Global macro conditions and monetary policy are facing several tests at once, with inflation trends in the euro area and the United States moving on different paths. The European Central Bank is expected to deliver its second rate increase of the year this week, while the Federal Reserve is heading into its mid-September meeting with fresh inflation data still to come.
ECB expected to raise rates again this week
According to Bloomberg, the ECB is expected to raise rates by 0.25 percentage points this week. Euro area headline inflation rose to 3.3% in August, above the central bank’s 2% target. While core inflation, which strips out volatile items such as energy and food, has shown signs of slowing, policymakers remain alert to price risks tied to Middle East tensions and higher energy costs.
The report said markets have already begun to reflect expectations for a third round of tightening in December as officials try to avoid falling behind the inflation curve. Some foreign institutions have also revised their policy forecasts higher.
U.S. CPI and PPI data in focus before Fed meeting
The Federal Reserve is scheduled to meet on Sept. 15-16. Before that, August Consumer Price Index and Producer Price Index readings due this week are being watched closely as key signals for the inflation outlook.
The article said headline CPI is expected to rise 0.4% month over month, driven by gasoline prices. Core CPI, however, is projected to increase by a milder 0.2%, bringing the annual rate down to 2.4%, which would mark the lowest level since 2021. At the same time, PPI faces upward pressure from Middle East tensions and supply chain disruptions.
According to CME FedWatch, markets currently assign a 58% probability to a 25 basis point Fed rate increase this month.
Housing and trade pressures add to uncertainty
Beyond inflation and rates, the report also pointed to pressure in the real economy and in international trade. The U.S. housing market continues to cool under the weight of high mortgage rates, elevated home prices, and limited supply. Existing home sales are expected to decline for a third straight month.
At the same time, Canada’s retaliatory tariffs against the United States are about to take effect, drawing close attention to the next steps from both governments. If the two sides do not return to negotiations, a new round of trade barriers could raise operating costs for businesses and add pressure to global economic growth.