Global markets are awaiting this week’s meetings of the US Federal Reserve on September 15 and 16, the Bank of England on September 17, and the Bank of Japan on September 17 and 18, amid expectations that the Federal Reserve will raise its policy rate by 25 basis points, the UK will hold rates at 3.75%, and Japan will raise rates to 1.25%.
Central-bank decision expectations
Expectations of a US Federal Reserve rate hike have increased following stronger-than-expected inflation data, while markets are awaiting updated economic projections and signals from the central bank on the path of interest rates in the coming period.
In the United Kingdom, expectations point to the Bank of England leaving interest rates unchanged at 3.75%, as it continues to monitor developments in inflation and the labor market. In Japan, the central bank is expected to continue tightening monetary policy by raising rates to 1.25%, as part of a gradual shift away from ultra-accommodative monetary policy.
Markets monitor borrowing costs and currencies
The meetings come as markets become increasingly sensitive to central-bank moves, given the impact of interest-rate decisions on borrowing costs, global investment flows and currency prices, as well as their effects on equity and commodity markets.
Investors are watching the meeting outcomes for clues about the direction of global monetary policy in the final quarter of the year, as inflationary pressures persist in several major economies and growth rates diverge across the United States, Europe and Asia.
Inflationary pressures and supply shocks
Jalal Qannas, an assistant professor at Qatar University’s College of Economics, said US Federal Reserve Chair Kevin Warsh faces a complex situation between political pressure to cut interest rates and his previous pledge to fight inflation decisively.
Qannas added that current inflation is driven by supply shocks and energy prices, and that raising interest rates would not resolve regional supply disruptions. He said holding rates steady was the wiser option to prevent widening the divergence between the policies of the Federal Reserve and the US Treasury.
