This week, the financial world is on alert as the three major central banks will announce their key interest rate decisions. The Bank of Japan (BOJ), the FED and the Bank of England (BOE) are holding policy meetings and analysts are expecting different results from each.
Bank of Japan (BOJ) – Decision Expected on Wednesday Morning
The BOJ will be the first institution to announce its decision, which is expected on Wednesday morning in Japan (Tuesday evening in the USA). Analysts are divided on whether the BOJ will raise its policy rate from its current 0%-0.1% range or signal that a rate hike is imminent. Inflation in Japan has been running above the bank's 2% target for some time, and despite the recent rise, the yen remains near decade-lows against the US dollar.
According to The Wall Street Journal, the BOJ believes tighter monetary policy could revive Japan's stagnant consumption. Higher rates could strengthen the economy, lowering the cost of key imports such as gasoline and food, thus easing inflationary pressures.
FED – Decision Expected on Wednesday Evening
From now on, all eyes will turn to the FED, which will announce its decision on Wednesday. The Fed will announce its decision at 21:00 Turkey time (UTC+3) and the verbal guidance of Fed Chairman Powell will be followed at 21:30. While no one expects the FED to cut interest rates, almost all analysts predict that the FED will signal an interest rate cut expectation at its next meeting in mid-September.
As stated in the CME FedWatch tool, current market expectations give a 100% chance of a rate cut in September, while there is a 12% chance that the cut will be 50 basis points instead of the usual 25.
Bank of England (BOE) – Decision Expected Thursday Afternoon
Finally, the Bank of England will announce its policy decision on Thursday afternoon. Economists and market participants are split about 50/50 on whether the BOE will ease policy for the first time in several years. Even if the BOE reduces interest rates, it is expected to take a cautious approach, signaling to the markets that a series of interest rate cuts should not be expected.
*This is not investment advice.