In the past week the SARB kept its rate at 8.25% as expected, The Central Bank of Turkey hiked less than expected 250 bps to 17.5 percent and the Bank of Russia hiked rates by a more-than-expected 100 bps to 8.5%. Ahead we have a potentially market shifting week with the Fed’s interest rate decision along with the European Central Bank (ECB) and the Bank of Japan (BoJ). A Bloomberg report indicates BOJ officials don’t see much of an urgent need at this point to address the side effects of the yield curve control program. We also have monetary policy decisions from Indonesia, Hong Kong and Chile.
There is a lot of data for central banks to chew over, inflation rates for Germany, France, Spain, and Australia. Additionally, Q2 GDP growth rates for South Korea, France, and Spain and the release of flash PMI readings for Australia, Japan, France, Germany, the UK, and the Euro Area, along with the Ifo business climate report for Germany.
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 have three of the major central banks on deck. The market has a FOMC meeting on Wednesday, the ECB meeting on Thursday, and the BOJ meeting on Friday. We also have monetary policy decisions from Indonesia, Hong Kong and Chile.
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:
- The Central Bank of Turkey hiked by 250 bps to 17.5 percent at its June 2023 meeting. It followed 650bps to 15% at its June 2023 meeting, the consensus guess was 20%.
- The South African Reserve Bank (SARB) kept its benchmark repo interest rate at 8.25% at its July 2023 meeting as markets had expected.
- Bank of Russia hiked rates by a more-than-expected 100 basis points to 8.5% with rising inflationary pressures, and weak Rouble.
Eyes on the Bond Market
U.S. Treasuries corrected some of last week’s rally except with the long bond that actually gained 2 basis points on the week. Weakness was in the short end with the 2-year losing 13 bps for the week. The market is poised fora heavy weak of central bank meetings and data. The market has a FOMC meeting on Wednesday, the ECB meeting on Thursday, and the BOJ meeting on Friday. There is a lot of data for central banks to chew over. Due out is US GDP, June’s personal outlays and income, PCE price index, flash S&P Global PMI surveys, Case-Shiller home prices, second-quarter employment cost index, new and pending home sales, and consumer confidence updates.
Yield Watch
Friday/Week/Month/Quarter
- 2-yr: +1 bp to 4.85% (+13 bps for the week)
- 3-yr: +2 bps to 4.45% (+9 bps for the week)
- 5-yr: unch at 4.10% (+7 bps for the week)
- 10-yr: unch at 3.85% (+3 bps for the week)
- 30-yr: unch at 3.91% (-2 bps for the week)
Highlights – Federal Reserve
- Federal Reserve Credit declined $10.7bn last week to $8.250 TN.
- Fed Credit was down $617bn from the June 22nd, 2022, peak.
- Over the past 201 weeks, Fed Credit expanded $4.523 TN, or 121%.
- Fed Credit inflated $5.438 TN, or 193%, over the past 558 weeks.
- Fed holdings for foreign owners of Treasury, Agency Debt declined $5.5bn last week to $3.431 TN.
- “Custody holdings” were up $79bn, or 2.4%, y-o-y.
- The fed funds futures market is pricing in a 99.8% probability of a 25-basis points rate hike. The questions revolve around what Fed Chair Powell signals about additional rate hikes after the July meeting.
- Fed funds futures are pricing the July rate hike as the last in the tightening cycle. There is only a 16% probability of a second-rate hike at the September meeting, a 30.7% probability of a second-rate hike at the November meeting, and a 27.3% probability of a second-rate hike at the December meeting, according to the CME FedWatch Tool.
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:
This Week’s Interest Rate Announcements (Time E.T.)
Sunday, July 23, 2023
- 21:15 PBoC 1-year Medium-Term Lending Facility
Tuesday, July 25, 2023
- 03:00 Bank Indonesia Interest Rate Decision
Wednesday, July 26, 2023
- 14:00 FOMC Interest Rate Decision
- 21:15 PBoC Loan Prime Rate
- 22:30 HKMA Interest Rate Decision
Thursday, July 27, 2023
- 08:15 ECB Interest Rate Decision
- 23:00 BoJ Interest Rate Decision
Friday, July 28, 2023
- 17:00 Chile Interest Rate Decision
This Week’s Central Bank Speeches, Meetings (Time E.T.)
Monday, July 24, 2023
- None Seen
Tuesday, July 25, 2023
- 03:00 Bank Indonesia Interest Rate Decision
- 04:00 ECB Bank Lending Survey
Wednesday, July 26, 2023
- 13:30 BOC Summary of Deliberations
- 14:00 FOMC Interest Rate Decision
- 14:30 FOMC Press Conference
- 22:30 HKMA Interest Rate Decision
Thursday, July 27, 2023
- 08:15 ECB Interest Rate Decision
- 08:45 ECB Press Conference
- 16:30 Fed’s Balance Sheet
- 16:30 Reserve Balances with Federal Reserve Banks
- 23:00 BoJ Interest Rate Decision
Friday, July 28, 2023
- 02:00 BoJ Press Conference
- 17:00 Chile Interest Rate Decision
Federal Reserve FOMC Schedule 2023
- January 31-February 1, 2023 (second day: statement released 1400 EST/1900 GMT; news conference expected 1430 EST/1930 GMT)
- March 21-22 (second day: statement released 1400 EDT/1800 GMT; news conference expected 1430 EDT/1830 GMT)
- May 2-3 (second day: statement released 1400 EDT/1800 GMT; news conference expected 1430 EDT/1830 GMT)
- June 13-14 (second day: statement released 1400 EDT/1800 GMT; news conference expected 1430 EDT/1830 GMT)
- July 25-26 (second day: statement released 1400 EDT/1800 GMT; news conference expected 1430 EDT/1830 GMT)
- September 19-20 (second day: statement released 1400 EDT/1800 GMT; news conference expected 1430 EDT/1830 GMT)
- October 31-November 1 (second day: statement released 1400 EDT/1800 GMT; news conference expected 1430 EDT/1830 GMT)
- December 12-13 (second day: statement released 1400 EST/1900 GMT; news conference expected 1430 EST/1930 GMT)
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.
Latest Key Central Bank Decisions, Reports Archive
2023
- Bank of Korea Keeps Rates Unchanged at 3.50%, Too Early on Stable Won Level
- Bank of Canada Raises Rates by 25bps to 5.00%, Persistent Price Pressures Remain
- Reserve Bank of New Zealand Leaves Rates Unchanged 5.50%, Inflation Remains Too High
- RBA Holds Rates at Ten Year High 4.10%, Signals Hiking Cycle Near End
- Sweden’s Riksbank Raise Rates by 25 bps, Krona Falls to New Record Low Against Euro
- Banco de México Leaves Rates Unchanged at Record High 11.25%, Inflation Risks to Upside
- Central Bank of Turkey Raises Rates First Time in Two Years, By 650 bps to 15.0%, Lira Collapses
- Bank of England Raises Interest Rates to 15-year High 5.00%, Risk of British Recession Increases
- Norway’s Norges Bank Raised Rates by 50 bps to 3.75%, Supports Krone, Fights Inflation
- Philippines Central Bank Held Rates at 6.25%, Highest Since May 2007 as Inflation ModeratesTRADERS COMMUNITY
- Bank Indonesia Keeps Rates Unchanged at Highest Level Since 2009 With Weaker Rupiah
- Swiss National Bank Raised Policy Rate by 25 bps to 1.75%, Will Remain Active in FX Market
- Brazil Central Bank Left Rates Steady at 13.75%, Delete Reference to Possibly Resuming Hiking
- Bank of Japan Keeps Monetary Policy Steady, No Change to JGB Yield Band as Expected
- ECB Tightens Screws, Raises Rates Another 25bps Despite Europe Being in a Recession
- Hong Kong’s Monetary Authority Kept Interest Rates in Lockstep With Fed, Hibor Continues to Rise
- Federal Reserve Leave Rates Unchanged as Expected. See 5.6% Fed Fund Rate at Year End
- Reserve Bank of India Kept its Key Repo Rate at 6.50% as Expected
- Bank of Canada Raises Rates After Five Month Pause by 25bps to 4.75%
- RBA Suprises Again Raising Rates to Ten Year High 4.10%, Australian Dollar Higher
- South Africa Raises Interest Rates 50bps, Rand Falls to All Time Low
- Ahead of Election Runoff Turkey Central Bank Leaves Rates at 8.5% as Lira Hits New Lows
- Reserve Bank of New Zealand Raise Rates by 25bp to 5.50%, Kiwi Sells Off on Peak Rate
- Bank of England Raises Interest Rates 25bps to 4.50%, Inflation Remains Too High
- Federal Reserve Financial Stability Report, Follows Three of the Four Largest Failures in U.S. History
- ECB Raises Rates Another 25bps, Highest Level Since July 2008
- Norway Hikes Interest Rate to 3.25 percent, Concerns About Weak Krone
- Hong Kong’s Monetary Authority Raised Interest Rates 25bps Despite Banking Liquidity at 2008 Lows
- Brazil Central Bank Left Rates Steady for Sixth Month at 13.75%, Less Likely to Resume Hikes
- Federal Reserve Raises Rates 25bps as Expected, Removes Additional Firming May be Appropriate
- Bank Negara Malaysia Surprises by Raising Interest Rates 25 bps to 3%
- Deja Vu as Dollar Yen Soars After Bank of Japan Keeps Monetary Policy Steady, No Change to JGB Yield Band
- Sweden’s Riksbank Raise Rates by 50 bps, However Dovish Tilt Weakens Krona
- An RBA Fit for The Future, 51 Revolutionary Recommendations for Australia’s Central Bank
- Bank Indonesia Keeps Rates Unchanged at Highest Level Since 2009 With Rupiah Stable
- Bank of Canada Holds Rates at 4.50% as Expected, Sees Inflation at 2% End of 2024
- Bank of Korea Keeps Rates Unchanged at 3.50%, Higher Rate Remains Possible
- Reserve Bank of India Surprised Keeping its Key Repo Rate at 6.50%
- Reserve Bank of New Zealand Unexpectantly Raise Rates by 50bp to 5.25% to Highest Since December 2008
- RBA Keeps Rates Steady at Ten Year High 3.6%, Monetary Policy Operates with a Lag
- ECB Raises Rates Another 50bps, Banking Sector Resilient
- Federal Reserve Beige Book Highlights Supply Chain Disruptions Continued to Ease
- Bank of Canada Holds Rates at 4.50% as Expected, USDCAD at Four Month High
- RBA Raises Rates to Ten Year High 3.6%, Less Hawkish Statement
- Reserve Bank of New Zealand Raise Rates by 50bp to 4.75% to Highest Since January 2009
- Banco de México Raises Rates by 50 bps to Record High 11.00%, Reacts to Higher Inflation
- Federal Reserve Hypotheticals For 2023 Bank Stress Tests have Unemployment at 10%
- Sweden’s Riksbank Raise Rates by 50 bps, Moves to Strengthen Krona
- Reserve Bank of India Hike Rates Sixth Time in a Row to 6.50%
- RBA Raises Rates to Ten Year High 3.35%, says Further Hikes Ahead
- ECB Raises Rates Another 50bps, Lagarde Says Another 50bps in March
- Bank of England Raises Interest Rates 50bps to 4.0%, Projects Inflation Likely Peaked
- Hong Kong’s Monetary Authority Raised Interest Rates 25bps Lockstep with US Federal Reserve
- Brazil Central Bank Left Rates Steady for Fourth Month at 13.75%, Cautious Due to Fiscal Risk
- Federal Reserve Raises Rates 25bps as Expected, Disinflationary Process has Started
- Bank of Canada Hikes Rates 25 bps to Highest Level Since 2008, Signals Holding Pattern
- Norway Holds Interest Rate at 2.75 percent, Signaled More Hikes Ahead
- Turkey Central Bank Left Interest Rates Unchanged at 9% As Lira Hits New Lows
- Bank Negara Malaysia Leaves Interest Rates Unchanged to Assess Previous Hikes Impact
- Bank Indonesia Raised Rates Another 25 basis points to Highest Level Since 2009
- Federal Reserve Beige Book Highlights Housing Markets Continued to Weaken
- Dollar Yen Soars After Bank of Japan Keeps Monetary Policy Steady, No Change to JGB Yield Band
- Bank of Korea Raises Rates To 3.50%, Highest level Since August 2008
2022
- Turkey Central Bank Cuts Left Interest Rates Unchanged at 9%, Bond Yield Hits Six Year Low
- Bank Indonesia Raised Rates by 25 basis points to Highest Level Since 2009
- Yen Soars After Bank of Japan Mini Pivot Widens Yield Curve Control Band
- Banco de México Raises Rates by 50 bps to Record High 10.50%, Hints at More Hikes
- ECB Raises Rates Another 50 bps as Expected, Forecasts Higher Inflation
- Bank of England Raises Interest Rates 50bps to 3.5%, Projects Inflation Likely Peaked
- Taiwan Raised Interest Rate by 1.75 percent, Highest Since 2015
- Norway Raised Interest Rate by 25 bps to 2.75 percent, Highest Since 2009
- Swiss National Bank Raises Policy Rate by 50 bps to 1.00%, as expected
- Philippines Central Bank Raised Rates by 50 basis points to 5.50% with Inflation at 14 Year Highs
- Hong Kong’s Monetary Authority Raised Interest Rates in Lockstep with US Federal Reserve
- Federal Reserve Raises Rates 50bps as Expected, Hawkish Revisions to Unemployment and Inflation
- Bank of Canada Hikes Rates 50 bps to Highest Level Since 2008
- Reserve Bank of India Hike Rates Fifth Time in a Row to 6.25%
- RBA Raises Rates to Ten Year High 3.10%, says Inflation in Australia Too High
- Federal Reserve Beige Book Highlights Higher Interest Rates Further Dented Home Sales
- NY Fed Williams Expects US Jobless Rate to Rise from 3.7% to 4.5-5.0%
- Turkey Central Bank Cuts Interest Rates Another 150bp Ending Easing Cycle
- Sweden’s Riksbank Raise Rates by 75 bps to the Highest Level Since December 2008
- South Africa Raises Interest Rates 75bps to Tame Inflation
- Bank of Korea Raises Rates To 3.25%, Highest level Since June 2012
- Reserve Bank of New Zealand Raise Rates by 75bp to 4.25% to Highest Since January 2009
- Appreciation of Swiss Franc Guards Against Inflation says SNBs Jordan
- Fed Vice Chair Brainard says Slower Pace of Rate Increases Probably Soon
- Bank of England Raises Interest Rates 75bps to 3% in Biggest Rise in 30 Years
- Norway Raised Interest Rate by 25bps, Norwegian Crown Fell Against Euro
- Markets Reverse Sharply on Feds Powell Statements, What Does it all Mean?
- Federal Reserve Again Raises Rates 75bps as Expected, Hints at Possibly Smaller Hikes
- Japan Spent ¥6.35 trillion in October on Intervention to Support the Yen
- ECB Raises Rates Another 75 bps as Expected TLTRO Terms and Conditions Recalibrated
- Bank Indonesia Raised Rates by Another 50 basis points to 4.75% to Tame Inflation
- Federal Reserve Beige Book Highlights Employment Strength as Price Increases Generally Moderate
- RBA says Financial Stability Risks Have Increased Globally
- Banco de México Raised Rates for 11th Straight Time to Record 9.25%
- Cable Pounded Again After Indecisive Bank of England Statement
- Japan Intervened to Support Yen for First Time Since 1998 After BOJ Decision
- Swiss National Bank Raises Policy Rate by 75 bps to 0.50%, Swiss Franc Falls sharply
- Philippines Central Bank Raised Rates by 50 basis points to 4.25%, Moves to Support Peso
- Bank of Japan Monetary Policy Unchanged Sending Yen to a Fresh 24-Year Low
- Brazil Central Bank Pauses Rates at 13.75%, after Inflation Eased Below 10%
- Federal Reserve Gives All Banks a Pass in Annual Bank Stress Test
For a Complete Macro and Micro Market Overview Visit Our Traders Market Weekly
Sources: TC WSJ Bloomberg Scotia Bank
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