5 Critical Developments to Watch This Week

The latest US inflation figures will be released on Thursday this week. Investors, whose hopes that the US central bank, the Fed, would back down from its aggressive rate hike campaign have been repeatedly dashed, are now turning their attention to the decision.

Here are 5 developments to watch this week:

US inflation data to be released

With Friday's employment report showing that the labor market remains strong despite the Fed's efforts to curb high inflation by weakening growth, Thursday's data showing inflation rose again may cause the Federal Reserve to become even more hawkish. While expert economists expect the core inflation rate to moderate, core inflation, which excludes food and fuel costs, is expected to accelerate in September, keeping the Federal Reserve on track for a fourth consecutive 75 basis point rate hike in November. Retail sales data to be released on Friday are expected to show a slight increase in September, driven by a rebound in auto sales. Consumer sentiment data, initial jobless claims and wholesale price inflation data are also expected to show how US consumers are faring after months of tight monetary policy.

Fed minutes and policymakers to speak

The minutes of the Federal Reserve's latest meeting, to be released this Wednesday, will reveal more information about policymakers' views on the state of inflation and the future path of interest rates. Investors will also have heard from several Fed officials during the week, including Vice Chair Lael Brainard, New York Fed President James Bullard, Cleveland Fed President Loretta Mester and Chicago Fed President Charles Evans. Recent comments by Fed officials suggested that the turmoil in financial markets would not deter the central bank from taking action to curb inflation, which is running at more than three times its target. Equity markets have been hit hard by fears that aggressive monetary tightening by the Fed could push the economy into recession.

Earnings reports from big banks

Major US banks will release quarterly corporate earnings on Friday against a backdrop of concerns about the impact of rising interest rates. The nation's four largest lenders - JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS) - will report third-quarter earnings ahead of Friday's open. Banks earn more, especially when rates rise, because they can borrow more from customers, but higher borrowing costs also affect demand for mortgages and other loans. "We expect a moderate but increasing negative impact on banks' asset quality and loan growth from higher interest rates, inflation and a mild recession in the US, which negates some of the benefits of higher rates," analysts at ratings agency Fitch Ratings said.  

Oil prices

OPEC+ decided to cut oil production. Oil prices, which hit a five-week high on Friday despite the strengthening dollar, remain on the agenda. OPEC+ plans to cut production targets by 2 million barrels a day ahead of the European Union's embargo on Russian oil, putting pressure on supply in an already tight market. "Among the most important consequences of OPEC's latest cut is the possibility of oil returning to $100 levels," Stephen Brennock of oil broker PVM told Reuters. US Treasury Secretary Janet Yellen noted in an interview published in the Financial Times on Sunday that this decision was "unhelpful and unwise" for the global economy, especially emerging markets.

UK data

The Bank of England's (BoE) Financial Policy Committee will publish the minutes of its meeting on Wednesday. The committee oversaw last month's emergency intervention to stabilize bond markets following the government's mini-budget. The minutes may provide some insight into the risks facing pension funds and the impact of sharply rising mortgage rates. The UK will release August employment data on Tuesday and August GDP, industrial production and trade balance data a day later. Weak economic data could increase pressure on the government to deliver on its long-term growth plans. Source: investing.com Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!