Fed Rate Cuts Enter Final Countdown,Will BOJ, BOE and BoC Follow Suit with Rate Cuts?【The week ahead】

TradingKey - U.S. major stock indices hit record highs last week. The S&P 500 gained 1.59% for the week, the Dow rose 0.95%, and the Nasdaq climbed 2.03%. This week brings a “super central bank week,” with the Federal Reserve’s rate decision on September 18 widely expected to deliver a rate cut—potentially as large as 50 basis points. The Bank of Japan, the Bank of England, and the Bank of Canada will also announce their latest policy rates.

Meanwhile, China and the U.S. are holding talks in Spain, where officials will discuss Washington’s unilateral tariffs, export control abuses, and issues including TikTok. Meta is set to host its annual Connect event on September 18, where the company is expected to unveil its first consumer-grade smart glasses. Former President Donald Trump is on a state visit to the UK, accompanied by Nvidia CEO Jensen Huang and other executives.

Preview of major events

Fed Rate Decision: Cut All but Certain

On September 18, the Federal Reserve’s rate decision looms large, with a rate cut all but certain—and a more aggressive 50-basis-point reduction now firmly on the table. The U.S. August CPI report, released earlier this week, showed inflation remains broadly subdued. While headline CPI edged up slightly to 2.9% year-over-year, core CPI came in line with expectations both month-on-month and annually, avoiding the runaway inflation some had feared due to tariff-related pressures.

Citi analysts called the details of the inflation print “encouraging” for Fed officials preparing to launch a series of rate cuts. The bank said the benign inflation data, combined with weakening labor market signals, clears the path for the Fed to begin its easing cycle. Citi now expects the central bank to deliver 125 basis points of rate cuts over the next five FOMC meetings, with the policy rate potentially falling below 3%.

BOJ Seen Holding Rates Steady Amid Cautious Stance

On September 19, the Bank of Japan will announce its interest rate decision, amid a period of heightened political uncertainty in Japan. Prime Minister Ishiba resigned unexpectedly on September 7, and the ruling Liberal Democratic Party is expected to hold a leadership election between late September and early October, with a new prime minister likely taking office in October. This political transition has intensified factional maneuvering within the party, potentially clouding fiscal and monetary policy expectations.

According to Moody’s Analytics, the BoJ is expected to keep its short-term policy rate unchanged at 0.5% this Friday, as trade risks and domestic weakness cloud the outlook. While stronger-than-expected growth in the first half and persistent yen weakness had opened the door for further tightening, softening exports, declining industrial output, and sluggish consumer spending may prompt the central bank to hold fire for now.

Moody’s expects the BoJ to hike rates in January next year, though it notes that a move later this year remains possible should conditions shift.

Meta Unveils First Consumer-Grade Smart Glasses

On September 18, Meta will host its annual Connect conference, where the company is widely expected to unveil its first consumer-grade smart glasses. CEO Mark Zuckerberg is slated to deliver a keynote on "AI-powered smart glasses," highlighting the integration of artificial intelligence into wearable devices.

According to Haitong Securities, the glasses are expected to start at $800. The design closely resembles the Ray-Ban Meta sunglasses, featuring a sleek frame with a key innovation: a monocular heads-up display that delivers glanceable information such as time, weather, notifications, photo previews, and real-time translation.

Meta is also expected to showcase a new wristband using electromyography (EMG) technology, designed to work in tandem with AR glasses to enable seamless hand gesture controls—filling critical gaps in voice-only interaction scenarios and advancing the company’s vision for post-smartphone computing.

BOE Policy Rate: Market Expects Hold at 4%

The Bank of England is set to announce its interest rate decision on Thursday, with markets overwhelmingly expecting a hold at 4%. According to data from London Stock Exchange Group (LSEG), the probability of no change stands at 98%. However, July’s inflation print hit an 18-month high, complicating the case for further monetary easing. The BoE’s monetary policy report and meeting minutes will be closely watched, as investors seek clues on the central bank’s future policy path.

BOE Governor Andrew Bailey has publicly expressed skepticism about delivering another rate cut this year, warning that “inflation risks have risen.” The strong consensus for a hold this month rests on two key factors.

Selected Economic Data

Tuesday: U.S. August Retail Sales MoM

Thursday: Fed Rate Decision, BOE Policy Announcement

Friday: BOJ Interest Rate Announcement

This week's featured events

Monday: U.S.-China Talks Held in Spain

Tuesday: ECB President Lagarde Delivers Speech

Thursday: Fed Chair Powell Holds Monetary Policy Press Conference