The Federal Reserve and several other central banks in wealthy nations are anticipated to lower interest rates in the coming week, in the aftermath of the U.S. presidential election, which may remain unresolved. These central banks, influencing more than a third of the global economy, will adjust borrowing costs while considering potential directions in U.S. policy over the next four years.
With Vice President Kamala Harris and former President Donald Trump in a tight race prior to the November 5th election, monetary authorities from Washington to London may still be awaiting a clear outcome. Regardless of the election, U.S. policymakers have indicated a preference for a slower pace of rate reductions following a half-point cut in September. Economists largely expect a quarter-point cut on Thursday, with another expected in December, particularly after recent data revealed the weakest hiring figures since 2020.
Though Federal Reserve officials strive to remain apolitical, they initiated a series of rate cuts amid the final stages of an election heavily influenced by economic perceptions. Chair Jerome Powell is likely to emphasize the need for a less restrictive policy in his post-decision remarks, but he and his colleagues may still face political criticism.
Central banks across the globe are grappling with various challenges, such as slowing economic growth and persistent inflation, even before considering the potential impact of former President Trump’s tariff threats on global trade.
The Reserve Bank of Australia is expected to maintain its current borrowing rates on Tuesday, just before U.S. election polls open. Meanwhile, central banks in the UK, Sweden, the Czech Republic, and other regions are predicted to cut rates following Election Day. Conversely, Brazilian officials may consider a rate hike of up to half a point.
With such a closely contested presidential race, policymakers from around 20 central banks setting borrowing costs this week might have to brace for a longer wait for definitive election results, reminiscent of the delayed outcome in 2020.
In the United States and Canada, economic data will accompany the Federal Reserve’s decision, including the preliminary estimate of third-quarter productivity growth. This growth has been strong recently as businesses have invested in new technologies and artificial intelligence, potentially increasing wages without sparking inflation. The Institute for Supply Management will release its October report on the U.S. service sector, while the University of Michigan will provide early November consumer sentiment data amid a cooling labor market.
In Canada, the labor force survey for October follows a stronger-than-expected September report, which saw the jobless rate decrease to 6.5%. Despite this, the Bank of Canada implemented a 50 basis-point cut due to weak inflation and economic growth, with upcoming jobs data offering insights into labor market conditions. The central bank will publish a deliberation summary from their decision-making process, and Senior Deputy Governor Carolyn Rogers will speak at the Economic Club of Toronto.
In Asia, Pakistan’s central bank is expected to continue its monetary easing cycle with a significant rate cut, while Australian officials are likely to keep their cash rate target unchanged. The Reserve Bank of Australia will also release updated economic forecasts. Malaysia’s central bank is expected to hold its benchmark rate, while further easing is anticipated in South Korea.
Additional consumer price data is expected from the Philippines, Thailand, Vietnam, and Taiwan, while Japan will release wage data that might influence its central bank’s future rate decisions. China, Australia, Vietnam, Taiwan, and the Philippines will also provide trade data updates, and GDP figures for the third quarter will be released by countries including the Philippines and Indonesia. China will also release key pricing trend updates on November 9.
In Europe, the Middle East, and Africa, the Bank of England’s decision will be in focus amid recent fiscal policy announcements in the UK, with a rate cut widely expected. The Riksbank in Sweden anticipates a half-point cut, while Norway’s central bank is set to maintain its current rate. Other regional decision-makers, including those in Madagascar, Poland, Botswana, the Czech Republic, Serbia, and Romania, have their rate decisions scheduled, influenced by local economic data and conditions.
In the euro zone, industrial output data from France, Germany, and Italy are scheduled, alongside commentary from key European Central Bank officials. Turkish inflation data will be released, and Egypt is set for discussions with the International Monetary Fund regarding a loan program, in light of regional tensions affecting Suez Canal traffic and tourism revenue.
In Latin America, Brazil’s central bank chief has indicated potential rate hikes due to rising inflation expectations. Peru is likely to lower borrowing costs, while Colombia reports both an inflation update and the minutes of its latest rate-setting meeting. Consumer price data for October will also be released by Brazil, Mexico, Colombia, and Chile.
