Economic calendar: ECB, CBRT and US inflation

Summary:

• ECB is widely expected to roll out a set of measures to address slowing growth and stubbornly low price growth
• Turkish central bank is expected to cut rates as inflation continues normalizing
• US CPI likely to show the slightly higher pace of growth

10:00 am BST - Retail sales and industrial output for July from EMU

12:00 pm BST - CBRT rate decision: The consensus calls for a 275 bps rate cut in terms of the one-week repo rate. Keep in mind that inflation in Turkey has been in a downtrend in recently which could embolden Recep Erdogan to stick to its unorthodox notion regarding a relationship between rates and prices. 

12:45/1:30 pm BST - ECB rate decision/press conference: The European Central Bank is broadly expected to spell out a set of measures aimed at addressing both sluggish economic growth and disappointing inflation. Hence, expectations suggest that a 10bps depo rate cut, a launch of QE of 30 billion EUR per month and of course this has to be accompanied by the dovish guidance signalling readiness to act further if necessary. At the same time, the ECB is likely to announce a so-called tiering system so as to alleviate downward pressure on banks’ profitability stemming from negative rates. As media reports suggest, such a system could be designed in a way to include up to 30% of excess reserves. Finally, the central bank will present its new set of staff macroeconomic projections, which are not expected to take market observers off-guard at all (mild downward revisions to both CPI and GDP are on the cards). To sum up, a lack of any of the above-mentioned measures would risk a surge in the common currency, which a scenario the ECB would like obviously to avoid. 

1:30 pm BST - CPI from the US for August: Yesterday's report on PPI brought the numbers being slightly higher than expected creating some upward pressure before today’s release on CPI. Although, a relationship is rather weak and not straightforward between PPI and CPI, expectations suggest CPI to be at 1.8% YoY (unch) and core CPI to be at 2.3% YoY (up from 2.2% YoY in July).

1:30 pm BST - Weekly jobless claims from the US

7:00 pm BST - A monthly budget statement from the US for August