Fed hike in October

Genevieve Signoret

Macro Views

After prolonged agony, we have shifted our forecast for the timing of the first Fed hike to October from September. We premise this forecast on the assumption that markets will start recovering in October and U.S. macro data will continue to signal expansion, especially in the service sector.

Why the change? We think that the Fed believes that its first rate hike will cause short-term volatility, possibly sharp, and won’t want to add one more source of volatility to a market undergoing correction.

Why so soon? We believe that the Fed is very eager to start normalizing.

More details on our evolving view can be found in this week’s edition of Letter from the President: “Six questions about the ongoing volatility”, Fixed income: “Fed hike in October”, and “I agree with Tim Duy but my reasons differ”.

Next four weeks

Events in red are those most likely to shake markets.

August 27-29

• USA: Federal Reserve annual economic policy symposium in Jackson Hole

Monday 31

• Japan: Industrial production (Jul, flash).
• Korea: Industrial production (Jul), consumer price (Aug).
• India: GDP (Q2).
• Turkey: Foreign trade (Aug).
• Italy: Consumer price (Aug, flash).

Tuesday 1 September

• China: Markit manufacturing PMI (Aug).
• Korea: Foreign trade (Aug).
• Russia: Markit manufacturing PMI (Aug).
• Turkey: Markit manufacturing PMI (Aug).
• Euro Area: Markit manufacturing PMI (Aug), unemployment (Aug).
• UK: Markit manufacturing PMI (Aug).
• Germany: Markit manufacturing PMI (Aug), unemployment (Aug).
• France: Markit manufacturing PMI (Aug).
• Italy: Markit manufacturing PMI (Aug).
• Spain: Markit manufacturing PMI (Aug).
• USA: Markit manufacturing PMI (Aug).
• Brazil: Markit manufacturing PMI (Aug), foreign trade (Aug).
• Mexico:Remittances (Jul), Banxico economic survey (Jul), IMEF manufacturing PMI (Aug), IMEF nonmanufacturing PMI (Aug), ordinary legislative session begins in Mexico, presidential Informe.

Wednesday 2

• USA: Factory orders (Jul), Beige Book.
• Brazil: Bank of Brazil monetary policy decision, industrial production (Jul).

Thursday 3

• China: Markit services PMI (Aug).
• Korea: GDP (Q2, flash).
• Russia: Markit services PMI (Aug).
• Turkey: Consumer price (Aug).
• Euro Area: Markit services & composite PMI (Aug), ECB monetary policy decision and statement
• UK: Markit services PMI (Aug).
• Germany: Markit services PMI (Aug).
• France: Markit services PMI (Aug)
• Italy: Markit services PMI (Aug).
• Spain: Markit services PMI (Aug).
• USA: Unemployment claims, foreign trade (Aug), Markit services & composite PMI (Aug).
• Brazil: Markit services & composite PMI (Aug).

Friday 4

• Russia: Consumer prices (Aug).
• USA: Employment report (Aug).

Monday 7

• China: Foreign trade (Aug).
• Japan: GDP (Q2).
• Germany: Industrial production (Jul).
• Italy: Consumer prices (Aug)

Tuesday 8

• China: Consumer prices (Aug).
• Korea: Unemployment (Aug).
• Russia: GDP (2Q, flash).
• Turkey: Industrial production (Jul).
• Germany: Foreign trade (Jul).
• France: Foreign trade (Jul).

Wednesday 9

• India: Foreign trade (Aug).
• UK: Industrial production (Jul), foreign trade (Jul).
• Mexico: Consumer prices (Aug).

Thursday 10

• Japan: Foreign trade (Jul).
• Turkey: GDP (Q2).
• UK: Bank of England monetary policy decision.
• France: Industrial production (Jul).

Friday 11

• Korea: Bank of Korea interest rate decision.
• India: Industrial production (Jul).
• Euro Area: Euro group meeting in Brussels.
• Germany:Consumer prices (Aug, flash).
• Italy: Industrial production (Jul).
• Spain: Consumer prices (Aug, flash).
• Mexico: Industrial production (Jul).

Monday 14

• Japan: Bank of Japan annual rise in monetary base.
• India: Consumer prices (Aug).
• Euro Area: Industrial production (Jul).
• Italy: Consumer prices (Aug).

Tuesday 15

• Russia: Industrial production (Aug).
• Turkey: Unemployment (Jun).
• UK: Consumer prices (Aug).
• France: Consumer prices (Aug).
• USA: Retail sales (Aug), industrial production (Aug).
• Mexico:Deadline for Mexican president to deliver 2016 budget proposal.

Wednesday 16

• Japan: Foreign trade (Aug).
• UK: Unemployment (Jul).
• USA: Consumer prices (Aug).

Thursday 17

• Russia: Unemployment (Aug), retail sales (Aug).
• Italy: Foreign trade (Jul).
• USA: Fed’s interest rate decision.

Sunday 20

• Greece: General elections

Monday 21

• Spain: Foreign trade (Jul).
• Mexico: Banxico interest rate decision.

Wednesday 23

• Euro Area: Markit manufacturing & composite PMI (Sep, flash).
• Germany: Markit manufacturing, services & composite PMI (Sep, flash).
• France: GDP (Q2), Markit manufacturing, services & composite PMI (Sep, flash).
• USA: Markit manufacturing PMI (Sep, flash).

Thursday 24

• Japan: Consumer prices (Sep).
• USA: Durable goods orders (Aug), unemployment claims.
• Brazil: Unemployment (Aug).

Friday 25

• Euro Area: Money supply.
• USA: GDP (Q2, 3rd estimate), Markit services & composite PMI (Sep, flash), Michigan consumer sentiment and inflation expectations (Sep, flash).
• Mexico: Foreign trade (Aug).

Update History:

• 2 September 2015: Thursday 15:  …to deliver 2015 2016 budget proposal.