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4 Central Banks’ Meetings to Focus on This Week

By:
Carolane De Palmas
Published: Sep 19, 2023, 07:06 UTC

It's going to be a significant week for traders and investors as four central banks will deliberate on recent developments and their potential implications for their monetary policies.

US Dollars, FX Empire

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This includes the Federal Reserve (Fed) meeting on Wednesday, the Swiss National Bank (SNB) and the Bank of England (BoE) meetings on Thursday, and the Bank of Japan (BoJ) meeting on Friday.

Market participants consistently keep a watchful eye on central bank meetings due to the valuable insights they offer into the prospective course of monetary policies, economic circumstances, and market sentiment. This information enables investors to adjust their portfolio allocations effectively.

In addition, these meetings, renowned for their potential to trigger swift and substantial market movements, are used by a variety of traders, including news traders, scalpers, and day traders. These traders frequently exploit the increased volatility often associated with such events, particularly when employing leveraged instruments like CFDs (Contracts for Difference).

Now, let’s take a closer look at the key central bank meetings scheduled for this week.

Federal Reserve – Wednesday 20th of September at 6 pm (GMT) – Current interest rate = a range from 5.25% to 5.5%

Since 2021, the Federal Reserve has faced a challenging situation as it seeks to uphold its dual mandate of maintaining price stability and fostering maximum sustainable employment. This dual mandate presents a delicate balancing act.

On one hand, the Fed endeavors to manage inflation to prevent it from eroding consumers’ purchasing power and destabilizing the broader economy. Conversely, it also works to mitigate the possible repercussions of a recession due to a “hard landing” resulting from a more restrictive monetary policy, which could have unfavorable effects on both employment levels and overall economic growth.

Looking ahead to the remainder of 2023, the Federal Reserve has three scheduled meetings in September, November and December – with November being of particular significance as it might involve an interest rate hike. Today, market participants are indeed expecting the Fed to maintain on hold interest rates in September and in December.

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With (hopefully) no surprise when it comes to rate hikes, this week still promises to be intriguing as the Federal Reserve is set to reveal its most recent economic projections and an updated version of the closely watched “dot plot,” providing insights into the perspectives of central bank members. This will provide a more in-depth insight into the November meeting and whether investors and traders should expect another interest rate hike, which, in theory, could be the last one.

Swiss National Bank – Thursday 21st of September at 7:30 am (GMT) – Current Interest Rate = 1.75%

In June, the Swiss National Bank increased its key interest rate for the fifth consecutive time as part of its continuous fight against inflation. Officials have also given indications that more rate hikes could happen, possibly as soon as the upcoming meeting this week.

However, even with these rate hikes, the SNB predicts that Swiss inflation will still exceed its target range of 0-2% by 2026. They’ve also revised their inflation forecasts upward for 2023 and 2024 (average annual inflation at 2.2%) and for 2025 (average annual inflation at 2.1%) and 2025, indicating potential for further tightening of monetary policy down the road.

Furthermore, the SNB has emphasized its readiness to intervene and make moves in currency markets as required, with a primary focus on selling foreign currency to uphold monetary stability.

During its last meeting in June, market analysts observed that while the SNB initially sought to counter the Swiss franc’s strengthening amidst market turbulence early last year, its current approach involves actively engaging in foreign currency sales to reinforce the Swiss franc‘s value. This shift is aimed at lowering the costs linked to imports.

Bank of England – Thursday 21st of September at 11:00 am (GMT) – Current Interest Rate = 5.25%

While global inflation has been decreasing from its highest levels in decades, inflation levels are still really high in England – mostly due to commodity price surges such as energy and food commodities.

Still, policy makers might be more frightened about an economy cooling more than expected. Market participants expect the Bank of England to decide on a 0.25 rate hike, which could push interest rates to its highest level since 2007.

Even though the path of interest rates depends on economic data being published between the central bank’s meetings, many analysts believe that current rising unemployment and sluggish growth in the United Kingdom are likely to make this rate hike the last of what “would rank fourth on the list of Britain’s biggest tightening cycles of the last century” according to Reuters.

Earlier this month, the BoE’s governor, Andrew Bailey, declared that “we are much nearer now to the top of the cycle. […] I’m not therefore saying we’re at the top of the cycle because we’ve got a meeting to come, but I think we are much nearer to it on interest rates on the basis of current evidence.”

Bank of Japan – Friday 22nd of September – Current Interest Rate = – 0.1%

While this week also brings rate decisions and guidance from Taiwan, the Philippines, and Indonesia, it’s the Bank of Japan’s policy meeting on Friday that stands out as the pivotal event in Asia.

Although significant policy changes are not anticipated, market observers will be scrutinizing the proceedings for any hints of a potential deviation from Japan’s long-standing ultra-loose policy and negative interest rates.

What has particularly caught the attention of market participants is the series of hawkish comments made by various Bank of Japan speakers in recent weeks. These statements suggest a greater willingness within the central bank’s leadership to engage in discussions about a potential policy change.

This change in tone reflects a recognition that the current ultra-accommodative policy stance may no longer be the most suitable response to the evolving economic conditions. As a result, the central bank’s evolving stance is under close scrutiny, as it could have significant implications not only for Japan‘s monetary policy but also for broader economic dynamics in the region.

The above financial instruments, available through regulated CFD brokers such as ActivTrades, are indeed favored by traders aiming to profit from swift price fluctuations without necessitating ownership of the underlying asset, thanks to the mechanisms of leverage and margin trading. Furthermore, CFDs afford them the flexibility to speculate on both rising and falling prices, enabling them to capitalize on diverse market conditions.

Disclaimer

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About the Author

Carolane graduated with a Masters in Corporate Finance & Financial Markets and got the AMF Certification (Financial Markets Regulator in France). Afterward, she became an independent trader, investing mostly in European and American stocks/indices.

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