LONDON The U.S. economy's readiness -- or not -- for an interest rate rise is likely to once again take the global economic spotlight in the coming week, just a month before a hotly contested U.S. presidential election.
Democratic candidate Hillary Clinton and Republican Donald Trump face off in the second presidential debate ahead of the November vote, after a recent slight bounce for Clinton in the polls since the first debate two weeks earlier.
Under Chair Janet Yellen, the Federal Reserve has done very little to surprise investors other than to repeatedly play up the likelihood of, and then put off, a follow-up hike to last year's baby step bringing rates a little above zero.
Minutes on Wednesday of the Federal Open Market Committee's September policy meeting, at which three members voted for a hike, could do more than any data release to convince investors of what already looks like a greater than 50-50 chance of a December rate rise.
Markets are still mostly addicted to dovish pronouncements from central bankers and so hawkish minutes have the potential to disrupt, as would similar talk from Yellen at a scheduled speech on Friday at a Federal Reserve Bank of Boston conference.
Her host, Boston Fed President Eric Rosengren, was one of the Fed's biggest doves until the last meeting when he changed his tune rather suddenly and dissented for a rate rise.
"The September FOMC minutes should help to shed light on what appeared to be a contentious meeting," noted economists at Credit Suisse.
"In our view, the data in the U.S. should be sufficient to support a hike this year, but the Fed's cautious approach and the under appreciated risk from the presidential election make further delays more likely than not. We continue to expect the next rate increase won't occur until May of 2017."
That stance is a familiar one, suggesting a degree of complacency about the Fed's intentions after it signalled rate rises several times this year only to back off from delivering.
The missing ingredient is inflation.
While wage inflation picked up to 2.6 percent in what was otherwise an unremarkable September employment report on Friday, broader measures of inflation show price pressure is remarkably tame this late in a multi-year economic expansion.
Low inflation remains the main story in Europe as well, confounding for years now the European Central Bank's myriad prescriptions to get it anywhere near its 2 percent target.
Official inflation data for September from Germany, France, Italy and Spain are all due in the coming week and, not surprisingly, none of them are expected to show any real pickup.
The range of forecasts provided in Reuters polls for all inflation measures across these four biggest euro zone economies is just 0-0.5 percent, giving a sense of just how ingrained low inflation expectations have become.
Even China inflation, due on Friday, is forecast to rise a meagre 1.6 percent compared with 1.3 percent the month before.
A continuing concern in markets will be the deteriorating outlook for how Britain will manage its divorce from the European Union, which Prime Minister Theresa May has said will begin in March. The subject may come up at a meeting of Eurogroup finance ministers early in the week.
The British pound GBP= took a pasting in the past week, falling to a new 31-year low against the dollar, and rattling nerves on trading desks with a "flash crash" in Asian trading early on Friday that has not been completely explained.
Renewed selling of sterling is linked to a growing perception that the Conservative government, once pushed into negotiations, may be more interested in restricting immigration than retaining access to Europe's single market.
Broadly speaking, economic data have been more resilient than most expected following the June 23 Brexit vote, but that was followed by a fusillade of Bank of England stimulus in the form of renewed large-scale asset purchases and a new record low interest rate.
"If the data continue to beat expectations, our call that the MPC will cut Bank rate from 0.25 percent to 0.10 percent on Nov 3 might start looking shakier," wrote economists at Investec.
(Editing by Catherine Evans)