This week, investor attention is squarely on the Federal Reserve, widely expected to cut interest rates. Other central banks, including those of Canada, the U.K., and Japan, will also announce monetary policy decisions. Meanwhile, U.S. retail sales growth for August is projected to slow, and shipping giant FedEx is scheduled to release quarterly results, providing a window into broader economic trends.
Federal Reserve Rate Decision
All eyes are on the Fed as markets anticipate a rate cut at the conclusion of its two-day meeting on Wednesday. Recent signs of a softer U.S. labor market have strengthened expectations for the first rate reduction since the easing cycle paused in December. Lower rates could help stimulate investment and hiring.
However, easing could also add pressure to inflation. Last week, the monthly U.S. consumer price index edged up due to rising housing and food costs, hinting at persistent price pressures. Yet weekly initial jobless claims rose, keeping the likelihood of a rate cut high. CME’s FedWatch Tool shows roughly a 95% chance of a 25-basis-point cut and about a 5% chance of a 50-basis-point move. The Fed’s target range remains 4.25% to 4.5%.
“Inflation remains above target and tariffs are likely to keep it elevated in the near term, but the balance of risks are tilted towards the need for more support for the economy,” analysts at ING said in a note.
Other Central Bank Announcements
The Bank of Canada is expected to lower rates by 25 basis points to support an economy sensitive to U.S. tariffs. August saw Canadian job growth slow for the second month, while Q2 GDP contracted sharply, although inflation stayed near forecasts.
The Bank of England is likely to keep rates steady, having already cut them in August, while monitoring new labor and inflation data. The Bank of Japan is also expected to maintain its current policy stance, though markets will look for hints on fourth-quarter plans amid domestic political uncertainty.
U.S. Retail Sales Data
August retail sales in the U.S. will be released Tuesday. Economists expect a slowdown to 0.2%, down from 0.5% in July, which had been supported by car sales and promotional activity from Amazon and Walmart. Revised June figures suggest economic activity has been resilient, though softer employment, waning consumer confidence, and higher goods prices could weigh on sales in the final weeks of Q3.
FedEx Earnings Preview
FedEx (NYSE:FDX) will report quarterly results this week, offering insight into consumer spending. As a bellwether, its performance often signals broader economic trends. Tariffs imposed under President Trump have added uncertainty, causing many businesses to limit expenditures. In June, FedEx forecasted cautiously, with CEO Raj Subramaniam warning of a “volatile” demand environment. Its fiscal Q1 adjusted profit per share guidance of $3.40 to $4 fell below analyst expectations.
U.S.-China Trade Talks
U.S. and Chinese officials are resuming discussions in Madrid after making limited progress on Sunday. Expectations remain low for a breakthrough on longstanding trade tensions.
Observers anticipate the talks will focus on extending the deadline for ByteDance’s TikTok U.S. divestment. If not sold by September 17, TikTok could face a U.S. shutdown. Reuters cited a source suggesting President Trump may extend the deadline.
Bessent told reporters both sides would “start again in the morning” after a six-hour meeting on Sunday. China’s embassy indicated a concluding press conference could occur Monday, signaling the talks may conclude soon. Bessent is expected to travel to London Tuesday ahead of Trump’s state visit with King Charles.
Ahead of the Madrid discussions, China’s Ministry of Commerce launched an anti-discrimination investigation into U.S. chip policies and a separate probe into suspected dumping of U.S. analog chips.
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