forecast) and we suspect it will be kept at that for 2023, before dropping back to a long-term average rate of 2.5%.

UK: Bank of England to stick to 50bp rate hike despite Fed and ECB doing more

We narrowly favour a 50bp hike on Thursday, taking the Bank Rate to 2.25%, although 75bp is clearly on the table and we would expect at least a couple of policymakers to vote for it. The announcement of an energy price cap from the government will drastically lower near-term CPI, reducing concerns about consumer inflation expectations becoming de-anchored and reducing the urgency to act even more aggressively. However, the hawks will be worried about the recent independent sterling weakness, and will also argue that the government’s support package could increase medium-term inflation given it reduces the risk of recession.

That means it’s a close meeting to call, but if we’re right and the committee does move more cautiously than the Fed and ECB next week, then we expect another 50bp move in November and at least another 25bp in December. That would take Bank Rate to the 3% area. Read our full Bank of England Preview here.

Sweden: Riksbank to match ECB’s 75bp hike – And there’s a risk of more

With only two meetings left this year, and facing higher-than-expected inflation and a tight jobs market, we expect the Riksbank to hike rates by at least 75bp on Tuesday. We expect a repeat move in November.

Norway: Norges Bank to repeat August’s 50bp rate hike

Norway’s central bank stepped up the pace of rate hikes in August, and core inflation has continued to push higher than Norges Bank’s most recent forecasts in June. The message from the August meeting was that the central bank is keen to continue front-loading tightening, and we expect another 50bp hike next week. That would take the deposit rate to 2.25%, and we’d expect another 50bp move in November.

Switzerland: SNB will follow the lead of other central banks and hike rates by 75bp

The Swiss National Bank (SNB) meets next week and is ready to raise its key interest rate for a second time, after the 50bp increase in June. Inflation in Switzerland stood at 3.5% in August, still above the SNB's target of 0-2%, although well below the inflation rate in neighbouring countries. The fact that the Swiss franc is relatively strong against the euro is no longer a problem for the SNB, as it reduces imported inflation. The SNB focuses much more on the real exchange rate, which takes into account the inflation differential and has remained very stable in recent months. With no fears of too much appreciation and with inflation above target, there is little reason for the SNB not to follow the lead of other central banks, especially as it only meets once every quarter, so the next meeting will be in December, while the ECB and the Fed will meet in between. We expect a 75bp rate hike next week.

Eurozone: PMIs expected to remain below 50

In the eurozone, we get the first look at economic activity in September with PMIs due on Friday. After two months below 50, we expect another one to follow as manufacturing production cuts due to high energy prices and the end of the tourist season are set to impact business activity. Consumer confidence will also be released next week, where we expect confidence to remain near historical lows for the moment as the cost-of-living crisis continues.

Key events in developed markets next week

Source: Refinitiv, ING

Read the original analysis: Key events in developed markets next week

All eyes are on the European Central Bank meeting next Thursday, when we are expecting a hike of 25bp.

Despite increasing expectations of the larger hike, we believe the Fed will repeat June's move

The market is split as to whether the Federal Reserve will raise rates by 75bp or 100bp on 27 July. The strong June US inflation print of 9.1% and the Bank of Canada’s decision to raise its own policy rate by 100bp have helped fuel expectations of a larger hike. However, the weakening economic growth outlook and the fact that two of the most hawkish FOMC members, Chris Waller and James Bullard, have hinted they favour 75bp means we think they will indeed opt to repeat June’s 75bp move.

Given there is the usual Fed blackout period starting on 16 July, there will be no additional comments from officials to provide guidance – although that doesn’t rule out someone getting in touch with the Wall Street Journal should there be a material change. In any case, the data flow is largely second-tier with an update on the housing market, which given rising mortgage rates is likely to remain under pressure.

Bank of England gearing up for 50bp August hike, despite little impetus from domestic data

On the face of it, next week’s data is unlikely to offer too much in the way of support for a 50bp rate hike in August. Another notch higher in the unemployment rate and a slight uptick in inflation will come as little surprise to the committee, which only a few weeks ago resisted pressure to step up the pace of rate hikes, opting instead for another 25bp move. However, the potential for another 75bp rate hike from the Fed, mounting worries among Bank of England hawks about GBP weakness, and earlier explicit warnings about more aggressive hikes from officials, suggest the Bank may well be tempted to join the growing number of central banks that have opted for larger rate increases. We narrowly expect a 50bp rate hike in August, though this may well be a one-off. Our central view is that the Bank of England will stop hiking when the Bank rate gets to roughly 2%.

Bank of Canada's 100bp hike was only the beginning – More to come

In Canada, we will be closely following inflation data, which will hit new highs on rising gasoline, but there will be broad gains elsewhere too. The central bank's 100bp hike on 14 July was to “front load” tightening to ensure inflation expectations remain anchored, but an upside surprise in CPI could heighten fears it repeats the move in September. Currently, we favour a 75bp hike.

ECB's first hike in 11 years: 25bp or 50bp?

It’s ECB week next week, so naturally all eyes are on the Thursday meeting. Expect the ECB to fiercely debate whether the first hike in 11 years will be just 25bp or perhaps 50bp after all. Also key out of next week’s meeting will be the anti-fragmentation tool which investors will watch closely to see how robust it can be to curb spreads in the eurozone. With Italian political problems surfacing, an additional challenge is added to next week’s meeting. While summer meetings at the ECB can be dull, this one clearly won’t be. Also important is how much the economy is cooling off in the eurozone. Next week’s PMI and consumer confidence data will give some evidence of that. This will be especially important for how much the ECB will hike in the coming cycle and we expect the economy to cool enough to keep the ECB's cycle quite limited.

Developed markets economic calendar

Source: Refinitiv, ING

Read the original analysis: Key events in developed markets next week