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Prior to the arrival of global finance leaders in Washington, the International Monetary Fund has already advised them to start tightening their budgets.
With the US election just two weeks away and the recent global inflation crisis still fresh in everyone’s minds, ministers and central bankers gathering in Washington are facing increasing pressure to address their fiscal situations while they still have the chance.
The IMF, whose annual meetings are set to begin on Monday, has highlighted some key themes it plans to emphasize with a range of projections and studies on the global economy in the upcoming days.
The IMF’s Fiscal Monitor report, set to be released on Wednesday, will include a warning that public debt levels are expected to reach $100 trillion this year, largely driven by China and the US. Managing Director Kristalina Georgieva emphasized in a speech on Thursday the impact of this massive borrowing on the world.
Georgieva stated, “Our forecasts indicate a challenging future characterized by low growth and high debt. Governments must focus on reducing debt and building up reserves for the next inevitable shock, which may come sooner than expected.”
Some finance ministers may receive additional warnings before the week is over.
UK Chancellor of the Exchequer Rachel Reeves has already been cautioned by the IMF about the risk of a potential market backlash if debt levels do not stabilize. This warning comes just ahead of the release of public finance data on Tuesday, before her budget announcement on October 30.
Meanwhile, Moody’s Ratings is expected to release a report on France on Friday, a country currently under intense investor scrutiny. Any changes in the outlook could have significant implications, as France’s rating is slightly higher than that of its major competitors.
For the largest borrowers, the IMF’s report has issued a stern warning: high public debt levels in key countries like China and the US could have widespread repercussions.
The IMF stated, “Elevated debt levels and uncertainty surrounding fiscal policies in systemically important countries can lead to higher borrowing costs and debt-related risks in other economies.”
In the upcoming week, economists anticipate a rate cut in Canada and a rate hike in Russia among the potential central bank moves.
For a recap of the past week’s economic events and a preview of what’s to come globally, click here.
US and Canada
Economists expect upcoming home sales reports to show that declining mortgage rates are helping to stabilize the US residential real estate market. The National Association of Realtors will release data on contract closings for existing homes on Wednesday, followed by government figures on sales of new homes the next day.
It is projected that September sales of both existing and new homes will see modest increases. Limited inventory has been a challenge for resales, keeping prices high and affordability low. New-home sales have been on the rise over the past two years with the help of incentives.
Other US data in the coming week includes September durable goods orders and capital goods shipments, which will help economists refine their estimates for third-quarter economic growth. The Federal Reserve will also release its Beige Book, providing anecdotal insights into the economy.
Regional Federal Reserve officials scheduled to speak in the upcoming week include Jeffrey Schmid, Mary Daly, and Lorie Logan.
On the other hand, the Bank of Canada is increasingly expected to cut rates by 50 basis points following a cooling inflation rate of 1.6% in September and ongoing weakness in some labor market indicators.
Europe, Middle East, Africa
Attention will be on Washington for many European Central Bank Governing Council members, with more than a dozen appearances scheduled in the US. ECB President Christine Lagarde will be interviewed by Bloomberg Television’s Francine Lacqua in Washington on Tuesday.
Bank of England Governor Andrew Bailey will speak in New York on Tuesday, and Swiss National Bank President Martin Schlegel is set to appear on Friday.
In the euro-area, reports on consumer confidence, purchasing manager indexes, and the ECB’s inflation expectations survey will be key highlights. Germany’s Ifo Institute will release its influential business confidence gauge at the end of the week.
In addition to the potential rating assessment on France, S&P may also issue reports on Belgium and Finland on Friday.
Looking east, Hungary’s central bank decision on Tuesday may keep borrowing costs unchanged.
The Bank of Russia has hinted at another rate hike on Friday due to continued inflationary pressures. They had previously raised rates by 100 basis points to 19% in September, and a similar move would bring the rate back to the 20% level set in an emergency increase following the full-scale invasion of Ukraine in February 2022.
South Africa is expected to report a slowdown in inflation to 3.8% in September, potentially leading to another rate cut next month. The central bank has forecasted that consumer price growth will remain within the lower range of its 3% to 6% target band over the next three quarters.
Asia
Chinese lenders are anticipated to lower their loan prime rates on Monday with support from the People’s Bank of China in an effort to stimulate business activity. The 1-year and 5-year rates are expected to drop by 20 basis points to 3.15% and 3.65%, respectively.
At the end of the week, data will reveal whether industrial profits in China rebounded in September after a significant decline in August. The latest figures showed the economy growing at its slowest pace in six quarters during that period.
Thursday will see a cluster of PMI releases from Japan, Australia, and India.
Singapore is likely to report a slowdown in consumer inflation in September, with price growth updates also expected from Hong Kong and Malaysia for that month.
Japan will release Tokyo CPI for October on Friday, an important indicator capturing corporate price changes at the beginning of the fiscal second half.
South Korea is set to publish third-quarter growth figures on Wednesday, which may indicate a slight slowdown in economic momentum.
Throughout the week, early trade statistics for October will be released by South Korea, Taiwan, and New Zealand.
Central bank officials from the region will be attending the IMF meetings in Washington. Reserve Bank of Australia Deputy Governor Andrew Hauser will participate in a fireside chat on Monday, and the bank’s annual report will be published three days later.
Reserve Bank of New Zealand Governor Adrian Orr will speak on policy during the IMF conference, while Uzbekistan’s central bank will decide on Thursday whether to pause following its rate cut in July.
Latin America
Brazil’s central bank Focus survey forecasts for inflation, interest rates, and debt metrics are eagerly awaited on Monday.
Expectations have turned pessimistic in light of doubts about the government’s fiscal discipline.
In Mexico, GDP proxy data is expected to confirm a loss of momentum, prompting economists to revise down their third-quarter growth projections. The economy is anticipated to slow down for the third consecutive year in 2024.
Argentina’s GDP proxy data will likely show the country struggling and still in the midst of a recession expected to extend into 2025.
Paraguay’s central bank will hold its rate-setting meeting, having kept borrowing costs at 6% for the past six months despite slightly higher inflation than the 4% target.
Inflation reports from Brazil and Mexico mid-month are unlikely to ease concerns about rising inflation rates. Brazil’s central bank is expected to tighten policy further on November 6, while Banxico may pause on a third consecutive rate cut at its November 14 meeting.
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