Events to Watch: FOMC Meeting, BoE Minutes, NZ GDP

New Zealand GDP - 2Q09: While consensus forecast New Zealand's GDP contracted -0.2% qoq in 2Q09 after a -1% decline in the prior quarter, risk is on the upside that a first rise since the end of 2007 may have been recorded. If that's the case, then it did not only mark the end of recession but also suggested that recovery has arrived earlier than the RBNZ's forecast.

Eurozone PMI - September: Flash reading for manufacturing is expected to have risen to 49.8 in September from 48.2 in prior month while services PMI should have increased to 50.6, the first time in expansionary territory since May 2008.

UK MPC minutes - September: At September's meeting, the BOE announced no change in policy rate and asset purchase program and we expect the Committee voted unanimously on it. What the market is interested the most is discussion regarding reduction in remuneration rate.

Last week, BOE Governor Mervyn King hinted the possibility of lowering the deposit rate paid on reserve and this triggered talks about the timing of implementation in the market. In fact, the Governor first mentioned about it at the August inflation report press conference but there was no 'follow-up' at the subsequent BOE meeting in September.

We would like to see if the MPC had discussed about it. If so, then it's likely for change in October. If not, the decision may be delayed until November.

FOMC Meeting - September: There are several things that we expect the Fed will announce after the 2-day meeting this week. First, the Fed will continue to keep its policy rate at 0-0.25% for an extended period of time despite signs of improvement in economic outlook. Second, the central bank should have turned more upbeat on the assessment of economic growth while keeping forecast on inflation low. Third, the Fed should taper off its purchase of agency MBS and agency debt by slowing down the pace rather than reducing the size of the program. We expect the MBS purchase program will be extended to 1Q2010 from December 2009.