Fed minutes, UK inflation, and RBNZ decision set the tone for a pivotal week

Fed minutes in focus ahead of September

The release of the July Federal Open Market Committee (FOMC) minutes on August 20 will be the highlight of the week. Investors are looking for insight into how policymakers assessed the risks from tariff pass-through and whether Chair Jerome Powell’s hawkish press conference reflected the committee’s consensus or an attempt to manage dissent.

Markets have already shifted toward pricing in a September rate cut, following weak July payrolls and large downward revisions to prior job data. With one more employment report due before the Fed’s next meeting, the labor market remains the swing factor. The minutes should reveal how much appetite there is among policymakers to begin easing if labor market weakness deepens.

UK inflation to test Bank of England’s resolve

The UK will release July CPI data on August 20, with expectations for headline inflation to rise slightly to 3.7% year-on-year from 3.6%. Food, fuel, and accommodation costs are expected to add upward pressure, while services CPI is likely to climb to 4.8%.

The Bank of England had projected inflation to peak at 4% in September, raising doubts about the pace of further cuts. While a November reduction remains the base case, another round of upside surprises could delay rate relief until 2026. The July reading will therefore be a crucial test of the BOE’s policy credibility and inflation trajectory.

RBNZ set to resume easing

The Reserve Bank of New Zealand (RBNZ) is widely expected to cut its cash rate by 25 basis points to 3% at its August 20 meeting, resuming its easing cycle after holding rates steady in July.

While food and utility prices are keeping headline CPI elevated, labor market deterioration has accelerated, raising concerns about growth momentum. Analysts believe further cuts will follow, potentially pushing rates below neutral as weaker demand and falling confidence take hold.

China to hold loan prime rates steady

China’s commercial banks are likely to keep loan prime rates (LPRs) unchanged in August, maintaining the one-year LPR at 3.0% and the five-year LPR at 3.5%. This marks the third consecutive month without adjustment, as the People’s Bank of China (PBoC) has refrained from new easing since its May rate cut.

However, weak July credit data has increased pressure on the central bank to act. Economists expect another 10-basis-point rate cut and a 25-basis-point reserve ratio reduction before the end of September, which would likely translate into lower LPRs.

Japan inflation unlikely to deter BOJ

Japan’s July CPI data is due on August 22 and is expected to show headline inflation easing to 3.0% YoY from 3.3% in June. Core-core inflation, which excludes food and energy, is forecast to remain steady at 3.4%.

While the moderation suggests some easing of price pressures, strong wage growth and resilient consumption underpin the Bank of Japan’s case for further tightening. The BOJ is still expected to deliver a 25-basis-point hike in October, signaling confidence in its price stability framework despite global uncertainties.

Geopolitics: Trump-Putin summit raises more questions than answers

Beyond macroeconomic data, geopolitics is shaping sentiment. US President Donald Trump and Russian President Vladimir Putin met in Alaska for their longest bilateral meeting since 2018. Trump described the talks as “extremely productive,” but territorial disputes remain unresolved.

Trump’s suggestion that Ukraine should move “directly” to a peace agreement, bypassing a ceasefire, was seen as favoring Putin’s strategy to gain time on the battlefield. While both leaders hinted at progress, Kyiv and European allies remain skeptical. Ukrainian President Volodymyr Zelenskiy is set to meet US officials in Washington on August 18 to rally continued Western support.

Markets view the outcome as reducing the risk of immediate US sanctions on Russia, but lingering uncertainty will keep investors cautious, particularly in energy and defense-linked assets.