Week Ahead-Fed and BOJ decisions lead in a central bank bonanza

Central bank expectations have been a key driver for all asset classes and the coming week sees the U.S. Federal Reserve, the Bank of Japan, Bank of England, Swiss National Bank, Norges Bank and the Reserve Bank of Australia hand down policy decisions.

The Fed is expected to remain on hold at 5.25% to 5.50% until its June meeting. The market focus will be on the Fed’s “dot-plot”, where the risk is for the Fed to change projections to just two 25 basis point cuts this year, following hotter than expected U.S. CPI and PPI last week.

The Bank of Japan will debate ending its negative interest rate policy (NIRP) at its 2-day meeting beginning Monday after Japan’s largest union group on Friday said that the country’s biggest companies had agreed to the heftiest wage hikes in 33 years . The Nikkei reported on Saturday that the BOJ is expected to end its negative rate policy on Tuesday .

The Bank of England meets on Thursday and is widely expected to remain on hold at 5.25%. The majority of economists believe the first rate cut will be in August, but the market is pricing in close to a 50% chance of a 25 basis point cut in June. The market is hoping to get guidance from the BOE on the timing of when the easing cycle commences.

The Reserve Bank of Australia is expected to maintain the cash rate at 4.35% on Tuesday. The focus will be on the RBA statement to see if it acknowledges the economy is slowing and inflation is heading in the right direction. The consensus is the RBA will maintain a mild hawkish bias.

On the data front, it will be a quiet week for key U.S. data. The only data of note are Philly Fed Index, S&P Global flash PMIs, second tier housing data – including building permits and existing home sales.

It will be a bit busier on Europe, with final HICP due for release along with EZ PMIs, German Zew and German IFO. It will be a busy week for key UK data. UK CPI and PPI will be of particular importance for shaping BOE expectations, but UK retail sales, flash PMIs will also be closely monitored.

China's February industrial production, retail sales, urban investment and unemployment are due Monday. The one-year and five-year loan prime rates are likely to be left unchanged on Wednesday though there are some expectations of a cut to support China's ambitious 2024 growth target of around 5%. Japan data includes IP, machinery orders, the trade balance and nationwide CPI.

Australia will be releasing February employment data. New Zealand publishes its GDP and Canada its inflation data. The minutes of the Bank of Canada's March meeting are due.

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