In the past week we had the 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. The end result was the higher for longer tone sent bonds and stock markets lower.
With the big dogs out of the way we get a chat from Fed’s Powell and decisions this week from central banks in Hungary, Mexico, Colombia and Thailand. Focus will be on Friday’s release of U.S. consumer spending, incomes and saving rates which includes Fed favorite core PCE inflation, also we get Eurozone inflation with September’s CPI rate.
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 4 central bank’s monetary policy meetings.
- Hungary’s central bank latest communication left no doubt the effective rate will be lowered to 13% on Tuesday. They bank made it clear at its August rate-setting meeting and in the following communication
- The Bank of Thailand may hike its policy rate by 25bps to 2.5% on Wednesday. That would extend the tightening cycle that began about a year ago and that has taken the policy rate up by about 175bps so far.
- Banxico is expected to leave its overnight rate unchanged at 11.25% again on Thursday. GDP growth has been running at a solid pace for seven consecutive quarters averaging at about 1% q/q SA nonannualized and with only modest variations from quarter to quarter.
- Colombia’s central bank is expected to hold its overnight rate unchanged at 13.25% on Friday. That would extend a pause dating back to April after a protracted hiking campaign that began in October 2021.
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 Bank of Japan as widely expected kept unchanged its -0.1% target for short-term interest rates, and 0% for the 10-year government bond yield unanimously.
- The Bank of England MPC at its September meeting Thursday keeping the key bank rate at 5.25% which was unexpected by many despite recent lower inflation in the UK.
- The Central Bank of Turkey hiked by 500bps to 30% at its September meeting. It has been raised by 22.5% since May. The lira was weaker in response and has been selling off throughout the hiking campaign.
- The Swiss National Bank kept its policy rate at 1.75% in its September meeting, it came as a surprise to the markets who had expected on more raise.
- 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 4.25% and guided that another hike was likely in December
- Sweden’s Central Bank, Riksbank on Thursday Sweden’s Riksbank hiked 25bps to 4% as expected, it also announced it was selling a quarter of reserves and guided the possibility of one more hike.
- Taiwan’s central bank, Central Bank of the Republic of China (Taiwan) unanimously held the policy benchmark discount rate at 1.875% during its September 2023 meeting.
- The Federal Reserve kept rates unchanged in a target range of 5.25-5.50% in unanimous vote at their September FOMC and updated economic projections.
Eyes on the Bond Market
A busy week for bond traders after a tidal wave of global central bank monetary policy decisions headlined by the Fed’s FOMC, Bank of England, Norges Bank, and the Swiss National Bank together with a slew of global macro readings. U.S. Treasuries ended Friday with gains across the curve, reclaiming some of their losses after the FOMC reinforced the higher for longer mantra. 10-year Treasury bonds hit 4.48%, a new 15 year high intraweek. 30-Year conventional mortgage at 7.49% a new 23 year high intraweek. Credit spread 1.72%, down -.04% w/w (1.72-2.42) (new 1 year low).
Yield Watch
Friday/Week
- 2-yr: -2 bps to 5.12% (+8 bps for the week)
- 3-yr: -3 bps to 4.83% (+13 bps for the week)
- 5-yr: -5 bps to 4.57% (+12 bps for the week)
- 10-yr: -4 bps to 4.44% (+12 bps for the week)
- 30-yr: -3 bps to 4.52% (+11 bps for the week)
Highlights – Federal Reserve
- Federal Reserve Credit dropped $59.2bn last week to $8.003 TN.
- Fed Credit was down $898bn from the June 22nd, 2022, peak.
- Over the past 210 weeks, Fed Credit expanded $4.276 TN, or 115%.
- Fed Credit inflated $5.192 TN, or 185%, over the past 567 weeks.
- Fed holdings for foreign owners of Treasury, Agency Debt declined $0.45bn last week to $3.434 TN.
- “Custody holdings” were up $49.6bn, or 1.5%, y-o-y.
Fed 2023 Bank Stress Tests.
Busy Central Bank Week Ahead:
This Week’s Interest Rate Announcements (Time E.T.)
Monday, September 25, 2023
- None Seen
Tuesday, September 26, 2023
- 08:00 Hungary Interest Rate Decision
Wednesday, September 27, 2023
- 03:00 Thailand Interest Rate Decision
Thursday, September 28, 2023
- 15:00 Mexico Interest Rate Decision
Friday, September 29, 2023
- 14:00 Columbia Interest Rate Decision
This Week’s Central Bank Speeches, Meetings (Time E.T.)
Monday, September 25, 2023
- 00:00 RBA Assistant Governor Jones Speaks
- 09:00 ECB President Lagarde Speaks
- 09:00 ECB’s Schnabel Speaks
- 18:00 FOMC Member Kashkari Speaks
- 21:00 BOK Financial Stability Board Meeting Minutes
Tuesday, September 26, 2023
- 07:00 BCB Copom Meeting Minutes
- 08:00 Hungary Interest Rate Decision
- 08:55 German Buba Wuermeling Speaks
- 13:00 German Buba Wuermeling Speaks
- 13:30 FOMC Member Bowman Speaks
Wednesday, September 27, 2023
- 03:00 Thailand Interest Rate Decision
- 08:00 ECB’s Enria Speaks
- 09:00 SNB Quarterly Bulletin
- 12:45 SNB Chairman Thomas Jordan speaks
Thursday, September 28, 2023
- 03:00 ECB’s Enria Speaks
- 03:45 ECB McCaul Speaks
- 04:00 ECB Economic Bulletin
- 04:00 SARB Quarterly Bulletin
- 08:00 BCB Inflation Report
- 15:00 Mexico Interest Rate Decision
- 16:00 Fed Chair Powell Speaks
- 16:30 Fed’s Balance Sheet
- 16:30 Reserve Balances with Federal Reserve Banks
Friday, September 29, 2023
- 03:40 ECB President Lagarde Speaks
- 07:30 RBI Monetary and Credit Information Review
- 12:00 ECB President Lagarde Speaks
- 12:45 FOMC Member Williams Speaks
- 14:00 Columbia 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
- 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
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