181224 Jerome Powell
Federal Reserve Chair Jerome Powell faces a communication challenge in the coming week as he leans toward paring back stimulus while trying to avert speculation. Image Credit: AFP

Washington: Federal Reserve Chair Jerome Powell faces a communication challenge in the coming week as he leans toward paring back stimulus while trying to avert speculation that such a shift presages future interest-rate increases.

Fed officials are expected to signal a start to scaling down monthly bond purchases in their policy statement at 2 pm Washington time on Wednesday, the most significant among at least 15 global central bank decisions due. Economists surveyed by Bloomberg see that hint being followed by a formal announcement in November.

Powell will try to convince Americans that such a stance doesn’t start the clock on raising rates, while explaining fresh Fed forecasts where some of his colleagues predict liftoff in 2022. He’ll also face questions from reporters about recent embarrassing 2020 stock-trading revelations involving two regional Fed presidents.

That tough to-do list for Powell will be made even harder by awareness that President Joe Biden is weighing whether to reappoint the Fed chair for another four years. A decision is expected this fall, and while Bloomberg News has reported that White House advisers are considering recommending to keep Powell at the helm, the deal hasn’t been stitched up.

Central banks’ dilemma

The Fed’s decision showcases the quandary for global central banks of determining whether economic growth is strong enough to dial back pandemic-era support, and if inflation pressures are strong enough to even require tightening.

That’s what officials in Brazil on Wednesday and Norway on Thursday are seen likely to do, with interest-rate increases foreseen for both countries. By contrast, central banks in Japan, Switzerland and the U.K. are among those that may keep policy stances largely unchanged.

“The September statement likely will be the first time since the pandemic began that the FOMC includes language about plans to reduce asset purchases this year.” said Anna Wong, Andrew Husby and Eliza Winger, economists at Bloomber Economics

Elsewhere, the OECD in Paris will release updated global economic forecasts on Tuesday.

Elections in the coming week will determine the leadership and economic direction of two Group of Seven countries. Canada goes first, on Monday, with Prime Minister Justin Trudeau seen holding a slight edge over his Conservative challenger. Germany’s national vote takes place Sept. 26, ending 16 years with Angela Merkel at the helm.

Asia undecided

The Bank of Japan is expected to reveal more details of its green lending program when it meets during a shortened holiday week. The central bank is widely expected to leave its main policy settings unchanged. Rivals vying to become Japan’s next prime minister will continue to offer details of their policy plans ahead of a ruling party election on Sept. 29.

In Australia, a speech by Reserve Bank of Australia Assistant Governor Michele Bullock will shed more light on any concerns over the financial system under the pandemic. Minutes of the bank’s most recent meeting may offer more details of the debate over tapering plans in light of extended lockdowns.

Early export figures from South Korea will give the latest reading of global trade’s pulse. Japan’s inflation data out Friday could turn positive for the first time since March 2020. Pakistan, Indonesia, the Philippines and Taiwan all have interest rate decisions.

China will be on holiday for the mid-autumn festival early in the week, with spending patterns to be scrutinized for a health check on the consumer after disappointing August retail sales. China will set its loan prime rate on