China's Steady Loan Rates, UK Inflation, and Fed's Upcoming Policy Update
Across the Asia-Pacific markets, there was a widespread decline in response to China's decision to keep its one-year and five-year loan prime rates unchanged. In contrast, European markets are gearing up for a mixed opening on Wednesday, as global investors eagerly await the upcoming monetary policy announcement from the U.S. Federal Reserve.
Specifically, China has maintained its one-year and five-year loan prime rates at 3.45% and 4.2%, respectively, for the month of September. The People's Bank of China had last reduced the one-year LPR rates in August, lowering them from 3.55% to 3.45%, while the five-year LPR saw its last cut in June, dropping from 4.3% to 4.2%.
Meanwhile, Japan experienced a significant improvement in its trade deficit for August, which plummeted by 66.7% to 930.5 billion yen ($6.3 billion), compared to the 2.79 trillion yen deficit recorded a year earlier.
On the other hand, the United Kingdom observed a 6.7% inflation rate in August, slightly below expectations and a marginal decrease from the previous month. This development may influence the Bank of England's decision to potentially halt its tightening cycle after tomorrow. The likelihood of a quarter-point increase on Thursday has also decreased, with the market assigning it a probability of less than 60%, down from the previous 90%, as indicated by swap pricing.
The Federal Reserve is widely anticipated to maintain its current interest rates on Wednesday. However, market attention will be focused on the central bank's updated economic outlook, including the "dot plot" charting the projected Fed funds rate movements. Chair Powell's subsequent press conference will provide investors with insights into the direction of policy changes leading up to the November meeting and into 2024.
Additionally, Canada has experienced a notable increase in consumer prices, primarily driven by surging gasoline costs. This development might provide supporting evidence for the Federal Reserve to adopt a more restrictive stance on interest rates. Market expectations have roughly doubled the likelihood of a rate hike in Canada, now standing at approximately 40%, following a rise in annual headline inflation from 3.3% in the previous month to 4% in August.
Across the Asia-Pacific markets, there was a widespread decline in response to China's decision to keep its one-year and five-year loan prime rates unchanged. In contrast, European markets are gearing up for a mixed opening on Wednesday, as global investors eagerly await the upcoming monetary policy announcement from the U.S. Federal Reserve.
Specifically, China has maintained its one-year and five-year loan prime rates at 3.45% and 4.2%, respectively, for the month of September. The People's Bank of China had last reduced the one-year LPR rates in August, lowering them from 3.55% to 3.45%, while the five-year LPR saw its last cut in June, dropping from 4.3% to 4.2%.
Meanwhile, Japan experienced a significant improvement in its trade deficit for August, which plummeted by 66.7% to 930.5 billion yen ($6.3 billion), compared to the 2.79 trillion yen deficit recorded a year earlier.
On the other hand, the United Kingdom observed a 6.7% inflation rate in August, slightly below expectations and a marginal decrease from the previous month. This development may influence the Bank of England's decision to potentially halt its tightening cycle after tomorrow. The likelihood of a quarter-point increase on Thursday has also decreased, with the market assigning it a probability of less than 60%, down from the previous 90%, as indicated by swap pricing.
The Federal Reserve is widely anticipated to maintain its current interest rates on Wednesday. However, market attention will be focused on the central bank's updated economic outlook, including the "dot plot" charting the projected Fed funds rate movements. Chair Powell's subsequent press conference will provide investors with insights into the direction of policy changes leading up to the November meeting and into 2024.
Additionally, Canada has experienced a notable increase in consumer prices, primarily driven by surging gasoline costs. This development might provide supporting evidence for the Federal Reserve to adopt a more restrictive stance on interest rates. Market expectations have roughly doubled the likelihood of a rate hike in Canada, now standing at approximately 40%, following a rise in annual headline inflation from 3.3% in the previous month to 4% in August.