Fed, BoE And BoJ Decide On Rates

September 20, 2023 21:26

Interest rate decision is going to be a popular long tail keyword this week as the US Federal Reserve (Fed), the Bank of England (BoE) and the Bank of Japan (BoJ) are expected to announce their decisions regarding their monetary policies.

The BoE received good news earlier in the morning as a report by the Office for National Statistics (ONS) showed headline inflation falling to 6.7% in August. It should be noted that economists had forecast a rise to 7.0%. The dropping inflation figures, which could allow the BoE not to increase rates, forced the pound to a four-month low against the US dollar.

The People’s Bank of China (PBoC) kept rates on hold in line with economists’ expectations as the weakening yuan and the strengthening economy enabled it to postpone the implementation of further monetary policy easing.

Fed Interest Rate Decision

The Fed’s governing board is expected to announce its interest rate decision later today. Market analysts suggest that the US central bank will keep its interest rates on hold, although inflation remains at levels above target range. The Fed’s head, Jerome Powell, reiterated during his Jackson Hole remarks, that one more rate hike could bring inflation down to the desired level.

A Reuters survey showed 95% of economists polled forecasting that the U.S. central bank would hold the federal funds rate in the current 5.25%-5.50% range. The CME FedWatch Tool also shows a 99% probability of rates being maintained at the current level. Fed’s policymakers tend to deflect any comment related to a rate cut and insist that borrowing costs could remain higher for longer.

BoE Interest Rate Decision

On Thursday, it will be the BoE’s turn to reveal its decision on interest rates. The UK economy seems to be on the brink of recession as growth figures don’t seem to be encouraging, and consumers try to adjust their budgets to higher prices and rates.

According to economists’ forecasts, the BoE’s Monetary Policy Committee (MPC) is expected to consider hiking rates by 25bps, tightening its monetary policy even more. However, recent inflation data could play a role in the decision.

Earlier in the month, the BoE’s Governor Andrew Bailey said that the bank is much closer to ending the tightening cycle. However, Catherine Mann has warned against any pausing with Citi analysts suggesting that “Mann's explicit pushback against a pause, and linked rebuke of majority MPC judgements is, we think, a sign of an internal discussion that is moving against her. A pause therefore is, we think, part of the discussion.”

BoJ Interest Rate Decision

Last but not least, the Bank of Japan’s governing board will convene to decide on the course of its monetary policy. Economists familiar with the BoJ’s policies suggest that the board won’t hike rates in this meeting and add that the Yield Curve Control (YCC) is likely to be maintained. 

The BoJ hasn’t followed the pattern of raising rates as the Fed and the ECB do, but some of its policymakers have started mentioning the need for reducing the monetary stimulus that supported the Japanese economy during the previous decade.

In his remarks last week, Governor Kazuo Ueda noted that the central bank of Japan could have enough data at its disposal by year’s end that would help it decide on whether to end the negative rates policy or not.  

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Miltos Skemperis
Miltos Skemperis Financial Content Writer

Miltos Skemperis’ background is in journalism and business management. He has worked as a reporter on various TV news channels and newspapers. Miltos has been working as a financial content writer for the last seven years.