Go big or go home By Reuters

(Reuters) – More interest rate cuts are coming in Switzerland and Sweden after an outsized Federal Reserve rate hike, with U.S. inflation data and surveys of global business activity pointing to pressure ahead.

In politics, Japan’s ruling party elects its next leader, who will become prime minister, and Sri Lankan voters elect a president.

Here’s the first time in world markets from Lewis Krauskopf in New York, Kevin Buckland in Tokyo and Libby George, Amanda Cooper and Dhara Ranasinghe in London.

1/ Front loaders

The central banks of Sweden and Switzerland are next in the Great Rate Cut Race of 2024.

Market participants expect both to cut benchmark rates at their meetings on Wednesday and Thursday, respectively, and there’s a good chance they could anticipate cuts this year, meaning 2025 could see relatively little in terms of policy relaxation.

The Swiss National Bank was the first major central bank to cut interest rates in March. Markets are divided by the size of a Thursday discount. The appreciation of the franc, which is close to its strongest since 2015, is exactly what the SNB does not want at the moment, given that inflation is already behind its forecasts.

Meanwhile, Sweden’s Riksbank is almost certain to cut by 25 basis points on Wednesday, especially as the inflation rate is now well below the bank’s target, with a strong possibility of a 50 basis point cut in November.

2/ INFLATION IN FOCUS

The Fed’s favorite gauge of inflation – due on September 27 – will show whether price pressures have continued to moderate even as the Fed has finally begun to pull back from the tight monetary policy that has been in place to cool the economy.

The price index for personal consumption expenditures (PCE) for August likely rose 2.5 percent on an annual basis, a Reuters poll showed.

The bank’s latest economic forecast sees the annual rate of the price index falling to 2.3% by the end of the year and 2.1% by the end of 2025.

Investors will also get new figures on consumer confidence and durable goods next week.

3/ RECESSION CLOCK

The flash data on business activity, released from the previous month, will provide the latest snapshot of the state of the world economy.

The Eurozone Composite Purchasing Managers’ Index (PMI) is in expansionary territory for six months and the UK’s for 10 months, bolstering a resilient pound.

Markets seem happy, for now, that the Fed’s half-point rate cut will help avert a US recession, and therefore a global one. Economists polled by Reuters put the likelihood of a recession at about 30 percent, a figure little changed throughout the year.

But not everything is rosy.

In European powerhouse Germany, the PMI slipped deeper into contraction territory below the 50 mark in August and sentiment is weak. And let’s not forget that a still struggling Chinese economy will hurt others.

4/ ELECTION OF A PRIME MINISTER

Japan’s ruling party elects its new leader and, by extension, a new prime minister on September 27. It’s a crowded field of nine people, with three seen as leaders, albeit with very different political views.

Sanae Takaichi – who would become the nation’s first female prime minister – is a reflationist who has accused the Bank of Japan of raising interest rates too soon. Conversely, Shigeru Ishiba is a critic of past monetary stimulus and told Reuters the central bank was “on the right policy track” with rate hikes so far. Shinjiro Koizumi, the son of charismatic former prime minister Junichiro Koizumi, has so far said only that he will respect the Bank of Japan’s independence.

The leadership race complicates the bank’s work – no matter who wins. Snap elections will be held at the end of October, making political action at that month’s meeting difficult.

5/ TOO CLOSE TO CALL

Sri Lankan voters will have the economy at the forefront of their minds when they go to the polls on Saturday in the debt-ridden nation’s presidential vote, which is too close to a vote.

While the island’s economy has pulled itself back from the abyss – and is set to return to growth next year – the austerity and struggle citizens have endured to do so could drive many away from incumbent Ranil Wickremesinghe and into the arms of leftist parties.

Two leaders have pledged to review or revise the terms of the International Monetary Fund bailout, and one has proposed a new approach to debt restructuring that is otherwise almost over the finish line, raising the risk of more political — and economic — uncertainty. .

(Graphics by Prinz Magtulis, Sumanta Sen and Vineet Sachdev; Compiling by Karin Strohecker; Editing by Christopher Cushing)