Connecting the Central Bank Dots

Estimated reading time: 6 minutes

Global central bankers will take center stage in what is sure to be an important week for anyone tracking where borrowing costs go next. 

At a Glance

• The news: The Federal Open Market Committee (FOMC) releases its interest rate decision and updated economic projections on Wednesday. The Bank of England and Bank of Japan will follow with decisions of their own.
• The context: Higher energy prices and other inflationary pressures from the war with Iran are building, making the Federal Reserve’s job harder. Investors are questioning whether the Fed can hold off on raising rates or whether a new period of rate hikes is about to begin.
• Your move: If interest rates go higher and the Fed is more hawkish than investors expect (i.e. raise rates more than once or twice before year-end), financial stocks, companies with less debt, and short-term Treasury Bills could outperform.

No use denying it: Wednesday afternoon is the marquee moment of the week, with the Fed announcing its latest interest rate decision at 2pm ET. That will likely set the tone for markets the rest of the year. 

The Fed will also publish its latest Summary of Economic Projections, including the oft-maligned, yet closely-watched “dot plot,” which shows where individual Fed officials expect interest rates to go for the rest of the year and into 2027. (It’s often criticized for being less than reliable as a forecast.) 

At 2:30 PM ET, Chairman Kevin Warsh will take the podium to explain the Fed’s decision and answer questions from journalists. The chairman’s words are always dissected by investors, who will be especially focused on whether Warsh’s views differ from other Fed officials’, and whether there are updates on the five task forces he announced a few months ago.  There’s also a good chance he won’t submit his own projections, just like in his first meeting as chairman.

Then we’re headed overseas. On Thursday, the Bank of England will deliver its latest rate decision against a backdrop of iffy growth and uncomfortably high inflation in categories like energy, hospitality and housing. While the market suggests there’s little chance of an interest rate hike at this meeting, a rate hike is fully priced in for the November meeting.

On Friday, the spotlight shifts to Tokyo. Unlike most central banks, the Bank of Japan has been slowly raising interest rates since 2024, reversing a decades-long period of ultra-low interest rates. This matters for investors outside of Japan because of the sheer size of the country’s bond market, and the role of the yen in global borrowing and investing.

All told, it’s a big week for gauging whether the world is moving toward a higher-rate environment. And that influences all sorts of things, from the cost of your mortgage to how your stock holdings perform. 

On the Docket

Monday

• Nothing notable.
  

Tuesday

• 8:15am ET | ADP Weekly Employment Change: This survey offers insight into weekly private sector employment trends. 
• 8:30am ET | September Empire State Manufacturing Activity: The New York Fed surveys manufacturing executives in the region on business conditions and their outlook.

Wednesday

• 7:00am ET | Weekly Mortgage Applications: Mortgage activity gives insight on demand conditions in the housing market. 
• 8:30am ET | September New York Services Activity: The New York Fed surveys executives in the region’s services industry on business conditions and their outlook. 
• 8:30am ET | August Retail Sales: This measures spending at retail stores and is a key indicator of consumer demand. 
• 8:30am ET | August Import/Export Price Indexes: These indexes track the changes in the prices of nonmilitary goods and services traded between the U.S. and the rest of the world. 
• 10:00am ET | September NAHB Housing Market Index: This index tracks how homebuilders feel about the current and future state of the single-family housing market. 
• 2:00pm ET | FOMC Interest Rate Decision: The Federal Reserve will announce any changes to monetary policy after the conclusion of its two-day FOMC meeting, in addition to providing commentary on the economy. It’s one of eight regularly scheduled meetings per year.
• Earnings
  • Large & Mid-Caps: Lennar (LEN)

Thursday

• 8:30am ET | September Philadelphia Fed Manufacturing Activity: The Philadelphia Fed surveys manufacturing executives in the region on business conditions and their outlook.  
• 8:30am ET | Weekly Jobless Claims: This high-frequency labor market data gives insight into initial and continuing filings for unemployment benefits. 
• 8:30am ET | August Building Permits and Housing Starts: Construction data is a leading indicator of economic activity.

Friday

• 9:15am ET | August Industrial Production and Capacity Utilization: The industrial sector accounts for much of the cyclical swings in economic activity. 
• 10:00am ET | August Leading Economic Index: This is an index composed of various economic indicators that have historically led changes in the broader economy.

Note: Companies with at least $200 billion in market capitalization are classified as “Mega-Caps,” while others are shown in the “Large & Mid-Caps” sections.

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