Central Bank Watch – Week Ahead Focus on Jackson Hole Speeches, PBOC and Turkey.

The week a head’s greatest risk is the speeches at Jackson Hole, this year’s theme is “Structural Shifts in the Global Economy”. Chair Powell kicks off the event with an economic outlook speech on Friday at 10:05amET. They will follow likely increases in China’s 1- and 5-year Loan Prime Rates following through on the PBOC’s 15bps decreased in the 1-Year Medium-Term Lending Facility Rate on August 14th from 2.65% to 2.50. Bank Indonesia, Iceland and Bank of Korea are expected to keep rates on hold. Turkey’s central bank is expected to deliver another large hike this week. We also have the annual BRIC’s summit of interest.

In the past week PBOC cut its one-year as China’s property woes deepen, RBA & FOMC minutes delivered no surprises. Bangko Sentral ng Pilipinas and RBNZ kept rates steady and Norges Bank hiked 25bps.

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 five central bank’s monetary policy meetings. PBOC’s 1- and 5-year Loan Prime Rates following through on the PBOC’s 15bps decreased in the 1-Year Medium-Term Lending Facility Rate on August 14th from 2.65% to 2.50. Bank Indonesia, Iceland and Bank of Korea are expected to keep rates on hold. Turkey’s central bank is expected to deliver another large hike this week.

The week a head’s greatest risk is the speeches at Jackson Hole, this year’s theme is “Structural Shifts in the Global Economy”. Chair Powell kicks off the event with an economic outlook speech on Friday at 10:05amET.

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 PBOC trimmed the interest rate on 401 billion yuan ($55.25 billion) worth of one-year medium-term lending facility (MLF) loans from 2.65% to 2.50. PBOC further cut interest rates on short-term overnight, seven-day and one-month standing lending facility by 10 basis points, respectively.
  • The Monetary Board of the Bangko Sentral ng Pilipinas (BSP), Philippines central bank held rates at 6.25%. Rates at their August meeting, the highest since the 7.50 percent logged in May 2007.
  • The Reserve Bank of New Zealand left its Official Cash Rate unchanged at 5.50%, as expected. Consensus almost unanimously expected no change. The bank’s committee members agreed the level of interest rates are constraining spending and inflation pressure.
  • Norway’s central bank, the Norges Bank’s Monetary Policy and Financial Stability Committee unanimously raised the policy benchmark interest rate by Norges Bank hiked 25bps to 4% and guided that another hike was likely in September during its August meeting.

Eyes on the Bond Market

Financial conditions tightened, “risk on” has begun the transition to “risk off,” with the system now vulnerable to an abrupt change in the liquidity backdrop. U.S. Treasuries closed out a turbulent a down week with a strong Friday rebound 2-yr notes reclaimed the bulk of this week’s loss as the long end continued its recent underperformance. Friday saw safe haven buying as there appears realization that China’s economy and its real estate sector in particular are of morose health.

This week the 2s10s spread expanded by six basis points to -66 bps. Crude oil surrendered broke a 7-week winning streak to settle $2.54, or 3.1% lower for the week. The U.S. Dollar Index on Friday closed at 103.40 closing just above its 200-day moving average (103.23), gaining 0.5% for the week.

Yield Watch

Friday/Week

  • 2-yr: -5 bps to 4.91% (+2 bps for the week)
  • 3-yr: -4 bps to 4.64% (+8 bps for the week)
  • 5-yr: -6 bps to 4.38% (+7 bps for the week)
  • 10-yr: -6 bps to 4.25% (+8 bps for the week)
  • 30-yr: -3 bps to 4.38% (+11 bps for the week)

Highlights – Federal Reserve

  • Federal Reserve Credit declined $17.7bn last week to $8.154 TN.
  • Fed Credit was down $747bn from the June 22nd, 2022, peak.
  • Over the past 205 weeks, Fed Credit expanded $4.427 TN, or 119%.
  • Fed Credit inflated $5.343 TN, or 190%, over the past 562 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt declined $4.8bn last week to $3.449 TN.
  • “Custody holdings” were up $68bn, or 2.0%, y-o-y.

Fed 2023 Bank Stress Tests.

Busy Central Bank Week Ahead:


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

Sunday, August 20, 2023

  • 21:15 PBoC Loan Prime Rate 5Y
  • 21:15 PBoC Loan Prime Rate

Monday, August 21, 2023

  • none seen

Tuesday, August 22, 2023

  • none seen

Wednesday, August 23, 2023

  • 04:30 Iceland Deposit Rate
  • 21:00 Bank of Korea Interest Rate Decision

Thursday, August 24, 2023

  • 03:30 Bank Indonesia Interest Rate Decision
  • 07:00 Turkey Interest Rate Decision

Friday, August 25, 2023

  • none seen

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

Monday, August 21, 2023

  • 06:00 German Buba Monthly Report

Tuesday, August 22, 2023

  • 04:15 BRICS Summit
  • 07:30 FOMC Member Barkin Speaks
  • 14:30 Fed Goolsbee Speaks
  • 14:30 FOMC Member Bowman Speaks

Wednesday, August 16, 2023

  • 04:15 BRICS Summit
  • 04:30 Iceland Deposit Rate
  • 21:00 Bank of Korea Interest Rate Decision

Thursday, August 17, 2023

  • 03:30 Bank Indonesia Interest Rate Decision
  • 04:15 BRICS Summit
  • 07:00 Turkey Interest Rate Decision
  • 07:30 RBI MPC Meeting Minutes
  • 08:00 Jackson Hole Symposium
  • 16:30 Fed’s Balance Sheet 8,146B
  • 16:30 Reserve Balances with Federal Reserve Banks

Friday, August 18, 2023

  • 05:00 German Buba Balz Speaks
  • 07:00 ECB President Lagarde Speaks
  • 08:00 Jackson Hole Symposium
  • 10:05 Fed Chair Powell Speaks
  • 15:00 ECB President Lagarde Speaks

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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Sources: TC WSJ Bloomberg Scotia Bank

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