Federal Reserve to Return to Stimulus Pump: Global Economy Week

The Federal Reserve is poised to cut interest rates again this week and may still not be done delivering monetary stimulus.

Having already reduced their benchmark in July to 2.0%-2.25%, Chairman Jerome Powell and colleagues will lop off another 25 basis points on Wednesday to support the slowing economy, according to a Bloomberg survey of economists.

Among the key questions that will be asked of Powell is whether he’s preparing for more than the “mid-cycle” adjustment he previously claimed was underway. Economists for now reckon he will act again this year before leaving the target range at 1.5%-1.75% for an extended period.

Also worth watching is how many policy makers will dissent after regional Fed presidents Eric Rosengren and Esther George voted in July in favor of keeping rates on hold, dealing Powell his the first double dissent since he took the Fed’s helm in February 2018.

“Bloomberg Economics expects policy makers to cut rates in steady 25-bp increments until the yield curve is no longer inverted. We believe this means rate cuts in September, October and December — although officials may hesitate to fully telegraph such intentions just yet, particularly as trade negotiations are underway.”

Meantime, the Fed will be followed Thursday by the Bank of Japan as it comes under pressure from investors to follow its U.S. and euro-area counterparts in loosening monetary policy anew. Also meeting next week are the central banks of Brazil, South Africa, Norway, Switzerland and the U.K.

Another big focus for investors will be the U.S-China trade war after last week’s scoop from Bloomberg that Trump administration officials had discussed offering China a limited trade agreement that would delay and even roll back some U.S. tariffs.

Here’s our weekly wrap of what’s going on in the world economy.

U.S. and Canada

The Fed officials start meeting on Tuesday before issuing their decision on Wednesday with Powell addressing reporters afterward. As they gather, they’ll have new industrial production data for August, with economists predicting a 0.2% gain.

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