Raphael Stevens

The market is pricing 25 basis point hikes for the Federal Reserve and the European Central Bank, but economists will be closely scrutinizing communications on their future rate paths.
The Bank of Japan faces a different challenge, and is expected to keep its -0.1% short-term interest rate target despite inflation consistently exceeding target and signs of the economy heating up.

With the Bank of Japan maintaining its ultra dovish stance of negative interest rates, the rate differentials between the U.S. and Japan’s central bank will persist, said Goldman Sachs economists.
Bloomberg | Bloomberg | Getty Images

The U.S. Federal Reserve, Bank of Japan and European Central Bank will all announce key interest rate decisions this week, with each potentially nearing a pivotal moment in their monetary policy trajectory.
As Goldman Sachs strategist Michael Cahill put it in an email Sunday, “This should be a momentous week.”

“The Fed is expected to deliver what could be the last hike of a cycle that has been one for the books. The ECB will likely signal that it is coming close to the end of its own cycle out of negative rates, which is a big ‘mission accomplished’ in its own right,” Cahill, a G10 FX strategist, said.
“But as they are coming to a close, the BoJ could out-do them all by finally getting out of the starting blocks.”
The Fed
Each central bank faces a very different challenge. The Fed, which concludes its monetary policy meeting on Wednesday, last month paused its run of 10 consecutive interest rate hikes as it waited to see where inflation was headed.
The subsequent figures for June showed that consumer price inflation stateside fell to its lowest annual rate in more than two years, but the core CPI rate, which strips out volatile food and energy prices, was still up 4.8% year on year and 0.2% on the month.
Policymakers reiterated their commitment to bringing inflation down to the central bank’s 2% target, and the latest data flow has reinforced the impression that the U.S. economy is proving resilient.

The market is all but certain that the Federal Open Market Committee will opt for a 25 basis point hike on Wednesday, taking the target fed funds rate to between 5.25% and 5.5%, according to the CME Group FedWatch tool.
Yet with inflation and the labor market now cooling consistently, Wednesday’s expected hike could mark the end of a 16-month run of almost constant monetary policy tightening.
“The Fed has communicated its willingness to raise rates again if necessary, but the July rate hike could be the last — as markets currently expect — if labor market and inflation data for July and August provide additional evidence that wage and inflationary pressures have now subsided to levels consistent with the Fed’s target,” economists at Moody’s Investors Service said in a research note last week.
“The FOMC will, however, maintain a tight monetary policy stance to aid continued softening in demand and consequently, inflation.”

This was echoed by Steve Englander, head of global G10 FX research and North America macro strategy at Standard Chartered, who said the debate going forward will be over the guidance that the Fed issues. Several analysts over the past week have suggested that policymakers will remain “data dependent,” but push back against any talk of interest rate cuts in the near future.
“There is a good case to be made that September should be a skip unless there is a significant upside inflation surprise, but the FOMC may be wary of giving even mildly dovish guidance,” Englander said.
“In our view the FOMC is like a weather forecaster who sees a 30% chance of rain, but skews the forecast to rain because the fallout from an incorrect sunny forecast is seen as greater than from an incorrect rain forecast.”
The ECB
Downside inflation surprises have also emerged in the euro zone of late, with June consumer price inflation across the bloc hitting 5.5%, its lowest point since January 2022. Yet core inflation remained stubbornly high at 5.4%, up slightly on the month, and both figures still vastly exceed the central bank’s 2% target.
The ECB raised its main interest rate by 25 basis points in June to 3.5%, diverging from the Fed’s pause and continuing a run of hikes that began in July 2022.
The market is pricing in a more than 99% chance of a further 25 basis point hike upon the conclusion of the ECB’s policy meeting on Thursday, according to Refinitiv data, and key central bank figures have mirrored trans-Atlantic peers in maintaining a hawkish tone.
ECB Chief Economist Philip Lane last month warned markets against pricing in cuts to interest rates within the next two years.
With a quarter-point hike all but predetermined, as with the Fed, the key focus of Thursday’s ECB announcement will be what the Governing Council indicates about the future path of policy rates, said BNP Paribas Chief European Economist Paul Hollingsworth.

“In contrast to June, when President Christine Lagarde said that ‘it is very likely the case that we will continue to increase rates in July’, we do not expect her to pre-commit the Council to another hike at September’s meeting,” Hollingsworth said in a note last week.
“After all, recent comments suggest no strong conviction even among the hawks for a September hike, let alone a broad consensus to signal its likelihood already this month.”
Given this lack of an explicit direction, Hollingsworth said traders will be reading between the lines of the ECB’s communication to try to establish a bias toward tightening, neutrality or a pause.
At its last meeting, the Governing Council said its “future decisions will ensure that the key ECB interest rates will be brought to levels sufficiently restrictive to achieve a timely return of inflation to the 2% medium-term target and will be kept at those levels for as long as necessary.”

BNP Paribas expects this to remain unchanged, which Hollingsworth suggested represents an “implicit bias for more tightening” with “wiggle room” in case incoming inflation data disappoints.
“The message in the press conference could be more nuanced, however, suggesting that more might be needed, rather than that more is needed,” he added.
“Lagarde could also choose to reduce the focus on September by pointing towards a possible Fed-style ‘skip’, which would leave open the possibility of hikes at subsequent meetings.”
The Bank of Japan
Far from the discussion in the West about the last of the monetary tightening, the question in Japan is when its central bank will become the last of the monetary tighteners.
The Bank of Japan held its short-term interest rate target at -0.1% in June, having first adopted negative rates in 2016 in the hope of stimulating the world’s third-largest economy out of a prolonged “stagflation,” characterized by low inflation and sluggish growth. Policymakers also kept the central bank’s yield curve control (YCC) policy unchanged.
Yet first-quarter growth in Japan was revised sharply higher to 2.7% last month while inflation has remained above the BOJ’s 2% target for 15 straight months, coming in at 3.3% year on year in June. This has prompted some early speculation that the BOJ may be forced to finally begin reversing its ultra-loose monetary policy, but the market is still pricing no revisions to either rates or YCC in Friday’s announcement.

Yield curve control is usually a temporary measure in which a central bank targets a longer-term interest rate, then buys or sells government bonds at a level necessary to hit that rate.
Under Japan’s YCC policy, the central bank targets short-term interest rates at -0.1% and the 10-year government bond yield at 0.5% above or below zero, with the aim of maintaining the inflation target at 2%.
Barclays noted Friday that Japan’s output gap — the difference between actual and potential economic output — was still negative in the first quarter, while real wage growth remains in negative territory and the inflation outlook is uncertain. The British bank’s economists expect a shift away from YCC at the central bank’s October meeting, but said the vote split this week could be important.
“We think the Policy Board will reach a majority decision, with the vote split between relatively hawkish members emphasizing the need for YCC revision (Tamura, Takata) and more neutral members, including Governor Ueda, and dovish members (Adachi, Noguchi) in the reflationist camp,” said Christian Keller, head of economics research at Barclays.
“We think this departure from a unanimous decision to maintain YCC could fuel market expectations for future policy revisions. In this context, the July post-MPM press conference and the summary of opinions released on 7 August will be particularly important.”
Clarification: This story has been updated to clarify that the Fed last month paused its run of 10 consecutive interest rate hikes as it waited to see where inflation was headed. More

An AMC Theatre on March 29, 2023 in New York City. AMC Entertainment shares jumped as much as 13%, following a report that Amazon was looking to buy the theater chain. 
Leonardo Munoz | Corbis News | Getty Images

Check out the companies making headlines in morning trading.
AMC Entertainment — Shares popped 37% after a judge on Friday denied a proposed settlement related to AMC Entertainment’s plan to convert preferred shares into common stock. The company said it has filed a revised stock plan. Preferred shares lost about 2% before the bell.

Domino’s Pizza — The stock lost nearly 4% in premarket trading after Domino’s reported mixed quarterly results. The company reported earnings of $3.08 a share on $1.02 billion in revenue. Analysts surveyed by Refinitiv had looked for EPS of $3.05 on revenues of $1.07 billion.
Mattel — The toymaker gained 1.5% after the movie based on one of its doll, Barbie, posted strong opening weekend box office numbers. Warner Bros. Discovery, the parent of the studio that made the film, rose 0.9%.
Tesla — The electric vehicle stock lost more than 1% after UBS downgraded shares to an underweight rating, saying that the recent uptick fully accounts for the demand boost prompted by recent price cuts.
American Express — The financial services stock lost nearly 2% before the bell after Piper Sandler downgraded shares to underweight and trimmed its price target. The firm cited concerns over the company hitting its revenue and profit growth targets.
UPS — Shares lost more than 1% before the bell as roughly 340,000 employees prepare to go on strike nationwide.

Shopify — The e-commerce stock popped 2.5% after MoffettNathanson upgraded shares to an outperform rating, saying that Shopify’s enterprise business is approaching an inflection point.
Chevron — Shares jumped 0.5% after Chevron announced long-time company veteran Eimear Bonner would become the next chief financial officer next year. The company reported preliminary second-quarter earnings results Sunday evening. Chevron posted adjusted earnings of $3.08 a share, which topped analysts’ estimates.
— CNBC’s Alex Harring and Hakyung Kim contributed reporting More

International investment firms have changed their China GDP forecasts nearly every month so far this year, with JPMorgan making six adjustments since January.
That’s according to CNBC analysis of the firms’ notes.
The average prediction among six firms studied by CNBC now stands at 5.1%, close to the “around 5%” target Beijing announced in March.

Workers load goods for export onto a crane at a port in Lianyungang, Jiangsu province, China June 7, 2019.

BEIJING – International investment firms have changed their China GDP forecasts nearly every month so far this year, with JPMorgan making six adjustments since January.
That’s according to CNBC analysis of the firms’ notes. JPMorgan did not immediately respond to a request for comment.

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The U.S. investment bank most recently cut its China GDP forecast in July to 5%, down from 5.5% previously.
That came alongside cuts this month by Citi and Morgan Stanley to 5%.

The average prediction among six firms studied by CNBC now stands at 5.1%, close to the “around 5%” target Beijing announced in March.
Citi’s latest forecast marks the firm’s fourth change this year. Morgan Stanley has only adjusted its forecast once since it was set in January.
During that same period, Nomura changed its forecast four times, while UBS adjusted it three times and Goldman Sachs changed forecasts twice.

The investment banks mostly revised their forecasts higher early this year after China’s initial rebound, following three years of strict Covid controls.

Quarter-on-quarter revisions 

The latest cuts come as recent economic data point to slower growth than expected, and authorities show little inclination to embark on large-scale stimulus. Second-quarter GDP rose by 6.3% from a year ago, missing the 7.3% growth that analysts polled by Reuters had predicted.
The disappointment in second-quarter GDP growth, however, is due to official revisions to China’s quarter-on-quarter growth last year, according to Rhodium Group’s Logan Wright and a team.
The resulting low figure helps Beijing make a case for supporting the economy, the analysts said in a July 17 report. “Understand what you are seeing in this year’s GDP data: these are artificially constructed narratives for various audiences, not reports on China’s economic performance.” 
The National Bureau of Statistics did not immediately respond to CNBC’s request for comment.
Instead of releasing multiple reads of data, the bureau discloses quarterly GDP relatively soon after the end of the period, and subsequently issues revisions.
The statistics bureau has also issued public statements about punishing local governments for falsifying data. The accuracy of official data in China has long been in question.
Goldman Sachs on Friday noted the seasonal revisions, but maintained its 5.4% forecast for China’s growth. “On net, we do not think the surprises are either consistent or large enough for us to make major adjustments to our China growth forecast this year.”

Non-official data

Researchers have sought alternatives to gauge growth.
One organization is the U.S.-based China Beige Book, which claims to regularly survey businesses in China in order to put out reports on the economic environment.
Earlier this year, the firm’s data “showed there was no revenge spending wave or a bombastic recovery,” said Shehzad Qazi, New York-based managing director at China Beige Book.
“Wall Street’s predictions of blockbuster growth in China were first based on hype, and then juiced up by China’s inflated GDP prints into early 2023.”
Qazi testified this month at a hearing of the U.S. House Select Committee on the Chinese Communist Party.
Investment bank research is often known as the “sell-side,” since it is meant to inform buyers about financial products and company stocks.
In the case of China, Qazi pointed out that “investment banks are not only incentivized to sell a ‘China booming’ story, but given their business interests in China, they are also unwilling to publish any views that can be seen as critical of China’s economy.”

Institutional predictions

The World Bank and International Monetary Fund also put out regular economic forecasts for China and other countries. However, their reporting schedule means that predictions may not fully match current the current economic situation.
In June, the World Bank raised its forecast for China’s growth this year to 5.6%, up from 4.3% previously.
The International Monetary Fund in April raised its forecast for China’s GDP to 5.2%, up from 4.4% previously. This month, its spokesperson noted that growth was slowing in China, and said an “updated forecast” would be reflected in the IMF’s next World Economic Outlook.  
Chinese officials have in the last several weeks emphasized the country is on track to reach its annual growth target of around 5%.
Among the six investment firms CNBC looked at, the highest China GDP forecast so far this year was JPMorgan’s 6.4% figure — when the bank adjusted for the second time in April alone.
In all, the range of the firm’s forecasts have spanned 1.4 percentage points, the most of any of those in the CNBC analysis.

Looking beyond 2023

Although businesses and investors have expressed uncertainty about China’s near-term economic trajectory, analysts expect growth in the world’s second-largest economy will still pick up in the longer term.
“Overall, there is a case emerging for a cyclical rebound in China’s economy in early 2024, even without any meaningful policy support in the second half of 2023,” the Rhodium analysts said.
They said that given four quarters, a steady household consumption recovery should help boost service sector employment, while industrial inventories will likely need restocking down the road. More

It’s a sophisticated trading strategy that’s becoming more accessible to retail investors.
The strategy: Zero days-to-expiration options — which is essentially a one-day bet on the direction of the markets.

And CBOE Global Markets CEO Ed Tilly is in the thick of it. His company offers them all five weekdays.
“It’s really become attractive and garnered a lot of interest in being able to express that opinion [on the market] in the short term,” Tilley told CNBC’s “ETF Edge” earlier this week.
Zero days-to-expiration options are contracts that expire the same day they’re traded. Tilly believes these options are appealing to investors by allowing them to invest at the shortest duration of time left in a contract.
“At the end of the trading day, the next result of that trade is settled in cash — not physically delivered like a stock or an ETF,” he said.

Most effective as a tool for pros?

Simplify Asset Management also offers these zero day-to-expiration options. Michael Green, the firm’s chief strategist and portfolio manager, also notes they’ve become especially attractive to individuals.

“About a third of [our] trades are coming from retail, and about two-thirds are coming from institutional,” he said.
Despite growing retail interest, Green emphasizes zero days-to-expiration options may be most effective as a tool for pros.
“We use the phrase sophisticated retail investors, and I think there’s actually a really important distinction there,” Green said. “In general, those who are buying options on a consistent basis are doing more speculation than they actually are being sophisticated in terms of a return profile. It tends to be a losing bet.”

Disclaimer More

“Skiplagging,” also known as “hidden city ticketing,” is a counterintuitive way to book airline tickets to potentially save money.
A traveler would book a multi-leg flight with a connection. Instead of flying to the final destination, the passenger opts to disembark at the connecting city.
Many airlines prohibit the practice, so it comes with risks.

Natnan Srisuwan | Moment | Getty Images

“Skiplagging” is a money hack for travelers looking to save on airline tickets — but travel experts warn the practice comes with big risks.
Also known as “hidden city ticketing,” the practice is a way to leverage a quirk in airfare pricing.

Here’s the basic concept: Rather than fly nonstop to a desired city, a passenger would instead buy a multi-leg flight with a connection in their desired city. The traveler would disembark at the layover stop instead of flying the final leg.
Sally French, a travel expert at NerdWallet, said travelers would be “surprised” to learn how often skiplagging is cheaper for fliers than buying a direct flight to their end destination.
More from Personal Finance:How you can save $500 or more on a flight to Europe this yearCanceled or delayed flight? What to know about your rightsU.S. passport delays may be months long
However, the practice also peeves airlines. In fact, many prohibit it — with a varying degree of consequences if a passenger is caught.
Skiplagging has “been around for a while,” said David Slotnick, senior aviation business reporter at The Points Guy.

However, “it’s controversial,” he said.
“I think it reveals a bizarre and counterintuitive way the airline-pricing model works,” Slotnick said. “But in terms of being able to take advantage of that to save money, it’s a super big risk and you probably shouldn’t do it unless you fully understand what you’re doing.”

Consequences include canceled flights, airline bans

It has become easier to engage in the practice due to online travel bookings, including via sites like Skiplagged.com that specialize in such bookings, French said.
Skiplagged.com has a series of frequently asked questions that speak to some of the associated risks, and advice for working around them.
“This is perfectly legal and the savings can be significant, but there are some things to be aware of,” the company said in one FAQ response, adding: “You might upset the airline, so don’t do this often.”
The risks were illustrated earlier this month when a teenager tried using the practice. The teen was scheduled to fly from Gainesville, Florida, to New York, with a stop in Charlotte, North Carolina; instead of disembarking in New York, the passenger planned to do so in Charlotte.

Baona | E+ | Getty Images

The carrier, American Airlines, reportedly discovered the traveler’s intent and canceled their ticket.
In addition to getting a flight canceled — and then having to re-book last-minute, likely erasing any initial cost savings — travelers could get banned from an airline’s frequent-flier program and lose all its accompanying perks, Slotnick said.
Carriers may also ban travelers from flying that airline in the future, he said. They also can theoretically take a traveler to court for damages.
When booking a flight, travelers agree to airlines’ contracts, or conditions of carriage. These contracts set rules for passengers, and often forbid skiplagging (though generally don’t use that specific term), experts said.
American Airlines’ contract, for example, states: “Your ticket is valid only when travel is to/from the cities on your ticket and in your trip record.”

I think it reveals a bizarre and counterintuitive way the airline-pricing model works.

David Slotnick
senior aviation business reporter at The Points Guy

More explicitly, it also prohibits reservations “made to exploit or circumvent fare and ticket rules,” examples of which include: “Purchasing a ticket without intending to fly all flights to gain lower fares (hidden city ticketing).”
United Airline and Orbitz filed a lawsuit against Skiplagged.com’s founder in 2014, but a judge dismissed the case the following year.
Carriers generally don’t like the practice because, for one thing, they can lose revenue. They may have been able to sell an empty seat to another passenger, or perhaps sell a more expensive nonstop ticket to the skiplagging passenger, for example.
Additionally, when travelers deviate from what’s expected it messes with airlines’ internal planning, flight scheduling and data science, for example, Slotnick said.
“They’re not angry that people save $20 on a flight,” he said. “It’s more the predictability in the data set.”
Skiplagging only exists “as a result of airlines’ own pricing schemes,” Dan Gellert, chief operating officer of Skipplagged.com, said in an e-mail.
“Airlines have monopolies on certain hub airports and their pricing reflects that. Thousands of people book Skiplagging or hidden city tickets every day and we generally hear of no issues from any of them,” Gellert said.

There are other risks, inconveniences to skiplagging

Travelers who use hidden city ticketing may be exposed to additional inconveniences. For example, you can’t check your bags, which will go onward to the final destination instead of the connecting city, French said.
Bringing a bag on board as a carry-on is also a gamble: If a plane’s overhead space is full by the time you board, you may be forced to check your bag, French added.
Passengers would also need to book separate one-way tickets. That’s because an airline would likely cancel a return ticket if you were a no-show for any leg of your flight, experts said.
Additionally, flight schedules are “very unpredictable,” French said. Airlines may opt to reroute your flight through a different city — meaning your layover destination (where you’d intended to go) could change.
“There are plenty of [other] ways to find good deals on flights,” especially for travelers willing to be flexible on trip timing and location, French said. Alternatives include using services like Google Explore and Going, which allow consumers to set flight alerts, she said. More

Gabe Bankman-Fried, the younger brother of FTX’s founder, tried to buy the island nation of Nauru, a Delaware lawsuit alleges.
The allegation was in a suit filed by attorneys from Sullivan & Cromwell, which is seeking to recover billions of dollars from Sam Bankman-Fried after the collapse of FTX.
Nauru, with a population of about 12,000, is a little over 2,100 miles away from Brisbane, Australia.

The Nauru ring road runs right around the island nation of Nauru.
(C) Hadi Zaher | Moment | Getty Images

Sam Bankman-Fried’s younger brother, who was a top lobbyist for failed crypto exchange FTX, considered purchasing the island nation of Nauru in the Pacific to create a fortified apocalypse bunker state, a lawsuit filed in Delaware bankruptcy court shows.
Gabe Bankman-Fried was looking at buying Nauru in the “event where 50%-99.99% of people die” to protect his philanthropic allies and create a genetically enhanced human species, according to the suit filed Thursday by attorneys from Sullivan & Cromwell, which is seeking to recover billions of dollars following the collapse of FTX.

Bunker life is a well-documented fixation among tech billionaires, particularly those who identify as doomsday preppers. There’s also a fascination with buying large estates in the Pacific and even owning small islands there.
In his years running FTX, the elder Bankman-Fried brother touted a philanthropic lifestyle called effective altruism and established the philanthropic arm with that in mind. Devotees of effective altruism work to maximize their income so they can give away their money in a fashion they see as most beneficial to humankind.
Gabe Bankman-Fried was FTX’s most visible presence in Washington, D.C., and was connected to bipartisan charitable donations that ran into the hundreds of millions. Along with an unnamed philanthropic officer of FTX, he considered buying Nauru, in part to foster “sensible regulation around human genetic enhancement, and build a lab there.”
A representative for Nauru confirmed the island nation was not and has never been for sale.
Nauru, with a population of about 12,000, is a little over 2,100 miles away from Brisbane, Australia. It was there that FTX lawyers allege the Bankman-Fried team sought to establish an emergency base for itself and a select group of “EAs,” or effective altruists.

In addition to serving as a haven in case of apocalypse, “probably there are other things it’s useful to do with a sovereign country, too,” according to a memo between the younger Bankman-Fried and the philanthropic advisor, which was noted in the suit.
WATCH: FTX seeks to claw back $700 million from ex-Clinton aide’s investment firm More