Will the Federal Reserve follow the ECB’s lead?

Will the Fed signal further easing?

On Tuesday the US central bank convenes for its hotly anticipated two-day meeting on monetary policy, announcing its decision on Wednesday. Markets are pricing in a near-certain chance that the Fed slashes its benchmark interest rate by 25 basis points on the heels of the European Central Bank rolling out an ambitious stimulus package on Thursday.

While the size of the Fed’s move appears all but guaranteed, the bigger unknown remains what chairman Jay Powell will signal about the path of monetary policy.

Mr Powell came under pressure in July despite the central bank reducing interest rates for the first time in 11 years. The quarter-point cut was widely expected by investors, but Mr Powell’s framing of the move as a “mid-cycle adjustment” muddled the outlook and called into question the Fed’s commitment to a more sustained period of monetary easing.

While the central bank did acknowledge mounting uncertainties related to global growth and the trade war between Beijing and Washington when it announced its July decision, part of the rationale for not easing more aggressively hinged on the relatively robust state of the US economy.

In the weeks since the July move, the data out of the US have softened somewhat but still points to a consumer economy on firm footing. At the same time, a tentative ceasefire has taken hold between the US and China amid an ever-gloomy global growth outlook. Until there are more tangible signs the woes that ail the global economy will spread stateside, strategists say the Fed is likely to continue approaching further rate cuts with caution. Colby Smith

Will the Bank of Japan continue its wait-and-see stance?

The yen’s recent softening against the dollar — it edged into the ¥108/$ range on Friday — has rather muddied the waters as markets prepare for the Bank of Japan’s monetary policy two-day meeting that starts on Wednesday.

Will the BoJ hold off on policy rate cuts, and will it tweak its purchasing programmes for Japanese government bonds and domestic exchange traded funds? The answer to all of those questions, say most analysts, is probably “no”. But that does depend on what the yen does after the Fed meeting.

If the yen suddenly starts surging against the dollar, say analysts, the BoJ may feel forced to do something, but will probably hold off from pushing short-term policy rates more deeply negative.

But even if the Japanese currency does not start heading back towards Y100/$, say analysts at Goldman Sachs, the BoJ “may find it difficult to stick to a wait-and-see stance” while other central banks are moving ahead with policy cuts. Leo Lewis

Will oil prices continue to sink below $60 a barrel?

Brent crude prices rallied at the start of the week, rising above $63 a barrel before slumping back down below $60. Oil prices have struggled to sustain a run-up over the $60 mark with trade war fears hurting the demand outlook. But supply concerns are also now at the forefront of traders’ and analysts’ minds.

Oil prices fell sharply after a report that President Donald Trump discussed easing sanctions against Iran to secure talks with its president, Hassan Rouhani, at the UN General Assembly this month. It followed the dismissal of Iran hawk John Bolton from the White House.

The International Energy Agency meanwhile warned that oil supply is likely to be in surplus in 2020, mounting pressure on Opec to deepen production cuts. Forecasts for the supply-and-demand balance next year increasingly suggest the oil cartel may need to cut output by more than 500,000 barrels a day, even before worrying about the potential return of Iran’s exports.

“The million-dollar question is what will happen with Iran,” said Tamas Varga, senior analyst at PVM Oil Associates. “Markets tend to react to what the US president says or tweets but ignore what the Iranian president says.”

Mr Rouhani previously said he will not negotiate with the US as long as sanctions are in place.

Mr Varga added that Opec would do everything to balance supply and demand but it was a tall order. The new Saudi Arabian oil minister, Prince Abdulaziz bin Salman, has his work cut out if he is to achieve a higher price. Harry Dempsey