The Week Ahead: The Moment Of Truth

Markets around the world have been suffering from a bad bout of the yips. But by the middle of next week the waiting will finally be over. The US Federal Reserve will have to decide whether to increase interest rates for the first time this year.

The economic numbers have not been particularly useful for market watchers, though. While headline inflation at 1.1% continues to look subdued, the core inflation rate of 2.3% was above market expectations. That could prod the rate-setting committee into hiking rates.

But the non-farm payroll employment number of 151,000 came in below market expectations, which is an argument for leaving interest rates where they are.

Singapore banks could be in focus as punters take their best shot at what they think the Fed might do. It could be a volatile few days for DBS Group (SGX: D05), United Overseas Bank (SGX: U11) and Oversea-Chinese Banking Corporation (SGX: O35) until the “fat lady” sings.

The Bank of Japan has to make a decision about interest rates too. It has decided not to abandoned the idea of pushing interest rates further into negative territory to achieve its inflation target of 2%. But it said it will examine the risks to economic activity and prices. Inflation is currently minus 0.4%.

China will report new property prices. The average price of new homes rose 7.9% last month. It was the 10th straight month of gains. In Beijing, prices rose 20.7%, while in Shanghai prices went up by 27%. The jury is still out as to whether the Chinese authority will introduce cooling measure. Did someone say “asset bubble”?

Singapore will report inflation numbers next week. Prices in the Garden City have fallen for 21 straight months, as cost of housing and utilities pulled the inflation basket lower. Could it be 22 consecutive months of falling prices? Core inflation, which strips out volatile items, rose 1% though.

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