On the other hand, while the leaders of the BRICS countries come together in India, citizens in Sweden will go to the polls on Sunday.
1. FED’S INTEREST RATE DECISION
Markets will closely monitor whether the Fed will increase interest rates as part of the fight against inflation on Wednesday.
According to Fed funds futures, markets are expecting a quarter-point interest rate increase, but some investors are still cautious about this possibility. Since the Fed has kept interest rates steady this year, investors are skeptical that this attitude will suddenly change.
While Fed President Kevin Warsh’s statements in favor of tight monetary policy last month supported the interest rate increase expectations, August employment data also reinforced these expectations.
Warsh’s decision not to provide guidance on future interest rate decisions makes it difficult for markets to predict the decisions to be taken at the Fed meetings.
2. BOJ’S NEXT STEP
The interest rate decision that the BOJ will announce on Friday may be the easiest decision to predict. Markets are almost certain that the BoJ will increase interest rates by 25 basis points to 1.25 percent. If the BoJ makes such a decision, interest rates in Japan will rise to the highest level in more than 30 years.
The bigger question is what decisions the BOJ will make next. After BoJ officials recently increased their messages of tightening monetary policy, markets focused on what might happen after September. While analysts see the possibility of an interest rate increase in the October and December meetings, swap markets predict that interest rates will reach 1.5 percent by January.
After the yen fell to its lowest level in the last 40 years in July, the BoJ took it upon itself to support the new currency. Although the recent recovery of the yen has reduced this pressure, investors are closely monitoring possible sales in yen-financed carry trade transactions, which can create volatility in global markets.
3.INFLATION IGNITED
Oil broke the calm trend that had been going on for weeks. The barrel price of Brent oil rose above $100 for the first time since July.
The physical delivery price of oil is above $120 per barrel, diesel prices are at record levels, and jet fuel is approaching its peak in April. While natural gas prices in Europe are at their highest level since the last months of 2022, natural gas reserves are at their lowest level in these months of the last 15 years as winter approaches.
Record-breaking summer heat waves have devastated harvests and pastures in many regions, indicating that food prices may increase. On the other hand, copper, which is used in many places from energy infrastructure to artificial intelligence investments, is heading towards record levels of $ 15,000 per ton.
The items that central bank officials must follow closely while trying to fight inflation are increasing every day.
4th BRICS SUMMIT
India is preparing to put forward ambitious ideas at the summit where BRICS leaders will meet in New Delhi on September 12-13.
India wants to ensure cooperation between central banks’ digital currencies to enable faster and cheaper payments between countries.
But political conflicts among the BRICS countries may make the idea difficult to accept, and digital currencies are not yet widely accepted.
While Iran and the United Arab Emirates have suspended their financial relations due to the conflict in the Middle East, India has so far been cautious about financial integration with China.
Although the idea of finding an alternative to the dollar, such as creating a common currency, was previously put forward in BRICS, no steps were taken. Central banks collaborating on digital currencies may be a more feasible option, but plans to create an alternative to the dollar could attract the attention of markets and the ire of the United States.
5. WILD ELECTION IN SWEDEN
The elections in Sweden, which go to the polls on Sunday, seem to be the country’s most competitive elections in recent times. In the pre-election polls, where it was previously thought that the opposition would easily win, Prime Minister Ulf Kristersson’s centre-right coalition closed the gap with the opposition centre-left coalition of Magdalena Andersson.
The Swedish Democrats party, which is against immigration and has supported Kristersson since 2022, are demanding ministerial positions after the election and could increase their influence in the country’s politics like never before. The trend of shifting to the right in Europe in general may be repeated here as well.
Investors, on the other hand, focus on budget planning. While the government is reducing taxes on fuel and food, they say they will make further tax cuts and establish free kindergartens if they win the election again. With these promises, fiscal policy came to the fore again in the election.
