Federal Reserve And Bank of Japan To Decide On Rates

June 12, 2024 22:41

All eyes are on the US Federal Reserve (Fed) which is expected to announce its interest rate decision later today. Just a few hours before that, economists will have the opportunity to scrutinise the US CPI inflation report for the month of May. On the other side of the Pacific, the Bank of Japan (BoJ) will have its monetary policy meeting on Friday.

In the UK, the economic growth rate came in at 0% in April, according to figures published on Wednesday by the Office for National Statistics. Economists polled by Reuters had expected growth to flatten, after the economy expanded by 0.4% in March. The Bank of England will have its monetary policy meeting on June 20th.

In China, CPI inflation surged by 0.3% in May on an annualised basis, matching April’s figure, as data from the National Bureau of Statistics (NBS) showed earlier today. May’s figure came in below a 0.4% increase forecast in a Reuters poll.

Fed Interest Rate Decision

The Federal Open Market Committee (FOMC) will announce its decision on interest rates later in the day. The majority of economists forecast that the Fed would leave borrowing costs on hold as a series of data reports indicate that the economy still runs hot. The CME FedWatch Tool seems to confirm the forecast as it gives 99.4% chance for the Fed to not alter its monetary policy today. Rates are currently at the highest level in the last 23 years.

ING economists stress that the Fed’s governing board would need to see a cooling jobs market as well as inflation would have to drop before making a move to reduce interest rates. In their report they note: “So, if we get the combination of cooler inflation, a looser jobs market and stalling consumer spending growth we believe the Fed will indeed look to move monetary policy from “restrictive” to “slightly less restrictive” with 25bp rate cuts at the September, November and December FOMC meetings.”

BoJ Interest Rate Decision

The BoJ’s governing council will convene to decide on matters of monetary policy on Friday. According to economists’ forecasts, the central bank of Japan is not expected to change its stance on rates after the board meeting.

A news report by Nikkei Asia suggested that the BoJ will consider whether to reduce its roughly 6 trillion yen in monthly Japanese government bond purchases. A BoJ source cited by Nikkei Asia said that “even if the central bank decides to cut its purchasing next week, the program "should be kept as a tool for responding to sharp gains in interest rates.”

ING economists see a rate hike taking place in July as they wrote in their report: “The Bank of Japan is expected to keep rates unchanged at its Friday meeting, but the latest inflation trend supports our view that the BoJ is likely to respond with a rate hike as early as July, sooner than the market believes.”

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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.