Central Bank Watch – Week Ahead Focus on FOMC, BOE, SNB, BOJ and PBOC

In the past week we had the ECB, PBOC and Peru central banks all acted as expected. In the week ahead we get a tidal wave of central banks meeting. The People’s Bank of China as already said lowered the foreign exchange reserve requirement ratio to 4.00% from 6.00%, effective September 15. The PBOC also confirmed speculation about rate cuts on some existing mortgages, effective September 25. There will be fifteen Central Bank decisions in the week ahead. Fed’s FOMC, Bank of England, Bank of Japan, PBOC, Norges Bank, Riksbank, Swiss National Bank, Banco Central do Brasil, Central Bank of China Taiwan, Hong Kong, Bangko Sentral ng Pilipinas, Bank Indonesia, Turkey’s Central Bank and South African Reserve Bank. Further to that a slew of global macro readings. Brace yourself.

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 15 central bank’s monetary policy meetings.

• PBOC, Banks Likely to Hold after no change in the PBOC’s 1-year Medium-Term Lending Facility Rate it’s probably unlikely that Chinese banks will alter their 1- and 5-year Loan Prime Rates on Tuesday.
• BoC’s Summary of Deliberations on Wednesday in the customary two-week lag to the decision itself. Watch for the balance of discussion around appetite for delivering another hike at this meeting. When asked if there was such a discussion during his September 7th press conference, Governor Macklem’s answer was to wait for the Summary of Deliberations.
• Federal Reserve on Wednesday, the FOMC policy decision at 2pmET accompanied by a statement and full forecast update in the Summary of Economic Projections including a new ‘dot plot.’ Chair Powell will follow with his press conference thirty minutes later. No one really expects a change in the policy rate or balance sheet guidance at this meeting. Instead, it will focus upon tweaks to forward guidance on the policy rate, updated macroeconomic projections and guidance that Powell provides. This one is likely to be about buying time.
• Hong Kong Monetary Authority, the HKMA moves lock step with the Fed, so no change is the call here.
• Banco Central do Brasil with another significant rate cut is expected on Wednesday. The reason for the remarkable unanimity around the calls from various shops is because the guidance that was offered at the August 2nd decision when the Selic rate was cut by 50bps said “the members of the Committee, unanimously, foresee a reduction of the same magnitude in the next meetings and assess that this is the appropriate pace to maintain the contractionary monetary policy necessary for the disinflationary process.”
• Bank Indonesia, no change is expected to the 7-day reverse repo rate on Thursday. The rate has been stuck at 5.75% since the start of this year and BI believes that inflation will remain under control within the target range.
• Bangko Sentral ng Pilipinas, no change is expected to be applied to the 6.25% overnight borrowing rate on Thursday, but a minority think there could be a resumption of the tightening cycle. Inflation recently surprised higher by jumping to 5.3% y/y (4.7% prior).
• Central Bank of China Taiwan, Thursday’s decision is unanimously expected to leave the benchmark rate unchanged at 1.875%.
• Swiss National Bank Thursday’s decision is expected to deliver a 25bps hike. Guidance at the prior meeting in June emphasized that “it cannot be ruled out that additional rises in the SNB policy rate will be necessary to ensure price stability over the medium term.”
• Riksbank, Sweden’s central bank is widely expected to hike its policy rate by another 25bps to 4% on Thursday. That would bring it in line with prior guidance on the terminal rate. This might be the end of the tightening cycle, or very close to it. Underlying inflation ex-energy has pulled off to 7.2% y/y from a peak of 9.3% earlier this year.
• Norges Bank, Thursday’s decision is widely expected to deliver another 25bps increase in the deposit rate because they said so in September when they last hiked! Recall the guidance that the deposit rate “will most likely be raised further in September.” Governor Ida Wolden Bache reinforced this by saying that “If the economy evolves as currently anticipated, the policy rate will be raised further in September.”
• The Bank of England widely expected to hike Bank Rate another 25bps on Thursday. Consensus is nearly unanimous. Markets are mostly priced for it. A recent Reuters article put it well by saying “Now comes the challenge: how to pause monetary tightening without unleashing market exuberance about future rate cuts that would loosen financial conditions and revive price pressures.”
• SARB, South African Reserve Bank is expected to hold its repo rate at 8.25% on Thursday. They introduced a pause at the July meeting following ten straight increases. A wildcard may be the release of August inflation figures the day before the decision.
• Turkey’s Central Bank, is expected to hike its one-week repo rate again on Thursday. By how much, who knows, but the median guess is for a five percentage point hike to 30%. The focus remains upon attempting to repair credibility, restore price stability and stabilize the Lira. Even after the 7.5 percentage point hike on August 24^th, the lira still depreciated by a cumulative amount of over 4% since then.
• Bank of Japan is expected not to alter either its -0.1% target rate or its 10-year JGB yield target range of 0% +/-50bps with latitude toward tolerating a peak of 1% on Friday. There will be no further forecast updates after delivering them in July and with the next ones due in October. This should be a maintenance statement with no changes.

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:

• ECB raised key rates by 25 bps in its September monetary policy decision to 4.50%, taking the closely watched deposit facility rate to 4.00%, in line with markets thoughts.

• The board of Peru’s Central Bank (BCRP) provided a key signal by deciding to cut its reference interest rate this Thursday by 25bps, to 7.50%. The interest rate cutting cycle has begun. The BCRP expressed concern by noting that the transitory effects on inflation have begun to dissipate in only some foods since June, and a general reversal has not been observed.

• Hawkish BOE Mann: – I would rather err on the side of over-tightening – If I am wrong and inflation & economy drop more significantly, I wouldn’t hesitate to cut rates – The idea that 3% inflation is ‘close enough’ can’t be the BOE’s guide – It’s a risky bet that inflation expectations are sufficiently well-anchored and we can wait for core inflation to ease – We need to prepare for a world where inflation is more likely to be volatile

Eyes on the Bond Market

Ahead of a tidal wave of global central bank monetary policy decisions over the coming week U.S. Treasuries closed the week on a modestly lower note as yields drifted higher for the week. The 2-yr note yield rose seven basis points this week to 5.04%. The 10-yr note yield rose seven basis points this week to 4.33%. it was a busy week for bonds with this week’s CPI and PPI inflation data which was supportive of stocks. August core consumer price inflation was up 4.3% year-over-year, versus 4.7% in July, which is what the Fed monitors more closely, showed ongoing improvement on a year-over-year basis; however, it is still well above the Fed’s 2.0% target, which will certainly keep the Fed in a “higher for longer” mindset.

Yield Watch

Friday/Week

• 2-yr: +3 bps to 5.04% (+7 bps for the week)
• 3-yr: +2 bps to 4.70% (+1 bp for the week)
• 5-yr: +3 bps to 4.45% (+5 bps for the week)
• 10-yr: +4 bps to 4.33% (+7 bps for the week)
• 30-yr: +2 bps to 4.41% (+8 bps for the week)

Highlights – Federal Reserve

• Federal Reserve Credit slipped $3.1bn last week to $8.062 TN.
• Fed Credit was down $839bn from the June 22nd, 2022, peak.
• Over the past 209 weeks, Fed Credit expanded $4.336 TN, or 116%.
• Fed Credit inflated $5.251 TN, or 187%, over the past 566 weeks.
• Fed holdings for foreign owners of Treasury, Agency Debt increased $4.1bn last week to $3.435 TN.
• “Custody holdings” were up $58bn, or 1.7%, y-o-y.

Fed 2023 Bank Stress Tests.

Busy Central Bank Week Ahead:

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

Monday, September 18, 2023

• None Seen

Tuesday, September 19, 2023

• 21:15 PBOC China Loan Prime Rate

Wednesday, September 20, 2023

• 14:00 Fed Interest Rate Decision
• 17:00 Banco Central do Brasil Interest Rate Decision
• 22:30 HKMA Interest Rate Decision

Thursday, September 21, 2023

• 03:00 Bangko Sentral ng Pilipinas Interest Rate Decision
• 03:30 Riksbank Interest Rate Decision
• 03:30 Swiss National Bank Interest Rate Decision
• 03:30 Bank Indonesia Interest Rate Decision
• 04:00 Central Bank of China Taiwan Interest Rate Decision
• 04:00 Norges Bank Interest Rate Decision
• 07:00 BoE Interest Rate Decision
• 07:00 Turkey Central Bank Interest Rate Decision
• 23:00 BoJ Interest Rate Decision

Friday, September 22, 2023

• None Seen

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

Monday, September 18, 2023

• 05:00 ECB’s De Guindos Speaks
• 06:00 German Buba Monthly Report
• 08:30 ECB’s Elderson Speaks
• 11:00 ECB’s Panetta Speaks
• 17:00 German Buba Mauderer Speaks
• 21:30 RBA Meeting Minutes

Tuesday, September 19, 2023

• 08:00 German Buba Wuermeling Speaks
• 08:20 German Buba Wuermeling Speaks
• 13:45 BoC Deputy Gov Kozicki Speaks
• 21:15 PBOC China Loan Prime Rate

Wednesday, September 20, 2023

• 03:00 ECB’s Panetta Speaks
• 03:30 ECB’s Enria Speaks
• 05:00 ECB’s Schnabel Speaks
• 05:50 ECB’s Supervisory Board Member Jochnick Speaks
• 08:00 ECB McCaul Speaks
• 08:30 ECB’s Elderson Speaks
• 13:30 BOC Summary of Deliberations
• 14:00 FOMC Economic Projections
• 14:00 Fed Interest Rate Decision
• 14:00 German Buba Mauderer Speaks
• 14:00 German Buba Mauderer Speaks
• 14:30 FOMC Press Conference
• 17:00 Banco Central do Brasil Interest Rate Decision
• 18:45 ECB’s Lane Speaks
• 21:30 RBA Bulletin
• 22:30 HKMA Interest Rate Decision

Thursday, September 21, 2023

• 03:00 Bangko Sentral ng Pilipinas Interest Rate Decision
• 03:30 Riksbank Interest Rate Decision
• 03:30 Swiss National Bank Interest Rate Decision
• 03:30 Bank Indonesia Interest Rate Decision
• 04:00 SNB Press Conference
• 04:00 German Buba President Nagel Speaks
• 04:00 Central Bank of China Taiwan Interest Rate Decision
• 04:00 Norges Bank Interest Rate Decision
• 07:00 BoE Interest Rate Decision
• 07:00 Turkey Central Bank Interest Rate Decision
• 07:30 BOE Inflation Letter
• 09:00 South African Reserve Bank Interest Rate Decision
• 10:00 ECB President Lagarde Speaks
• 10:40 ECB’s Schnabel Speaks
• 16:30 Fed’s Balance Sheet
• 16:30 Reserve Balances with Federal Reserve Banks
• 23:00 BoJ Interest Rate Decision

Friday, September 22, 2023

• 02:30 BoJ Press Conference
• 08:50 Fed Governor Cook Speaks

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

• ECB Raises Rates Another 25bps, Seen as a Dovish Final Hike
• Federal Reserve Beige Book Highlights Consumers Exhausted Savings, Job Growth Subdued
• Bank of Canada Holds Rates at 5.00% as expected, Warns CPI Higher with Gasoline Prices
• RBA Holds Rates at Ten Year High 4.10%, For Third Straight Meeting
• Fed’s Powell at Jackson Hole; Inflation: Progress and the Path Ahead, the Market Response
• Norway’s Norges Bank Raised Rates 25bps to 4% and Guided Another Hike Likely in September
• Philippines Central Bank Held Rates at 6.25% with Stable Peso and Downward Inflation Trend
• Russia’s Currency Slide Accelerates, Is the Ruble the New Turkish Lira?
• Bank of England Raises Interest Rates to 15-year High 5.25%, Monetary Policy Restrictive
• RBA Holds Rates at Ten Year High 4.10%, For Second Straight Meeting
• Bank of Japan No Change to Monetary Policy, JGB Yield Band Hard Celling to 1.00%
• ECB Raises Rates Another 25bps, Hints May be End of Rate Hikes
• Hong Kong’s Monetary Authority Raises Interest Rates in Lockstep with Fed to 16 Year High
• Federal Reserve Raise Rates to 22-Year High 5.25-5.50% Range as Expected
• 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 Moderates
• 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

Trade Smart

From The TradersCommunity Research Desk