Federal Reserve Chairman Powell announced at a press conference at the Fed’s William McChesney Martin Building in Washington, DC, on June 12, 2024 that interest rates would remain unchanged.
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This week, a series of major central banks will hold monetary policy meetings, with investors bracing for two-way changes in interest rates.
The Federal Reserve’s much-anticipated two-day meeting begins on Tuesday and is expected to be in focus.
The Fed is widely expected to join other central banks around the world in starting its own rate-cutting cycle. The only remaining question appears to be how much the Fed will cut interest rates.
Traders currently see a 25 basis point rate cut as the most likely outcome, although as many as 41% expect a 0.5 basis point cut. CME’s FedWatch Tool.
Elsewhere, Brazil’s central bank scheduled The next policy meeting is on Tuesday and Wednesday. The Bank of England, Norges Bank and the South African Reserve Bank are all due to follow suit on Thursday.
A busy week of central bank meetings will come to an end when the Bank of Japan releases its latest interest rate decision at the end of its two-day meeting on Friday.
“We’re entering a tapering phase,” John Bilton, global head of multi-asset strategy at J.P. Morgan Asset Management, told CNBC’s “Squawk Box Europe” on Thursday.
Before the ECB’s latest rate cut, Bilton said the Federal Reserve would also cut interest rates by 25 basis points this week, and the Bank of England “may join them.”
“We have all the ingredients in place to begin a fairly long cycle of cuts, but this cycle may not be tied to a recession — that’s an unusual arrangement,” Bilton told CNBC’s “Squawk Box Europe.”
“What that means is that, in terms of price discovery, there’s a lot of movement in my mind between people who believe that the Fed is actually late, the ECB is late, that this is a recession, and those who, like me, believe People who believe we don’t have an economic imbalance would actually spur further gains.
The Fed decides
Federal Reserve policymakers have laid the groundwork for rate cuts in recent weeks. Currently, the Fed’s target interest rate is 5.25% to 5.5%.
Some economists believe the Fed should cut interest rates by 50 basis points in September, accusing the central bank of having previously “Monetary policy tightening is “too far, too fast.”
Others described the move as “very dangerous” to markets and would instead prompt the central bank to cut interest rates by 25 basis points.
“We’re more likely to be at 25, but (hopefully) see 50,” David Volpe, deputy chief investment officer at Emerald Asset Management, told CNBC’s “Squawk Box Europe” on Friday.
“The reason for doing 50 next week is more or less a safety mechanism. There are seven weeks between next week and…the November meeting, and a lot of things can go wrong,” Volpe said.
“So, it’s more of an approach to try to get ahead of the curve. The Fed is kind of not keeping up, so we think it would be great if they get ahead of the curve, which is what the 50 countries are doing now.” A decision is made in November and December, maybe they will do 25 at that point,” he added.
brazil and uk
For Brazil’s central bank, which has cut interest rates several times since July last year, stronger-than-expected second-quarter economic data considered possible This will lead to a rate hike in September.
“We expect the central bank to raise the Selic rate by 25 basis points (to 10.75%) next week,” TS Lombard economist Wilson Ferrarezi said in a research report released on September 11. Increase it to 11.50% by the end of 2024.
“Further rate hikes in 2025 cannot be ruled out and will depend on the strength of domestic activity in the fourth quarter of 2024,” he added.
Traffic outside the headquarters of the Central Bank in Brasilia, Brazil, Monday, June 17, 2024.
Bloomberg | Bloomberg | Getty Images
In the UK, the Bank of England (BOE) is unlikely to cut interest rates on Thursday. A Reuters poll showed that Published on FridayThe survey found that all 65 economists surveyed expected the Bank of England to hold interest rates steady at 5%.
In early August, the central bank cut interest rates for the first time in more than four years.
Ruben Segura Cayuela, head of European economics at Bank of America, told CNBC’s “Squawk Box Europe”: “We’re going to have quarterly cuts starting here. We don’t think they’re going to take action next week, in a 7-2 vote” on Friday.
He added that the next Bank of England rate cut would likely come in November.
South Africa, Norway and Japan
South African Reserve Bank expected to cut interest rates on Thursday, economists say Reuters investigation. The move would mark the first time the central bank has done so since it responded to the coronavirus pandemic four years ago.
Norges Bank is scheduled to hold its next meeting on Thursday. Norges Bank kept interest rates unchanged at 4.5%, a 16-year high in mid-August explain At the time, the policy rate “is likely to remain at this level for some time to come.”
Meanwhile, the Bank of Japan is not expected to raise interest rates this weekend, although most economists think Reuters investigation It is expected to increase by the end of the year.
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