The world’s major central banks will decide monetary policy this week. The worst inflation crisis in decades continues to show signs of easing.
Both the US Federal Open Market Committee (FOMC) and the European Central Bank (ECB) are expected to raise interest rates by 25 basis points (bp, 1 bp = 0.01%). But more attention is being paid to signals from policy makers whether they are likely to raise rates further, or whether they are planning a long pause.
Both Federal Reserve Chairman Jerome Powell and ECB President Lagarde have warned that inflation remains too high. But economists said the policy outlook for the rest of the year remains uncertain, with neither central bank meeting until September after this week.
The Bank of Japan is an exception, with more than 80% of analysts surveyed expecting Governor Kazuo Ueda to continue supporting the economy, even though inflation is above the bank’s 2% target.
Survey report: 80% of economists predict status quo at Bank of Japan July meeting
Central Bank Rate Decisions This Week
Decision schedules for distinct central banks
Source: Data compiled by Bloomberg
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The FOMC is expected to raise the policy rate by 25 basis points to 5.25-5.5%. That would be the 11th rate hike in 16 months.
“Inflation is slowing, but not fast enough for the FOMC,” said James Knightley, chief international economist at ING Financial Markets. “Officials will have all the best as the job market remains resilient,” he said.
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With a 25 basis point hike this week almost certain, attention will be focused on how Lagarde will explain the policy plan after July.
“The ECB is likely to focus on three key actions at its next meeting on July 27,” said David Powell, senior economist at Bloomberg Economics. “Lagarde will likely announce another 25 basis point rate hike, offer a dialogue that September policy decisions will depend on data, and emphasize that no rate cuts are coming soon.”
Bank of Japan
Inflation is above the BOJ’s 2% target, but Ueda continues to suggest a policy shift toward tightening is still some way off.
“There is some speculation that Governor Ueda will adjust the yield curve at the July 28-29 meeting in a surprise move like Kuroda’s, but we don’t anticipate that,” said Taro Kimura, senior economist at Bloomberg Economics. We expect to maintain the status quo policy until the end of the first half of 2024.”
news-rsf-original-reference paywall">Original title:Fed Readies Another Rate Hike in Pivotal Week for Central Banks(excerpt)
2023-07-23 16:09:00
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