Central Bank Watch – Week Ahead Brings BOC, RBNZ, BOK and Fed Beige Book

In the past week The Reserve Bank of Australia left rates unchanged in line with consensus but with markets pricing a return to hiking later. FOMC Minutes for the June 13-14 meeting were released with no surprises. With US CPI and PPI out next week Chicago Fed President Goolsbee noted that services inflation is the main reason inflation overall has been more persistent. He added, “We can have 1-2 more rate hikes this year”. In the week ahead we get the Bank of Canada’s, RBNZ, Peru’s central bank and BoK policy decisions and the Fed’s Beige Book. We also have a slew of Fed Speakers and the BOE’s Bailey talking.

Central Bank Weekly Analysis and Outlook – Banker dynamics are complex. There are myriad facets to analyze and contemplate.

Central bank monetary policy decisions and market activity interest rate decisions can have a dominant effect on financial markets, fiscal policy and geopolitics. We keep an eye on key banker developments, what they mean and what is ahead.

In the Week Ahead

In the week ahead we get the Bank of Canada’s, RBNZ, Peru’s central bank and BoK policy decisions and the Fed’s Beige Book. We also get US CPI on Tuesday and PPI on Wednesday and the start of the US bank earnings season on Friday.

To say central bankers, have issues is an understatement. Already grappling with the quickest inflation in decades they now have these decisions to make, forcefully raise borrowing costs to defend currencies and risk hurting growth, spend reserves that took years to build to intervene in foreign exchange markets, or simply stand aside and let the market play out.

Central Bank Highlights This Past Week:

Most of the G10 central banks may complete their rate hike cycles around the middle of the year or earlier, the unwinding of central bank balance sheets may continue longer, depending on the damage done.

This week’s central bank main events included:

  • RBA Holds Rates at Ten Year High 4.10%, Signals Hiking Cycle Near End
  • Bank Negara Malaysia kept benchmark interest rates unchanged on Thursday, as expected, amid signs of moderating growth and easing inflation, with economists saying it will likely stay on hold for the rest of the year.
  • National Bank of Poland (NBP) left its main interest rate on hold at 6.75% as expected, but with policymakers signaling potential rate cuts in autumn. The NBP now sees inflation at 11.1-12.7% in 2023, 3.7-6.8% in 2024 and 2.1-5.1% in 2025. Its previous forecasts were, respectively, 10.2-13.5%, 3.9–7.5% and 2.0–5.0%.
  • The Bank of Japan announced that the frequency and size of its bond purchases will not change in Q3.
  • European Central Bank policymaker de Guindos repeated that the governing council is not yet done with rate hikes while President Lagarde said that there is more work to do in order to lower inflation.
  • Chicago Fed President Goolsbee says I feel like we’re on the golden path to ‘no recession and low inflation. Job market is outstanding. It’s getting back to a balanced, sustained level. I haven’t seen anything that says one or two more hikes this year is wrong. Services inflation is the main reason inflation overall has been more persistent

Eyes on the Bond Market

U.S. Treasuries in a volatile week saw the 5-yr note and shorter tenors reclaim some of their losses from Thursday after the stronger than expected ADP employment report was tempered by a much tamer BLS jobs report. However, the 10s and 30s added to this week’s losses. The 2-yr note recovered Thursday’s entire loss, continuing this week’s outperformance, which alleviated some pressure on the 2s10s spread, widening it by 17 bps to -89 bps. We get more volatility next week with the latest CPI report and Beige Book on the docket.

Treasury borrowings will now be playing catch up. Treasury Q1 issuance slowed to $124 billion to a record $26.956 TN. Outstanding Treasury debt surged $7.937 TN, or 41.7%, over the past 13 quarters. Since the end of 2007, Treasury debt has inflated $20.905 TN, or 345%. After ending 2007 at 41%, Treasury debt closed the quarter at 102% of GDP.

Yield Watch


  • 2-yr: UNCH at 4.88% (+13 bps for the week; +49 bps in June; +82 bps in Q2)
  • 3-yr: -2 bps to 4.49% (+16 bps for the week; +45 bps in June; +66 bps in Q2)
  • 5-yr: -1 bp to 4.13% (+13 bps for the week; +39 bps in June; +52 bps in Q2)
  • 10-yr: -4 bps to 3.82% (+8 bps for the week; +18 bps in June; +33 bps in Q2)
  • 30-yr: -6 bps to 3.86% (+4 bps for the week; UNCH in June; +17 bps in Q2)

Highlights – Federal Reserve

  • Federal Reserve Credit declined $48.9bn last week to $8.269 TN.
  • Fed Credit was down $598bn from the June 22nd, 2022, peak.
  • Over the past 199 weeks, Fed Credit expanded $4.542 TN, or 122%.
  • Fed Credit inflated $5.458 TN, or 194%, over the past 556 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt slipped $0.6bn last week to $3.442 TN.
  • “Custody holdings” were up $55.1bn, or 1.6%, y-o-y.

Fed 2023 Bank Stress Tests.

The Federal Reserve released the hypothetical scenarios for its annual bank stress tests before hand. This year, 23 banks will be tested against a severe global recession with heightened stress in both commercial and residential real estate markets, as well as in corporate debt markets. Last year the Fed found all 34 large banks tested remained well above their risk-based minimum capital requirements, and the Fed announced no restrictions relating to dividends and buybacks.

Busy Central Bank Week Ahead:

  • Bank of Canada with new forecasts in the July Monetary Policy Report and a full set of communications including a press conference held by Governor Macklem and Senior Deputy Governor Rogers. Expectations the BoC to hike by another 25bps, going to be another potentially close call. Markets have pushed toward 70% odds of a hike at this meeting. Sixteen out of twenty-four forecasts expect a hike including all six of the nation’s largest bank economics groups.
  • Reserve Bank of New Zealand is widely expected to hold its target rate unchanged at 5.5% on Tuesday evening (ET). The consensus of economists is unanimous in favouring a hold and markets are assigning a very low probability of a hike.
  • Bank of Korea widely expected to hold its 7-day repo rate unchanged at 3.5% for the fourth consecutive meeting on Thursday. Inflation has been trending lower in year-over-year terms, albeit that core CPI has been running at hotter than seasonally normal pace over the past three months in m/m term
  • Peru’s Central Bank is widely expected to hold its policy reference rate unchanged at 7.75% for a sixth consecutive meeting on Thursday evening (ET).

This Week’s Interest Rate Announcements (Time E.T.)

Tuesday, July 11, 2023

  • 22:00 RBNZ Interest Rate Decision

Wednesday, July 12, 2023

  • 10:00 Bank of Canada interest rate announcement
  • 21:00 Bank of Korea Interest Rate Decision

Thursday, July 13, 2023

  • 19:00 Peru Interest Rate Decision

This Week’s Central Bank Speeches, Meetings (Time E.T.)

Monday, July 10, 2023

  • 03:00 Swedish Central Bank minutes from the Executive Board’s monetary policy discussion will be published
  • 10:00 Fed Vice Chair for Supervision Barr in a discussion at Bipartisan Policy Center about bank supervision, regulation, and new capital requirements
  • 10.30 Federal Reserve Bank of San Francisco President Mary Daly participates in fireside chat hosted by the Brookings Institution Hutchins Center on Fiscal and Monetary Policy
  • 11.00 Federal Reserve Bank of Cleveland President Loretta Mester speaks virtually on the economic and policy outlook before the University of California, San Diego 2023 Economics Roundtable Lecture Series: “An Update from the Federal Reserve with Loretta Mester.”
  • 12:00 Federal Reserve Bank of Atlanta President Raphael Bostic participates in “National and Metro Atlanta Economies” armchair conversation before the Cobb Chamber of Commerce Marquee Monday event
  • 15:00 GMT Bank of England Governor Andrew Bailey gives a speech at the City of London’s annual Mansion House dinner

Tuesday, July 11, 2023

  • 09:00 Federal Reserve Bank of St. Louis President James Bullard participates virtually in moderated discussion on the U.S. economy and monetary policy before a National Association of Business Economics webinar
  • 22:00 RBNZ Interest Rate Decision
  • 22:00 RBNZ Rate Statement
  • 23:10 RBA Governor Lowe Speaks

Wednesday, July 12, 2023

  • 02:00 Bank of England publishes Financial Stability Report
  • 02:00 BoE FPC Meeting Minutes
  • 04:00 GBP BoE Gov Bailey Speaks
  • 08:30 Federal Reserve Bank of Richmond President Thomas Barkin speaks on inflation before the Anne Arundel County Chamber of Commerce
  • 09:45 Federal Reserve Bank of Minneapolis President Neel Kashkari participates in “Banking Solvency and Monetary Policy” panel before the National Bureau of Economic Research Summer Institute: Macro, Money and Financial Frictions.”
  • 10:00 Bank of Canada key policy interest rate announcement and Monetary Policy Report
  • 11:00 Bank of Canada Governor Tiff Macklem and Senior Deputy Governor Carolyn Rogers hold a press conference to discuss the contents of the Report
  • 13:00 Federal Reserve Bank of Atlanta President Raphael Bostic speaks on “Financial and Payments Inclusion” before the Federal Reserve Bank of Atlanta 2023 Payments Inclusion Forum: “Breaking Barriers” –
  • 14:00 Federal Reserve issues the Beige Book
  • 16:00 Federal Reserve Bank of Cleveland President Loretta Mester speaks on “FedNow” before a session on Instant Payment Systems before the National Bureau of Economic Research Summer Institute: Macro, Money and Financial Frictions,” in Cambridge
  • 21:00 Bank of Korea Interest Rate Decision

Thursday, July 13, 2023

  • 04:30 BOE Credit Conditions Survey
  • 11:00 Philippines’ economic managers including the central bank governor, ministers of finance, budget and economic planning hold Philippine Economic Briefing in Toronto
  • 16:30 Fed’s Balance Sheet
  • 16:30 Reserve Balances with Federal Reserve Banks
  • 19:00 Peru Interest Rate Decision

Friday, July 14, 2023

  • None Seen

Federal Reserve FOMC Schedule 2023

The Fed with a Strong US Dollar

The strong dollar is likely to negatively affect the US economic outlook and could alter the Federal Reserve terminal interest rate, economists surveyed by Bloomberg said. Just 28% saw the currency strength as unlikely to have any impact.

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