The Federal Reserve and many rich-world peers are widely expected to lower interest rates again in the coming week, right after a US presidential election that may not be decided yet.
Central banks responsible for more than a third of the global economy will set borrowing costs in the wake of the vote, clinging to whatever certainties they can discern on the likely path of American policy for the next four years.
With Vice President Kamala Harris and former President Donald Trump neck-and-neck before Election Day on Nov 5, monetary officials from Washington to London may find themselves still in suspense.
Election aside, US policymakers have already communicated a desire to proceed with a more gradual pace of rate cuts after September’s half-point reduction. Economists widely expect a quarter-point move on Thursday, followed by another in December — and their conviction grew after data on Friday showed the weakest hiring since 2020.
Fed officials try to steer clear of politics, yet they kicked off a rate-cutting cycle heading into the final stretch of an election whose outcome may hinge on how voters feel about the economy. While chair Jerome Powell will likely stress that the current conditions warrant less restrictive policy when he speaks after the decision, he and his colleagues still risk political backlash.
See also: BOK surprises with rate cut as Trump win boosts trade risks
Central banking counterparts elsewhere are confronting a panoply of risks ranging from slowing economic growth to lingering inflation, even before they contemplate what sort of hit to global trade Trump’s threat of tariffs would effectively entail.
While the Reserve Bank of Australia will probably keep borrowing costs on hold again in a decision on Tuesday, hours before US polls open, other peers are poised to act. Those in the UK, Sweden, the Czech Republic and elswewhere are anticipated to cut rates in decisions after Election Day, while Brazilian officials may hike by as much as a half point.
With such a close-run presidential race, policymakers at the 20 or so central banks setting borrowing costs in the coming week may need to prepare for an extended wait until there’s a settled result.
See also: ECB’s Schnabel sees only limited room for further rate cuts
In modern US elections, the losing candidate generally concedes within a day or two, but the 2020 outcome wasn’t called until four days later.
In Asia, South Korea will release an update on inflation on Tuesday, with figures expected to show further easing, supporting the Bank of Korea’s policy pivot last month.
Consumer price statistics are also due from the Philippines, Thailand, Vietnam and Taiwan. Japan publishes wage data that may keep the central bank on track for a rate hike late this year or early next; and trade data are due from China, Australia, Vietnam, Taiwan and the Philippines.
Countries publishing third-quarter gross domestic product data include the Philippines and Indonesia.
Finally, China will release key updates on price trends on Nov 9, with the focus on whether consumer inflation continues to stagger along at a pace just north of zero, and factory-gate prices slide further, after declines deepened in the previous two months.
Chart: Bloomberg
