The BOJ, the Federal Reserve, the BOE in the New Week

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The BOJ is likely to be on hold this week when it meets on Wednesday, with impending elections and potential candidates promising more fiscal stimulus measures. Last week, the dollar and the yen were the undisputed leaders in the currency markets. While the Fed is unlikely to announce cutting this week, recent strong data suggests that November is the most likely timeframe. Stocks in the United States and Europe have lost most of their upward momentum as central banks begin to prepare for a reduction in stimulus.

Aside from that, there are concerns about re-escalating tensions between China and the United States, with the latter’s close allies the United Kingdom and Australia thrown into the mix. In the context of a slowing economy, the size of the impact of China’s Evergrande crisis is also concerning.

Last week was a set-up week, with plenty of economic data to thicken the plot before central banks meet this week to decide whether to taper or not taper. The Bank of Japan is likely to remain on hold, but will the Federal Reserve of the United States announce that it will begin cutting bond purchases? The BOE appears to have become more hawkish, but will this trend continue? Aside from the central bank meetings, the United States is started to discuss lifting the debt ceiling. The US will run out of money in about a month, according to Treasury Secretary Janet Yellen, unless the debt ceiling is raised. Also, as the Evergrande drama unfolds in China, will they be saved or doomed to fail?

BOJ, FED, and BOE This Coming Week

The BOJ, FED, and BOE will meet this week to discuss inflation, retail sales, and employment data. Was the stock market sell-off last week all about positioning and profit-taking ahead of this week’s central bank meetings? The RBA, BOC, and ECB held meetings two weeks ago that were, for the most part, “as expected.” There were no major swells. This week, though, things may be different, as the BOJ, FED, and BOE among others are all scheduled to meet.

Despite Kuroda’s bullish economic news conference last week, he also stated that inflation will be about 1% in 2023 and that he is prepared to do more to assist the economy if necessary. The BOJ is likely to be on hold this week when it meets on Wednesday, with impending elections and potential candidates promising more fiscal stimulus measures.

On Wednesday, the Federal Open Market Committee, chaired by dovish Governor Jerome Powell will meet. Key speakers discussed before Powell’s speech at the Jackson Hole Symposium, in which he provided no hint that the Fed was ready to taper. This appeared to be Powell’s opportunity to announce that the Fed would begin tapering.