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THE WEEK AHEAD

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The monetary meeting between the Chancellor of the Exchequer and the Governor of the Bank of England on Thursday wi...
The monetary meeting between the Chancellor of the Exchequer and the Governor of the Bank of England on Thursday will be the main focus of attention in the UK given the scant economic data on offer. The debate over monetary policy that has raged since May has now moved firmly in favour of the Chancellor.

The most recent monetary meeting minutes and the August Bank of England Inflation Report also suggest a softening in the Governor's attitude. While he continued to advice a tightening of monetary policy to be certain of achieving the inflation target, he recognised that the policy dilemma has now become more acute. On balance, interest rates are likely to remain on hold until the direction of fiscal policy is confirmed in this year's budget.

The publication of UK industrial production data for July on Wednesday will also generate some interest. Output slowed much more sharply than expected in June. However, some recovery is expected, reflecting increased energy production, as oil and gas supply rebound from an exceptionally large summer maintenance programme.

The Bank of Japan's Tankan Survey, published on Friday, should confirm the current Japanese slowdown. Uncertainty over the strong yen's impact on the domestic economy continues to depress sentiment although this should be partially offset by the recent improvement in the equity market.
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