Traders to focus on Powell, Bailey and Lagarde speeches this week

Investors will hone in on speeches from some of the world's most important central bankers in a much quieter week for markets than last week.
Investors will hone in on speeches from some of the world's most important central bankers in a much quieter week for markets than last week.

Investors this week will hone in on speeches from some of the world’s most important central bankers in what is set to be a much quieter week for markets.

Fed Chair Jerome Powell will be speaking at the International Monetary Fund’s (IMF) annual research conference on Thursday while both Andrew Bailey and Christine Lagarde will speak on Wednesday.

All three central banks left rates on hold over the previous two weeks, with markets now increasingly certain that interest rates have peaked. Indexes in both the US and UK recorded strong performances last week as a result.

Focusing on the Fed, markets are hopeful that the world’s most important central bank might be able to engineer a soft landing. Growth remains buoyant while inflation has fallen and there are signs of increasing slack in the labour market.

Economists at Capital Economics noted that at the Fed’s press conference last week, Powell did not indicate that growth necessarily had to slow in order to lower inflation.

“Although Powell reiterated that officials still believe that a period of below-trend growth and softer labour market conditions is needed to bring inflation down to target, the Fed appears open to the idea that recent downward progress on inflation could continue even if the economy holds up,” Andrew Hunter, deputy chief US economist at Capital Economics said.

Bailey and chief economist Huw Pill will also both deliver speeches on the state of the UK economy this week, which is not in the best position.

Bank of England forecasts published last week showed that growth would be flat next year while inflation would remain above target until the end of 2025.

“We will certainly be keeping an eye on comments from BoE Governor Bailey and Chief Economist Huw Pill for any further policy hints,” economists at Investec said.

Investors will also get the latest snapshot of the UK economy when GDP figures for September are revealed on Friday. According to the Bank of England’s forecasts, growth will be flat in the third quarter of this year.