Central Bank Watch – Week Ahead FOMC, BoJ, BoE, BoC, Norges, BanRep, Brazil, Bank Negara

Another busy week ahead for central bank watchers. The FOMC is expected to stay on hold amid upside risks to inflation. We have the BoJ with an eye on policy tweaks, the BoE is expected to hold as the macro environment sours. In Canada the BoC’s Macklem has two speeches to give. The Norges Bank and BanRep are expected to pause, and Brazil’s central bank is likely to cut again. Bank Negara is playing defense on ringgit weakness. The Treasury market continues to respond to hot geopolitical risk, hotter inflation, greater supply and credit risk. Curve shapes are being bent as the US economy continues to grow much faster than the non-inflationary speed limit and is outpacing many other major industrialized economies.

Central Banks delivered for the most part as expected last week, with the ECB, Bank of Canada, Banco Central de Chile, Central Bank of Turkey, National Bank of Hungary, Central Bank of the Russian Federation and Bank of Israel policy meetings mostly on track. The surprise came with a hike from the Bangko Sentral ng Pilipinas (BSP) following an emergency meeting on Thursday, lifting the key rate to 6.5%.

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

  • BoC Governor Macklem and Senior Deputy Governor Rogers deliver parliamentary testimony as is customary following MPR meetings Monday before the House of Commons Standing Committee on Finance at 3:30pmET. Then on Wednesday to do it all over again at 4:15pmET before the Standing Senate Committee on Banking, Commerce and the Economy.
  • Bank of Japan latest policy decisions on Tuesday. No change is expected for the -0.1% policy balance rate and the yield curve control range around the 10-year JGB yield target of 0% and an upper tolerance range of 1% compared to 0.87% at present. Then again, the Bank of Japan is much more prone to shocking markets as it has done twice in the past year alone. As the upper limit of the 10-year JGB yield target range is probed it could be that Governor Ueda will decide not to stand in its way and raise the upper ceiling by 25–50 bps. If so, then global bonds face a bleak week ahead. If not, there could be a relief rally.
  • BanRep Colombia’s central bank is expected to leave its overnight lending rate unchanged at 13.25% on Tuesday. BanRep has been on hold since the last hike in late April. Inflation remains stubbornly too high. Some think that the central bank may pivot toward modest easing by the December 19th decision or early in 2024, but that would require considerably further progress toward lower inflation when oil prices and the currency have not been terribly cooperative of late.
  • Federal Reserve the FOMC statement on Wednesday at 2pmET sans dots and Summary of Economic Projections this time with the next release of projections due at the December meeting. Chair Powell’s press conference will follow 30 minutes later. No change is expected. The Powell Fed doesn’t like to spring surprises. Chair Powell’s comments at the Economic Club of New York set the stage for this meeting just before entering the pre-meeting communications blackout period.
  • Brazil BCB is expected to have another 50bps reduction in the Selic Rate is expected on Wednesday that would bring it down to 12¼%. Why? Because they said so at the last decision.
  • Bank Negara is widely expected to leave its overnight policy rate unchanged on Thursday. It has been stuck at 3% since early May following the last hike. Inflation is low at 1.9% y/y and may support easing, but inflation risk and stability concerns stem from the ringgit’s weakness plumbs historic depths. Uncertainty toward whether the Federal Reserve is done tightening policy creates an unforgiving backdrop for domestic monetary easing.
  • Bank of England expected to leave Bank Rate unchanged at 5.25% on Thursday. Markets are priced for no policy rate change at this meeting and a modest chance at another rate hike several meetings from now. Core CPI pressures are no longer as hot as they once were. GDP growth as stumbled. Jobs are being lost. Wage growth has eased somewhat of late.
  • Norges Bank after hiking in September, no change is expected in the deposit rate of 4¼% on Thursday. Norges Bank has previously guided that it may hike by another 25bps before year end which is why markets are pricing a decent shot at a hike at the December 14th decision. Higher oil prices may reinforce this guidance.

Previews come from Scotiabank and other sources.

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 kept key rates unchanged in its October monetary policy decision at 4.50%, with the closely watched deposit facility rate to 4.00%, in line with markets thoughts.
  • Bank of Canada held its overnight rate to 5.00% in October 2023 as expected by markets, following up the no change from the previous meeting. BOC sees “clearer signs that monetary policy is moderating spending and relieving price pressures”

Eyes on the Bond Market

  • Chile’s central bank cut by less than consensus expected. The 50bps reduction was expected by only 5 out of 22 forecasters, the rest expected a 75bps reduction. Clearly the peso’s slide drove the concern behind a smaller than expected cut since they also stopped a program to rebuild reserves through USD purchases.
  • Russia’s central bank hikes by more than expected. It took its key rate up by 200bps to 15% in order to counter inflation risks.
  • The Bangko Sentral ng Pilipinas (BSP) resumed monetary tightening following an emergency meeting on Thursday, lifting the key rate to 6.5%. The move came after inflation accelerated to 6.1% year-on-year in September as food prices rose. The Philippines’ central bank raised its benchmark interest rate by 25 basis points and hinted at further hikes to contain surging inflation.
  • Monetary Council of the Hungarian National Bank (MNB) cut the central bank base rate by 75bp to 12.25% at a monthly policy meeting on October 24. The MNB is the second Central European central bank to cut the base rate since the Polish central bank’s surprise cut last month before the general election. Rate-setters lowered the symmetric interest rate corridor in tandem, bringing the O/N deposit rate to 11.25% and the O/N collateralized loan rate to 13.25%.
  • The Bank of Israel kept short-term borrowing rates unchanged for a third straight decision as expected on Monday, citing the need to prevent an uptick in inflation as a result of a weaker shekel during Israel’s war against Palestinian Islamist group Hamas. The shekel is at an 8 1/2 year low versus the dollar. The benchmark rate is 4.75%, its highest level since late 2006. It had raised rates 10 straight times in an aggressive tightening cycle that has taken the rate from 0.1% last April before pausing in July and again in August.

US Bond Watch

U.S. Treasuries ended the week mixed, the 5-yr note and shorter tenors added to this week’s gains while the long bond gave back some of its advance. The long bond underperformed while shorter tenors saw more speculation about an RRR cut in China and a growing sense that the European Central Bank has reached its peak rate. U.S. Treasuries completed this week’s note auctions Thursday with a B+ $38 billion 7-yr note sale, which met much stronger demand than the 5-yr note offering and the day before 2-yr note auction.

Treasuries on Friday reversed the lows seen in immediate reaction to the Personal Income/Outlays report for September, which showed a below-consensus increase in personal income (actual 0.3%; consensus 0.4%) coupled with a larger than expected increase in personal spending (actual 0.7%; consensus 0.5%). The core PCE Price Index was up an in-line 0.3% with the yr/yr growth rate slowing slightly to 3.7% from a downwardly revised 3.8% (from 3.9%) in August.

The 2s10s spread ended the week at -18 bps, one basis point tighter for the week. Crude oil reclaimed the bulk of yesterday’s loss after Israel troops entered Gaza, but still gave up $2.52, or 2.9%, for the week. The U.S. Dollar Index gained 0.4% for the week.

Yield Watch


  • 2-yr: -2 bps to 5.03% (-6 bps for the week)
  • 3-yr: -4 bps to 4.85% (-7 bps for the week)
  • 5-yr: -3 bps to 4.77% (-9 bps for the week)
  • 10-yr: UNCH at 4.85% (-7 bps for the week)
  • 30-yr: +4 bps to 5.02% (-7 bps for the week)

Highlights – Federal Reserve

  • Federal Reserve Credit declined $19.2bn last week to $7.886 TN.
  • Fed Credit was down $1.015 TN from the June 22nd, 2022, peak.
  • Over the past 215 weeks, Fed Credit expanded $4.160 TN, or 112%.
  • Fed Credit inflated $5.075 TN, or 181%, over the past 572 weeks.
  • Fed holdings for foreign owners of Treasury, Agency Debt fell $7.6bn last week to $3.426 TN.
  • “Custody holdings” were up $88bn, or 2.6%, y-o-y.

Fed 2023 Bank Stress Tests.

Busy Central Bank Week Ahead:

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

Monday, October 30, 2023

  • 22:30 BoJ Interest Rate Decision

Tuesday, October 31, 2023

  • 14:00 Colombia BanRep Interest Rate Decision

Wednesday, October 25, 2023

  • 14:00 Fed Interest Rate Decision
  • 17:00 Brazil Interest Rate Decision
  • 22:30 HKMA Interest Rate Decision

Thursday, October 26, 2023

  • 03:00 Bank Negara Interest Rate Decision
  • 05:00 Norges Bank Interest Rate Decision
  • 08:00 BoE Interest Rate Decision

Friday, October 27, 2023

  • 05:30 Central Bank of the Russian Federation Interest Rate Decision

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

Monday, October 30, 2023

  • 09:00 ECB’s De Guindos Speaks
  • 14:30 ECB’s Enria Speaks
  • 15:30 BoC Senior Deputy Governor Rogers Speaks
  • 15:30 BoC Gov Macklem Speaks
  • 18:50 RBA Assistant Governor Jones Speaks
  • 22:30 BoJ Interest Rate Decision

Tuesday, October 31, 2023

  • 02:30 BoJ Press Conference
  • 05:00 Norges Bank Central Bank Currency Purchase (Nov)
  • 07:00 German Buba Wuermeling Speaks
  • 07:30 RBI Monetary and Credit Information Review
  • 12:00 German Buba President Nagel Speaks
  • 12:30 ECB’s De Guindos Speaks
  • 14:00 Colombia BanRep Interest Rate Decision
  • 16:00 RBNZ Financial Stability Report
  • 18:00 RBNZ Gov Orr Speaks

Wednesday, November 1, 2023

  • 08:40 SNB Chairman Thomas Jordan speaks
  • 14:00 Fed Interest Rate Decision
  • 14:30 FOMC Press Conference
  • 16:15 BoC Senior Deputy Governor Rogers Speaks
  • 16:15 BoC Gov Macklem Speaks
  • 17:00 Brazil Interest Rate Decision
  • 22:30 HKMA Interest Rate Decision

Thursday, November 2, 2023

  • 03:00 Bank Negara Interest Rate Decision
  • 05:00 Norges Bank Interest Rate Decision
  • 07:00 ECB’s Lane Speaks
  • 08:00 BoE Interest Rate Decision
  • 10:15 BoE Gov Bailey Speaks
  • 12:45 ECB Supervisory Board Member Fernandez-Bollo Speaks
  • 13:00 SNB Chairman Thomas Jordan speaks
  • 16:30 Fed’s Balance Sheet 7,908B
  • 16:30 Reserve Balances with Federal Reserve Banks
  • 18:30 ECB’s Schnabel Speaks
  • 19:50 RBA Assistant Governor Jones Speaks

Friday, November 3, 2023

  • 08:00 Fed Vice Chair for Supervision Barr Speaks
  • 08:15 BoE MPC Member Pill Speaks
  • 12:00 MPC Member Haskel Speaks
  • 15:30 Fed Vice Chair for Supervision Barr 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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