As key policymakers like US Secretary of State Antony Blinken head to Beijing and London and Paris host some major summits, the health of the world economy is receiving a new perspective.
BoE
The Bank of England may be facing its worst nightmare - a barely growing economy and the shadow of a 1970s-style wage cycle. Earnings growth - excluding the pandemic - is at record highs. The labor market is tight, the cost of living is high and workers in both the public and private sectors are demanding better pay to make ends meet.
Add to this the rise in government borrowing costs to their highest level since 2008, putting pressure on an already struggling mortgage market and the central bank's position, and the outlook looks gloomy.
Markets show traders give the BoE almost a one-in-five chance of raising interest rates by half a percentage point next week, up from near zero in early June. Even if the bank raises rates that much, will it work?
FED
A series of resolute voices from major central banks, including the Fed, have once again raised questions about how much central bank tightening is accelerating a global slowdown.
Cue Purchasing Managers' Indexes (PMIs) from around the world will provide evidence of the health of the manufacturing sector and a fresh look at demand trends in the US, Europe and Japan in June.
May's reports showed bad news in several key regions. US manufacturing contracted for the seventh consecutive month as new orders continued to fall due to higher interest rates. May's PMIs for the euro area moved further into contraction territory, another gloomy sign for the region, which turned into a technical recession in the first quarter of 2023.
Reserve Bank of Australia
After back-to-back surprises at the Reserve Bank of Australia's last two policy meetings, investors will be eager to study the minutes of June's confab on Tuesday to gauge the risks of a third.
At the moment, money markets are tossing a coin for July, putting the odds on a hike or a hold steady, but either way, by November at the latest, traders think certain rates will be 50 basis points higher than now.
With the cash rate at a ten-year high and RBA Governor Philip Lowe prioritizing reining in stubborn inflation over protecting jobs, recession risks are rising. May's record-setting employment report could give the RBA more scope to tighten rates further.
Investors in Australia also need to keep a close eye on key trading partner China, where the post-COVID recovery is already accelerating and Sino-US tensions are on the rise.
Some general developments
Top diplomat Antony Blinken's team, expected to visit on June 18-19, downplayed expectations that the first visit to Beijing in five years for a US secretary of state could lead to a breakthrough between the world's two largest economies.
Cautious optimism also prevailed in London, where Western policymakers gathered for the Ukraine Rescue Conference on June 21-22 to discuss issues ranging from short-term financing to long-term reconstruction costs. The event follows the breach of a massive Soviet-era dam on the Dnipro river, which experts warn will have a major impact not only on Ukraine but also on global food security.
Meanwhile, in Paris, on June 22-23, the New Global Financing Pact will be the first summit of newly appointed World Bank president Ajay Banga, where heads of state from around the world will join heads of state from around the world to discuss how to secure financing for some of the poorest countries, especially in relation to climate issues.
Expectations for a CBRT rate hike
Turkey's newly appointed central bank chief Hafize Gaye Erkan, who hosted her first interest rate meeting on Thursday, has one more exit on her agenda.
Analysts at leading investment banks expect her to start raising interest rates, currently at 8.5%, to as high as 25% as part of a major reset of the country's economic policies. That's still slightly below the rate of inflation, which fell to just below 40% in May.
Bank of America Securities said it expects the Central Bank of Turkey to raise its policy rate to 25%, but sees room for a downside surprise.
Economists, including Zümrüt İmamoğlu, said in a report published on Sunday that a lower-than-expected rate could be supported by an interest rate corridor or a signal of further rate hikes.
"We see a large one-time rate hike that would remove controls as less likely," the report said, adding that regulations and controls are expected to be lifted gradually.
"Two paths are possible for the CBRT. The first path is to raise interest rates and slowly remove regulations and controls. In this scenario, it is possible to set the interest rate at 25 percent or lower and signal further rate hikes. The other scenario is to start by raising interest rates to restrictive levels without easing existing financial conditions. This scenario would allow for a faster correction in the economy and strengthen credibility and predictability. In our view, the odds are more in favor of a gradual correction rather than a rapid one. The corridor can also be used for additional tightening without raising interest rates."
The institution predicted that if the CBRT starts with a low interest rate of 15-18 percent, it could make at least two more rate hikes to catch up with current bank rates.
"At the same time, the CBRT could ease regulations to facilitate the private sector's access to finance. This may be accompanied by an increase in FX demand as deposit rates ease from their current levels. However, summer tourism revenues will support the currency. Although we do not expect a currency peg, we expect CBRT interventions to continue for as long as necessary."
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