Everyone Is Booked for December

Three central banks meet in three days, and the winning move on all three is to do nothing and call it discipline.

The Fed decides Wednesday. The ECB follows Thursday. The Bank of Japan goes Friday at midday Tokyo, with a new Outlook Report attached. CME puts the odds of a Fed hike this week at about 9%. In a Reuters poll taken October 5–8, 70 of 73 economists expected the ECB to hold at 2.50%. The BoJ is expected to sit on 1.25%. Add it up and you get roughly zero policy changes across the three biggest rate-setters in a week when Brent closed at $116.72.

Now look at December. The Fed is priced around 84% for a hike. In the same Reuters survey, 64 of 73 economists want a December ECB hike. A December move at the BoJ is, in the polite language of the previews, "in play." It's a restaurant with one reservation slot, and the whole sector booked it for 8 p.m. in December.

Nobody has said why December. Not one of the three has offered a reason that survives contact with the calendar.

The data excuse has expired

Central bankers love the phrase "data dependent," so let's feed them the data. US headline CPI printed 3.7%. September PPI rose 1.3% in a single month, the biggest jump since March 2022, with a core PPI at +0.7%. Gasoline surged. Real wages have shrunk for six straight months. Fed funds sit at 3.75–4.00%, which leaves a real policy rate hovering around zero.

None of that is hidden, and none of it will improve before December. The one input that could move, the October CPI, lands in mid-November, after the vote on the third. That is a coincidence I'm happy to leave unexplained, since no central banker will ever confirm it. I'll only note that the Fed funds futures have spotted the same calendar, and a pre-announced hike is a scheduled appointment, no longer a decision.

Washington, which has the dots and no voice

Warsh's Fed hiked on September 16 with a 12–0 vote, and 16 of 18 dots pencilled in at least one more. He has also made a doctrine of declining to narrate his own thinking. So Wednesday gives us a hold, a statement that sounds patient, and a chair who tells us as little as the rules permit. Meanwhile the ten-year has been trading around 5.00% and the 30-year mortgage is at 7.40%. The curve is doing the Fed's job, tightening on his behalf, and he doesn't have to own the damage. I admire the efficiency of that arrangement. I don't trust it.

Frankfurt, which is trying not to hike twice into an oil shock

The ECB raised its deposit rate to 2.50% on September 10, its second hike this year. Lagarde has been talking up "measured" action. Barclays published a forecast with the deposit rate staying at 2.50% through 2027, while the poll says 64 of 73 economists expect another hike in six weeks. One of those forecasts is going to look silly, and I have a feeling it's the one built on oil staying put.

There is a precedent the Governing Council will not be mentioning. In 2011 the ECB hiked in April and July into an energy-driven inflation scare, and by November its new president was cutting. Meanwhile France's ten-year OAT closed Friday at 5.01%, level with the US Treasury, after Moody's blinked and left the rating at Aa3 on negative outlook. A government that borrows at American rates does not give a central bank much room for heroics.

Tokyo, which should hike and won't

The Bank of Japan hiked to 1.25% on September 18, its second hike in three months and the shortest gap between hikes since 1990, with the US Treasury Secretary publicly asking for it. The yen has been parked around 158. The last readings on Japanese producer prices and import prices came in around 6.8% and 24.5% respectively, and you could argue the BoJ is the only one of the three with a hard, domestic reason to move this week. It will hold anyway. The standing order is December.

Why this is the part that scares me

When everyone has the same date in their diary, the date stops being a plan and becomes a trade. Fixed income has already moved to the December curve. Equities are being asked to absorb the cost of $800 billion in hyperscaler capex financed at 5%, with Microsoft and Alphabet reporting Wednesday evening and Amazon Thursday. A bad guide from any of the three lands on a market that has already tightened by itself.

The asymmetry is ugly. The market gets to react to every headline between now and December, and the central banks get to react to none. If the weekend produces a bombing campaign and Brent goes to $130 in November, they hike into it, late and frightened, and everyone calls it a policy error afterwards. If the Gulf calms and oil drops, they hike anyway because the pricing demands it. I can't find the scenario where waiting wins, and I've looked.

Wednesday's statement will use the word "patient" at least once. Read it as: December, after the election, after the strike window, after the CPI. Three banks, one reservation, and nobody wants to be the first one seated.