Plus: Bird of the day
IN TODAY’S EDITION
1️⃣ A big week for central banks |
2️⃣ Iran launches a satellite |
3️⃣ Bird of the day |
Hi Intriguer. One of my favourite memes is the one of ex-footballer Anthony “Spice” Adams dressed in a yellow jacket, peeping out from behind a tree, rubbing his hands and licking his lips. The meme is captioned: “Millennials and Gen Z waiting for the housing market to crash so they can buy their first home”.
The meme came out a while ago, but it still slaps. This is particularly the case as the two demographics continue to grapple with inflation and the rising cost of living in many economies.
So today's briefing is timely as we look at this week's flood of scheduled central bank announcements, starting with the big one: expected rate cuts in the US.
PS – ¿Hablas español? ¡Check out our weekly edition in Spanish!
Israel makes securing north a war goal.
Israeli Prime Minister Benjamin Netanyahu has made the return of around 60,000 Israeli citizens to northern Israel an official goal of the ongoing war. They were first evacuated amid near-daily attacks by Iran-backed Hezbollah in neighbouring Lebanon. The pledge to return them, announced by Bibi’s office, comes after his defence minister told a US official the “only way” to stabilise northern Israel was through military action against Hezbollah. It’s raised concerns about the war spiralling into a regional conflict.
Ursula von der Leyen presents new EU Commission.
The re-elected EU Commission President has just presented her new team, a day after the shock resignation of France’s EU Commissioner. Her proposed line-up includes former Estonian PM Kaja Kallas as the EU’s top diplomat, Austria’s Magnus Brunner in the internal affairs and migration portfolio, and France’s Stéphane Séjourné handling industrial strategy. Each nominee will now need to be approved by the EU parliament.
Microsoft announces stock buyback program.
The tech giant has unveiled a $60B stock buyback scheme, while also declaring a 10% increase in quarterly dividends. Microsoft’s shares have gained 15% this year as it continues to lean heavily into AI.
Meta bans Russian state media from its platforms.
The US company (which runs Facebook and Instagram) says Russian outlets were involved in “foreign interference activity”. The ban comes after the US accused Russian state media outlet RT of funnelling $10M to fund covert influence campaigns on popular social media platforms.
Host Azerbaijan sets out COP29 goals.
The priorities for this year’s climate conference skip over plans for the transition away from fossil fuels, instead focussing on a six-fold increase in battery storage capacity, expansions in electricity networks, and cuts in methane emissions from organic waste. Azerbaijan is a major exporter of oil and gas. The summit kicks off in November, but negotiations on helping developing nations with climate adaptation are still deadlocked.
TOP STORY
Why you should watch central banks this week
Federal Reserve Chair Jerome Powell
This week is kinda like the Super Bowl for finance nerds, as several central banks issue decisions on what to do with interest rates.
So here are some quick primers on what to expect.
The US Fed is up first with its highly-anticipated rate cut due tomorrow (Wednesday). It’s been widely telegraphed, but its size and any accompanying banter from Fed chair Jerome Powell and his board will still bring buzz:
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Background: Borrowing costs are currently at a 23-year high (5.25-5.5%), and any cuts will be the first in four years after they dropped near zero when Covid hit.
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Powell has said the Fed’s moves are now based on “the data, the outlook and the balance of risks”, so the recent weaker jobs reports and uptick in unemployment are all making a rate cut inevitable at this point.
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Market reaction: Markets suggest there’s a 63% chance of a big half-point cut and a 37% chance of a standard quarter-point cut. That’s sent the Dow Jones to a record high, as traders expect cheaper borrowing to make it easier for folks to get out there and spend and invest. But they’ll also pour over Powell’s every word for any hint he’s worried about the economy, particularly if he opts for the bigger half-point cut.
Then Brazil’s central bank wraps up its two-day meeting the same day:
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Background: Brazil paused its cuts earlier this year, and it’s now set to hike rates for the first time in 3.5 years, kinda bucking the trend playing out elsewhere.
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That’s because Brazil just posted surprisingly strong growth, so folks are betting on more hikes (from 10.5% now to 11.25% by year end) to curb inflation.
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Market reaction: Traders watch not just the numbers here, but also the personalities – President Lula has long been in a public spat with the bank’s hawkish chair, who was appointed by Lula’s predecessor and has warned that Brazil still has an inflation problem.
Then on Thursday, it’s Norway, Turkey and the UK’s turn, with markets not expecting any changes:
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In Oslo, rates are already at a 16-year high (4.5%), and the bank’s mid-August meeting suggested it’s happy to keep things that way while inflation persists
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In London, rates seem likely to hold at 5% after last month’s cut, given services and wage inflation are still up, and
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In Ankara, rates should stay at 50% (!) given inflation is still over 50% (!).
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Market reaction: Expect a tizz if there is a change, as markets don’t like surprises. Unexpected cuts can spook folks, by signalling that central banks are worried.
Meanwhile, South Africa’s central bank is meeting the same day (Thursday):
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Background: Like the US, it’s set for a pivot, cutting rates for the first time since Covid – ie, the bank is likely switching from hose-down mode to support mode.
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Market reaction: It’s no coincidence South Africa (like the others above) has timed its meeting for right after the US – emerging markets in particular worry that if their rates get out of sync, capital can flee in search of higher US returns.
And to round things out on Friday, there’s the Bank of Japan:
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Tokyo is expected to maintain rates at 0.25%, but folks will hang on Governor Ueda’s every word given the weight of Japan’s economy, its legacy of ultra-low rates, and its move earlier this year to raise rates for the first time in 17 years.
So there may be fewer beers, buffalo wings and bars involved, but this week’s central bank Super Bowl is still well worth watching.
INTRIGUE’S TAKE
Sure, everyone’s expecting the Fed to cut, but that doesn’t make the coming months any clearer:
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Cut too fast, and you risk asset bubbles, or
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Cut too slow, and you risk a recession.
So you gotta cut just right. How? For years, many central bankers were guided by the Brainard principle (from the Yale economist in 1967): if you’re uncertain, go slow.
But in the decades since then, we’ve learned that sometimes going slow just makes the problem worse, and renders your eventual course correction less effective.
That’s partly why markets are expecting Powell to go medium-hard (0.50%) and then choose his words very carefully.
Also worth noting:
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Donald Trump has said the Fed shouldn’t cut rates before the November election, while some fellow Republicans are disagreeing and calling for the Fed to cut given signs of a slowdown. Meanwhile, some Democratic senators just wrote a letter calling on the Fed to cut even faster (0.75%).
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The European Central Bank cut rates again last week.
MEANWHILE, ELSEWHERE…
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🇰🇷 South Korea: The US and South Korea are reportedly in talks to renew their cost-sharing agreement for US troops in South Korea as officials on both sides of the Pacific prepare for a possible Trump 2.0 presidency. During his first administration, Trump argued Seoul should pay up to 400% more for the US to maintain its ~28,500 troops on the Peninsula.
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🇷🇺 Russia: President Putin has again ordered the Russian army to expand its regular size, this time by 180,000 troops to 1.5 million soldiers. It’s the third time he’s given such an order since his 2022 invasion of Ukraine, and comes amid consistently high casualties.
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🇮🇳 India: The subcontinent just recorded its biggest IPO this year after India’s top non-bank lender floated its housing finance arm. The listing comes after India’s central bank exhorted a group of non-bank lenders to go public to enhance financial transparency.
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🇦🇷 Argentina: President Javier Milei has personally presented his 2025 budget to congress, promising to veto any measures that would threaten his tight fiscal austerity plan. He needs congress to clear his budget, but his allies only control a fraction of the seats.
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🇮🇷 Iran: Tehran says it successfully launched a domestic-made satellite over the weekend, its second ever. While there’s been no independent confirmation, the West worries Iran’s space program is helping its ballistic missile program.
EXTRA INTRIGUE
Here’s what people around the world have googled lately
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🇨🇦 Canadians searched ‘Shōgun’ after the historical TV drama (set at the end of Japan’s Sengoku period) won a record 18 Emmys.
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Fans in 🇿🇲 Zambia googled ‘Tito Jackson’ after the Jackson Five singer and brother of pop legend Michael Jackson died aged 70.
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And folks in 🇨🇺 Cuba looked up ‘Evo Morales’ after Bolivia’s former president faced accusations of plotting a coup in his Andean home nation.
BIRD OF THE DAY
The hoiho. Credits: Dean O Schneider, Rod Morris and Janice Jones / New Zealand Geographic.
In a year filled with elections, we’re committed to bringing you hard-hitting updates from even the tiniest ballots.
So… be advised that a small, smelly, endangered penguin with yellow eyes has won New Zealand’s prestigious ‘Bird of the Year’ contest. Ecologists have rejoiced at the win, hoping the spotlight might translate to better conservation efforts for the hoiho.
Like any good election, this bird competition has faced a few controversies over the years. In 2018, neighbouring Australians attempted to influence the outcome in favour of the humorously named ‘shag’; a year later, votes cast from Russia triggered complaints of interference; and in 2021, the winning bird was not even a bird, but a bat.
Extra fun fact: the hoiho is featured on the Kiwi $5 note.
DAILY POLL
What do you think is the biggest risk for the Fed right now? |
Yesterday’s poll: Not wanting to start a war here, but… which country do you think serves the best cup of coffee?
🟩🟩🟩🟩🟩🟩 🇮🇹 Italy (35%)
🟨🟨🟨⬜️⬜️⬜️ 🇦🇺 Australia (19%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🇹🇷 Turkey (5%)
🟨⬜️⬜️⬜️⬜️⬜️ 🇪🇹 Ethiopia (6%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🇻🇳 Vietnam (5%)
🟨⬜️⬜️⬜️⬜️⬜️ 🇨🇴 Colombia (11%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🇮🇩 Indonesia (2%)
⬜️⬜️⬜️⬜️⬜️⬜️ 🇧🇷 Brazil (5%)
🟨⬜️⬜️⬜️⬜️⬜️ ✍️ Other (write in!) (12%)
[Thanks to those Intriguers who pointed out we accidentally used Indonesia’s flag twice yesterday and so missed Colombia’s banner!]
Your two cents:
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🇮🇹 B.J: “I'm an American citizen who thought he knew what ‘real’ coffee was. That all ended while assigned to military temporary duty at Tirrenia, Italy in late summer of 1995. I ordered a cappuccino at the hotel bar — my goodness, it was a religious experience served in 8 fluid ounces for 3K lira ($2)… in a ceramic cup, no less!”
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✍️ J.M.I: “It’s the USA, at least if you like third-wave microlot coffee. Nowhere else is it quite as fussed over quite so nerdily, in my experience.”
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🇪🇹 N.I: “Japan probably makes the best cup of coffee while Ethiopia or Kenya provide the best beans.”
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✍️ B.S.G: “Having lived in Zanzibar, Peru, Ecuador, Honduras and Turkey, I can tell you that consistently the best coffee I've ever had is in Porto (Portugal).
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✍️ J: “Tea, please.”
Honourable mentions: Jamaica, Greece, Guatemala, New Zealand, India, South Africa, and Yemen.
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