• MON: Canadian CPI (Aug)
• TUE: US Midterm Primary Elections: Delaware, Chinese Activity Data (Aug), UK Jobs (Jul), German ZEW Survey (Sep), Indian Trade Balance (Aug)
• WED: FOMC Announcement and SEPs, BCB Announcement, Japanese Trade Balance (Aug), UK Inflation (Aug), EZ Industrial Production (Jul), US Retail Sales (Aug)
• THU: BoE Announcement, EZ Final CPI (Aug), US Philly Fed (Sep)
• FRI: BoJ Announcement, Japanese CPI (Aug), UK Retail Sales (Aug), US Industrial Production (Aug), ECOFIN Meeting

WEEK AHEAD

SWEDISH ELECTION (SUN): The current parliament consists of a three-party coalition of the Moderates, Christian Democrats and Liberals, with legislation ultimately passed with the support of the Sweden Democrats, which sit outside the Cabinet. The main opposition Red-Green coalition is polling incrementally better than the current government, setting the scene for drawn-out coalition talks. Ultimately, the short-term impact on the SEK is likely to be limited. Should a left-leaning coalition form a government, the bias for the SEK is likely to be bearish, given the implications for growth. Polling stations are open between 08:00-20:00 local time (07:00-19:00 BST), with preliminary numbers due around an hour later. Thereafter, early counts are completed on the 14th of September.

CANADIAN CPI (MON): BoC policymakers will look to next week’s inflation report to assess whether the upside risks to the central bank’s forecast are materialising, as higher gasoline prices drive recent gains. Other data in August showed an unexpected decline in employment, with the unemployment rate ticking up. The Ivey PMI S.A. also hit its highest level since 2020, with the prices index accelerating to 80.5 from 75.5, its highest level in the last couple of years. On an unadjusted basis, the prices index rose to 78.2 from 74.0, although it remained below the 79.8 YTD high. At the last meeting, the BoC Governor said inflation was too high, very concentrated in gasoline and oil prices, and that its tolerance for higher inflation was limited.

CHINESE ACTIVITY DATA (TUE): Industrial Production is expected at 4.8% Y/Y (prev. 4.5%), Retail Sales at 0.8% (prev. 0.6%) and Fixed Asset Investment at -7.1% Y/Y (prev. -6.7%). ING expects the divergence between external and domestic demand to persist, with industrial activity supported by exports while consumption and investment remain weak despite efforts to accelerate fiscal spending. Focus after the data will remain on the extent of domestic weakness, with softer-than-expected activity likely to reinforce calls for further policy support from Beijing.

UK JOBS (TUE): June’s series did not show a significant change in the labour market, in-line with consensus into the data. Though, GBP did see some modest pressure at the time, despite hotter-than-expected wage components, as the unemployment rate remained sticky. Once again, the labour market is not expected to show a significant change. Focus will be on any signs of the relatively resilient jobs environment faltering as the Middle East conflict continues, and, if the build up to the Autumn Budget is having any early impact.

FOMC POLICY ANNOUNCEMENT (WED): Given the Fed is avoiding forward guidance amid ongoing uncertainties, incoming economic data has been key in shaping rate expectations. The August CPI report saw core inflation hotter than expected at 0.3% M/M (exp. 0.2%), resulting in money markets assigning a rate hike with a 90% probability, up from 70% before the data. The August jobs report was also strong, with the economy adding 162k jobs, well above the 56k forecast and prior 21k, while two-month net revisions added a further 55k jobs – implying the labour market is in a better position than initially thought. A robust labour market and above-target inflation give the Fed room to hike. Before the CPI data, the Reuters poll showed the majority of economists expected the Fed to hold rates in September and remain on hold for the rest of the year. However, given the poll was conducted before the CPI release, it is now somewhat outdated. Oxford Economics writes that next week’s confab is on a knife’s edge, and while the firmer core CPI reading pushes them towards a hike, it is still no guarantee, particularly as the Fed’s preferred inflation measure is likely to prove more benign. Meanwhile, Pantheon Macroeconomics write “A September rate hike is now very likely, but a tightening cycle looks unwarranted”. Aside from the data, tensions in the Middle East have risen, with the US and Iran resuming strikes on each other, while the Houthis have been looking to take control of the Bab al-Mandeb Strait. This has helped oil prices rally over the past week, with WTI briefly reclaiming USD 100/bbl while Brent remains above the psychological USD 100/bbl level. Global bond yields have continued to rise amid higher oil prices, corporate issuance to fund AI CapEx, strong economic data and an elevated term premium, resulting in tighter financial conditions, at least through the bond market. At the last meeting, Fed Chair Warsh noted that the recent tightening in financial conditions had provided some comfort that the Fed has the ability to deliver, implying he was comfortable with how markets were functioning and helping the Fed do some of its work. Recent commentary from Chair Warsh at Jackson Hole was hawkish, placing increased emphasis on returning inflation to target. Meanwhile, Governor Waller had been awaiting the August CPI report. He did not explicitly specify the inflation print he needed to see, but said that continued progress on disinflation would support a hold, whereas hotter inflation could warrant a hike. Waller also suggested he would be comfortable with a three-month inflation reading of 2.8%. Pantheon Macroeconomics notes that “The three-month average of annualized month-to-month changes in the deflator, cited by Governor Waller as a key metric, probably dropped to 2.3% in August (again on the new methodology), from 2.7% in May.” However, Pantheon cautions that “the residual seasonality in the numbers means that slowdown offers limited reassurance, while the rise in oil prices has worsened the outlook, both for headline and core inflation.”

US RETAIL SALES (WED): The Chicago Fed’s prelim retail & food services sales ex. auto projected to increase +0.5% (prev. -0.3% in July) on a seasonally adjusted basis and to be unchanged when adjusted for inflation (prev. -0.3% in July.

BCB POLICY ANNOUNCEMENT (WED): Brazil’s central bank is expected to cut rates by 25bps to 13.75%, following the 25bps reduction in August. Oxford Economics writes that the Copom will cut rates amid weak household consumption momentum. OxEco adds that the contraction in household consumption flagged by Q2 national accounts last week should pacify the need for further recalibration of the policy rate, which remains above its neutral level and thus heavily contractionary. Ahead, Oxford see another 25bps cut in November and a pause in December, leaving the Selic rate ending 2026 at 13.5%.

UK INFLATION (WED): Note, this prints on the eve of the September BoE Policy Announcement (see below for more). July’s print ticked up, as expected, driven by an increase in the Ofgem energy price cap, taking the headline to 2.9% Y/Y. For August, the headline is expected to surpass the 3.0% mark and the BoE’s view of 2.8%, to around 3.2% Y/Y. Upside driven by a rebound in some components and energy upside in the period filtering through to fuel, airfares and so on. A series that could prove decisive for the September BoE, as if it is as-expected or even hotter, and particularly if the core components tick up markedly, some more of the MPC may be persuaded to vote for a hike, potentially putting Governor Bailey back into the tie-breaking role. Recent commentary from him suggests he remains in favour of a hold at this stage; however, hawkish risks dominate and a particularly hot August series could be enough to turn the guidance explicitly hawkish, or even push the Governor into calling for a hike.

BOE POLICY ANNOUNCEMENT (THU): The BoE is expected to hold the Bank Rate at 3.75%, with the MPC likely to maintain July’s 6-3 split as Pill, Greene and Mann continue to favour a 25bps hike. The case for holding rests on limited evidence of second-round effects from the energy shock and signs of labour-market softening, while elevated oil and gas prices remain the key upside risk to inflation. The MPC will also conduct its annual QT vote, with the gilt stock expected to be reduced by GBP 50bln over the coming year, down from GBP 70bln previously, including around GBP 20bln of active sales. Eyes will be on the vote split, QT composition and whether the MPC retains a hawkish bias in response to the recent energy spike while awaiting the Autumn Budget on 28th October.

BOJ POLICY ANNOUNCEMENT (FRI): BoJ is expected to hike rates at its meeting next week, with money markets pricing around a 79% chance for the short-term rate to be increased by 25bps to 1.25%. As a reminder, the BoJ kept rates unchanged at 1.00% during the July 30th-31st meeting, which was widely expected as the central bank had just hiked rates in June, while the decision was made by an 8-1 vote. There was little deviation in the language from the central bank, as it stated that it will consider the timing and pace of rate hikes while examining the likelihood of realising baseline scenario risks. There has been a gradual ramp-up of rate hike bets since that last meeting amid numerous reports and rhetoric from officials, including source reports that PM Takaichi’s government is said to support a faster BoJ rate hike, and sources suggested the BoJ could be pressured to act in September due to the recent joint Japan-US yen intervention. BoJ Governor Ueda also suggested that prospects for a hike were on the table as he noted that monetary conditions remain accommodative, so they would like to continue increasing rates and will take upside price risks into account when deliberating policy. Elsewhere, hawkish dissenter Takata left the door open for more aggressive moves as he called for the BoJ to conduct rate hikes nimbly and believes that this year marks the beginning of a new phase, where rate hikes will not follow a fixed pace, although a source report then pushed back against this, stating that the BoJ is favouring a 25bps hike and a flexible future pace. Furthermore, board member Masu stuck to the hawkish script in which he stated that Japan is no longer in deflation, so real interest rates should be moved out of negative territory as soon as possible, and that the BoJ must raise rates further and move its policy rate to within the estimated neutral-rate range so it can conduct policy flexibly. Nonetheless, the greatest pressure for the central bank to continue policy normalisation seems to be coming from overseas following the rare US-Japan joint intervention to prop up the yen at the end of July. US Treasury Secretary Bessent stated that Japan should stop the reflation now and that Abenomics has worked, but added that Japan needs to shift and it is time for Takaichi-nomics.

JAPANESE CPI (FRI): Japanese Core CPI is expected to remain at 1.8% Y/Y in August (prev. 1.8%), with government electricity and gas subsidies expected to offset some upward pressure from elevated energy and import costs. Attention will be on signs of broader price pressures after PPI remained elevated, alongside the extent to which higher input costs are being passed through to consumers. The release comes just hours before the BoJ policy decision and could prompt a muted reaction ahead of the BoJ announcement.

UK RETAIL SALES (FRI): July’s print was weak, as expected, following the BRC monitor for the period. For August, the BRC series points to another disappointing month, amid the ongoing cost of living squeeze, a point that particularly hit discretionary spending. Increasingly, attention from a consumer perspective turns to the Autumn Budget amid concern that UK PM Burnham and Chancellor Healey will have to increase taxes in order to restore some headroom.

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WEEK IN REVIEW

OPEC+ MEETING (SUN): OPEC+ kept October production targets unchanged, pausing further output increases after completing the rollback of the 1.65mln BPD voluntary cuts in September. The group is now turning towards 2027 production quotas, with member capacity assessments set to determine future baselines. Meanwhile, ongoing disruptions around the Strait of Hormuz have kept actual exports from some producers below targets, reducing the impact of headline quotas on physical supply. The next meeting is scheduled for 4th October.

GERMAN STATE ELECTIONS SAXONY-ANHALT (SUN): AfD secured 44% of the vote share in the region, the best performance of a right-wing party in the modern-era. This equates to 39/83 seats, three short of a majority. Following this, the regional leader Siegmund has indicated that he would not want to lead a minority in the region, and would instead return to the polls targeting an outright majority. Nonetheless, party leaders have suggested talks could occur, though parties continue to stonewall the AfD on cooperation, with the exception of left-wing BSW, which could provide conditional/limited support; though, it remains to be seen if AfD would accept this. While pertinent, the result does not impact national-level policy within Germany. However, it does not bode well for the current grand coalition at the next national election, and is already applying additional pressure onto Chancellor Merz. Pressure that could well intensify at the other regional elections in the next few weeks, which are expected to go to the AfD and Die Linke.

SWEDISH CPIF (MON): A cooler-than-expected report supports the view that the Riksbank will remain on hold for the remainder of the year. At its last monetary policy meeting, the Riksbank highlighted elevated inflation metrics during the summer months. Policymakers had suggested that if this trend persisted beyond the summer, the Riksbank would raise rates again. Nonetheless, CPIF Y/Y at 0.7% remains slightly above the Riksbank’s own forecast of 0.6%, while the M/M reading is below its forecast. At the headline level, Y/Y inflation cooled to the Riksbank’s projection of 0.3%, while the M/M reading fell below its forecast at -0.1%. Overall, further progress is needed on inflation, but the report ultimately supports the case for holding rates at the Riksbank’s next meeting on 24th September 2026.

JAPANESE GDP Q2 (TUE): Japanese Q2 GDP was revised higher to 0.4% Q/Q from 0.3%, while annualised growth was upgraded to 1.4% from 1.1%, marking a third consecutive quarter of growth. The revision was mainly driven by capital expenditure, which fell 0.9% compared with the initial 1.2% decline, while private consumption was flat and net exports added 0.5ppts to growth. The upward revision signals that the economy remained resilient despite weak consumption and supports the case for further BoJ tightening.

CHINESE TRADE DATA (TUE): Chinese trade data remained strong in August, with exports rising 25.0% Y/Y (exp. 25.0%, prev. 23.9%) and imports increasing 28.2% (exp. 30.0%), while the trade surplus widened to USD 119.09bln (prev. USD 112.5bln). Export growth remained supported by strong global tech demand, particularly for semiconductors, alongside continued front-loading of shipments to the US ahead of potential tariffs.

US TREASURY LONG-END BUYBACKS (WED): The US Treasury announced it would purchase a maximum of USD 6.00bln in the 10-20year buyback operation. Expectations had been as high as USD 10bln, and Treasury yields rose on the announcement. The operation itself saw the Treasury purchase USD 5.187bln of the USD 10.489bln offered. Although the Treasury purchased less than its USD 6bln maximum, this likely reflected a lack of offers it deemed acceptable, with 23 of the 40 eligible securities accepted. The next announcement, for the 20-30year sector, will take place on September 23rd, where at least USD 4bln will be announced. We will be looking to see whether the Treasury opts to purchase more than the USD 6bln maximum announced for the 10-20year operation.

CHINESE INFLATION (WED): Chinese CPI rose 0.8% Y/Y in August (exp. 0.8%, prev. 0.5%) and 0.4% M/M (exp. 0.3%, prev. -0.1%), while PPI accelerated to 3.8% Y/Y (exp. 3.6%, prev. 3.5%). Higher energy and commodity costs contributed to the pickup, while core CPI edged up to 1.0% from 0.9%. Overall, the data showed inflationary pressures picking up, particularly at the factory gate, although underlying consumer demand remained relatively weak and continued to limit broader price pressures.

ECB POLICY ANNOUNCEMENT (THU): As expected from the ECB. A 25bps hike, and one that would have occurred under all three additional scenarios set to be published in the near term. Lagarde said today’s decision was unanimous and that a 25bps hike was a “robust” move under all the additional scenarios, a comment that marginally supported Bunds on the implied narrative that none of the scenarios would have required a 50bps move. In the baseline forecasts, the 2027 and 2028 HICP projections were raised, and while this takes the 2028 forecast above target at 2.1%, the 2027 increase was smaller than desks expected. The core forecast was also upgraded for 2027, while the 2028 view was reiterated. Note, the new guidance is already outdated given the cut-off date. In terms of guidance, the statement retained the familiar data-dependent and meeting-by-meeting approach. Overall, the decision, statement and press conference do not significantly shift the dial on market pricing, which implies two more 25bps hikes by April 2027. Robust growth, the upgraded 2028 forecast and Lagarde’s comments on the growth backdrop arguably give the ECB policy space to tighten further. However, the inflation forecasts discussed and her comments that, while elevated inflation will be longer lasting, it has been lower than forecast are factors in favour of the ECB potentially entering an extended hold once it judges rates to be sufficiently restrictive, a point Lagarde would not be drawn on during the press conference. Following the meeting, a Bloomberg source report suggested policymakers see further rate hikes, potentially as early as October. Citi, Barclays and UBS see another round of tightening in December. Interestingly, Danske Bank believes the ECB will deliver two 25bps hikes, in October and December.

CBRT POLICY ANNOUNCEMENT (THU): The CBRT left the policy rate unchanged at 37%, as expected, with the interest rate corridor also steady. In its statement, the Bank said that “recent inflation data and indicators suggest the underlying trend is decelerating”, but highlighted that elevated energy prices amid geopolitical developments pose an upside risk to the inflation outlook. On the economy, the Bank noted that the “limited pass-through of supply shocks to domestic prices confirm the weakness in domestic demand.” Forward guidance was unchanged, maintaining its meeting-by-meeting approach. Looking ahead, ING reiterates its forecast for two 100bps cuts in Q4’26, bringing the policy rate to 35%, and warns that the Middle East conflict and the inflation outlook remain the key risks to its projections.

NORWEGIAN CPI (THU): Norwegian CPI in August was mixed. Headline M/M printed at -0.3% (prev. 1%), while Y/Y rose more than expected to 3.3% (exp. 3.2%, prev. 3%). CPI-ATE Y/Y increased to 3% (prev. 2.7%), as expected, and importantly remained below Norges Bank’s own forecast. The question for policymakers will be whether CPI-ATE continues to track below the Bank’s forecast and eventually moves towards target. Current guidance suggests it may still become necessary to raise the policy rate. This poses two-sided risks ahead of the 24th September meeting, with markets still undecided on whether Norges Bank will deliver a 25bps hike or hold rates steady.

UK GDP (FRI): A stronger than expected series for July, at 0.4% M/M (exp. 0.0%, prev. 0.3%), with AI-related activity seemingly supporting the economy and particularly the services sector. However, production and construction was pressured over the last three months. Overall, the series is welcome and provides some relief for the UK Government on the fiscal side of things, though recent yield moves more than offset this. For the BoE, the data is unlikely to influence the September outcome; however, it does give further ammunition to the hawks to once again vote for a hike.

US PPI (THU) The PPI report was mixed. Headline PPI rose 0.4% M/M, in line with the consensus and accelerating from the prior 0.1% increase (revised from 0.0%), while the Y/Y rate accelerated to 5.4%, above the 5.3% forecast and the prior 4.8%. The core metrics were more encouraging, with core PPI rising 0.2% M/M, below the 0.3% forecast and prior. Core PPI rose 4.6% Y/Y, in line with expectations but accelerating from the prior 4.3%. The report noted that more than three-quarters of the broad-based increase in final demand goods prices could be attributed to energy, which rose 4.2%. More than a third of the August increase in final demand goods prices was attributable to diesel fuel, while the indices for gasoline, jet fuel, home heating oil, candy and nuts, and tobacco products also advanced. In contrast, residential electric power prices fell 0.5%, while fresh sausage and aluminium mill shapes also declined. Services prices rose a more modest 0.1% M/M, primarily due to a 2.3% increase in transportation and warehousing services. Conversely, the index for final demand trade services fell 0.2%, while prices for final demand services less trade, transportation and warehousing were unchanged. Looking at the PPI components that feed into PCE, portfolio management prices declined, while air passenger transportation prices increased modestly following the prior decline, and the healthcare components were mixed. Pantheon Macroeconomics highlighted that most of the relevant components rose only modestly, although the 0.7% increase in air passenger transportation PPI points to a 2.3% rise in the corresponding seasonally adjusted PCE measure. Pantheon also noted that “hospital prices rose by 0.6%, twice their average monthly increase over the previous 12 months.”

US CPI (FRI): US CPI: Core CPI rose 0.29% M/M in August, above the expected 0.22%, while the Y/Y rate eased to 2.4%, in line with forecasts and below the prior 2.5%. Headline CPI rose 0.396% M/M, in line with the forecast and accelerating from the prior 0.1%, while the Y/Y rate was unchanged at 3.4%, in line with expectations. Within the report, supercore inflation accelerated to 0.51% M/M from 0.19%, while core goods inflation eased marginally and core services accelerated slightly. Following the slightly hotter-than-expected core M/M print, the implied probability of the Federal Reserve hiking by 25bps next week increased to c. 90% from 70% pre-data. The inflation side of the mandate is currently the Fed’s primary focus, so an above-consensus M/M print may be enough for the Committee to lift rates by 25bps next week. Oxford Economics writes that next week’s confab is on a knife’s edge, and while the firmer core CPI reading pushes them towards a hike, it is still no guarantee, particularly as the Fed’s preferred inflation measure is likely to prove more benign. Oxford adds that the acceleration in core prices was most notable within non-housing core services, particularly transportation services, which underscores the risk of further energy pass-through to a broader array of consumer prices.

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