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Central Bankers Haggle Over Stimulus Amid Dismal Factory News

Check back later on Friday for U.S. nonfarm payrolls data, which will probably show that employers added 160,000 workers. 

Central Bankers Haggle Over Stimulus Amid Dismal Factory News
Mark Carney, governor of the Bank of England (BOE), left, and Jerome Powell, chairman of the U.S. Federal Reserve. (Photographer: David Paul Morris/Bloomberg)

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Two of the world’s top central banks are about to hold much anticipated meetings, and policy makers used the last days before their quiet periods to pile into the debate over how much stimulus is needed in the euro area and the U.S.

Central bankers weren’t the only thing that kept us busy this week: trade tensions continued to mount and factory gauges once again painted a dismal picture.

Here’s our weekly wrap of what’s going on in the world economy.

Extent of Stimulus

The European Central Bank’s interest-rate decision next week -- the penultimate one headed by Mario Draghi -- is dividing the Governing Council, with the ECB president facing his biggest ever pushback. In the last few days, central bank chiefs from France and Estonia joined those questioning if a new salvo of quantitative easing is necessary at this point. Still, more than 80% of economists surveyed by Bloomberg predict Draghi will override opposition and announce more QE.

Meanwhile, Federal Reserve officials are weighing two competing forces in the U.S. economy: the resilience of the consumer versus the fallout from uncertainty around trade disputes and weaker global growth. Data Friday showed U.S. companies’ hiring stumbled in August, likely cementing expectations for a second straight interest-rate cut.

Central Bankers Haggle Over Stimulus Amid Dismal Factory News

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Bucking the Trend

Not all central banks are jumping on the easing bandwagon despite pressure from investors to do so.

Sweden’s Riksbank on Thursday said it was sticking with a plan to withdraw stimulus, although it acknowledged it would likely to do so at a slower pace than previously signaled. The previous day, the Bank of Canada surprised markets by saying its current level of stimulus was appropriate. On Tuesday, the Reserve Bank of Australia also kept its key rate unchanged and said it’s waiting to see the effects of previous stimulus.

Central Bankers Haggle Over Stimulus Amid Dismal Factory News

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Trade War Uncertainty

Much of the outlook for the global economy hinges on trade talks between the U.S. and China, which look set to get restarted in the weeks ahead. Negotiating teams from Beijing and Washington just announced plans to meet face-to-face in early October and work again toward a deal that the U.S. wants to balance the trading relationship and that Chinese officials hope will lift tariffs on their exports.

An agreement couldn’t come too soon: Global financial markets are hanging on every trade development and both economies are showing signs of weakness tied to the dispute.

Central Bankers Haggle Over Stimulus Amid Dismal Factory News

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Weekend Reading

Chart of the Week

Central Bankers Haggle Over Stimulus Amid Dismal Factory News

--With assistance from Simon Kennedy and Brendan Murray.

To contact the reporter on this story: Zoe Schneeweiss in London at zschneeweiss@bloomberg.net

To contact the editor responsible for this story: Fergal O'Brien at fobrien@bloomberg.net

©2019 Bloomberg L.P.