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A number of central banks worldwide are meeting this week and news arising from it will dominate the week’s investor sentiment. Image Credit: Reuters

Dubai: A number of central banks worldwide are meeting this week and news arising from it will dominate the week’s investor sentiment, with their discussion on policy likely to influence market volatility.

The US Federal Reserve, Bank of England and Bank of Japan meetings are scheduled this week, and manufacturing numbers for the prior month are due this week, and this is expected to provide further insight on the global economy.

Stocks are entering what is often considered to be a volatile period, so multiple analysts currently evaluate how the US Federal Reserve will attempt to not rock the boat further in the week ahead. The central bank meeting in the week ahead is important, and the big news may be its interest rate forecast.

Fed meeting to be not as exciting

However, the meeting this week may not be quite as exciting for markets as some investors had been expecting in the usual choppy month of September. Global stocks were slightly lower in the past week, with the exception of a few major stocks that edged up.

US central bank officials begin meeting Tuesday, and end their two-day session with an announcement Wednesday afternoon. That will be followed by a press briefing with Fed Chairman Jerome Powell.

In the world’s top economy, the US, the unwinding of the $120 billion a month bond buying program is important since it would be the first major move away from the unprecedented policies the US used to fight the pandemic. It also takes them a step closer to interest rate hikes.

What the US central bank could do

The odds for a September tapering announcement from the Fed fell sharply after August’s softer than expected employment report showed just 235,000 jobs were created, about 500,000 less than expected.

Economists now mostly expect a November announcement, but the September meeting could be important for what else the Fed says. The quarterly forecasts of Fed officials are released along with the statement on Wednesday.

They include new economic projections and an updated interest rate forecast. Rising prices and concerns about growing inflation drove pessimism among consumers. While inflation slowed in August, it remains elevated above pre-pandemic levels.

US stocks ended lower, global stocks too

All three major US stock indexes and several key global benchmarks ended the week lower on mixed economic data and on a weak increase in consumer sentiment for September that continued to linger near decade lows.

Markets in Europe received a weak handover from Asia-Pacific, where Hong Kong’s Hang Seng index led the declines among major indexes as casino shares plummeted amid regulatory worries.

Most stock markets in the Gulf were subdued on Sunday in response to Friday’s decline in global equities, although the Dubai index bucked the trend to trade higher.

Investor sentiment to stay subdued?

Investors in recent days have been reacting to softer US inflation data, which tempered expectations of imminent tapering of asset purchases by the US Federal Reserve, and weak retail sales figures from China, which suggested a slowdown in the global economic recovery.

Brent crude, the oil benchmark, had been rising after Hurricane Ida shut US refineries and surging natural gas prices drove speculation of energy consumers switching from gas to oil.

However, the dollar index, which measures the US currency against six others, fell., while the Sterling rose against the dollar after UK inflation jumped to an annual rate of 3.2 per cent, increasing expectations for the Bank of England raising interest rates from its record low.