September 2024 Rate Decisions: FED, BOE & BOJ

This week (16 September) may be crucial for consumers, traders, and economists alike. As we approach year-end, some of the world’s largest economies’ central banks are set to release their interest rate decisions. 

From the USA to Japan and England, here are this week’s central bank decisions and what you can expect from each one:

Fed Decision: Will Rate Cuts Materialise?

Arguably one of this week’s most important financial and economic events, the FOMC’s sixth rate meeting is expected to take place on Tuesday and Wednesday (17-18 September). 

Like many of its peers, the world’s largest economy’s central bank has grappled with geopolitical tensions, inflationary pressures, recession fears, and political uncertainties surrounding the elections. This, in turn, may have prompted the Fed to adopt a more hawkish tone throughout the past couple of months. Nonetheless, this time around, the Fed is expected to cut rates, but markets are unsure whether the cuts will be by 25 basis points or 50 basis points. 

Among the factors that are expected to influence the decision is inflation above the Fed’s 2% target, which may complicate the expected rate cuts. On the other hand, data like the jobs report reflected a weaker US labour market, which might suggest that the “central bank may already be behind the curve.” Besides the above, the Fed will likely watch Tuesday’s retail sales reading, projected to drop 0.2% in August, marking a “significant deceleration from the 1% sales growth surprise seen in July.”

To better understand the Fed's challenges, it may be helpful to observe the comments of market experts and economists. For example, Michael Ferole, a JPMorgan economist, states that the Fed should “recalibrate the policy rate  50bp lower to adjust for the shifting balance of risks.” 

However, these are projections, and only time will reveal the monetary policy path the Fed will take. 

BoE Decision: What Will Be Decided?

The Bank of England (BoE) is scheduled to decide on interest rates on Thursday, 19 September. The BoE’s decision will be key, especially as it succeeds last week’s European Central Banks’ (ECB) decision, whereby rate cuts were decided in the Eurozone. 

The English central bank’s decision is still unclear, as conflicting factors can come into play. For instance, services inflation cooled above expectations in July as wage growth eased, showing that underlying price pressures may be dropping. Nevertheless, despite the drops in services inflation and wage growth, it is important to remember that they are still high. In addition, August’s inflation data, which is due on Wednesday, might also affect the decision. The expectations from Wednesday’s inflation release point towards a monthly rise in services inflation and similar headline inflation (MoM). 

According to ING economist James Smith, in the BoJ’s latest meeting in August, the central bank “made it abundantly clear that officials don’t want markets running away with the idea that this is going to be a rapid easing cycle.” 

As such, given this blurry forecast, traders and consumers will have to wait and see what will emerge from England’s monetary policymakers on Thursday. (Source: Financial Times)

BoJ Decision: Where Is Asia’s Second Largest Economy Headed?

The Bank of Japan (BoJ) will decide on the interest rates of Asia’s second-largest economy on Friday, 20 September. 

Whereas the BoJ raised the rate by 15 basis points in its July meeting, this time around, it is expected to take a more “cautious approach,” keeping its policy rate at 0.25%. Interestingly, Japan’s inflation “remained steady at 2.8% for the third consecutive month in July.” 

The decision, perhaps unsurprisingly, is expected to affect the Japanese yen—particularly comments from BoJ Governor Kazuo Ueda’s speech following the decision. If Ueda shows any signs of hawkishness (rate hikes), this could strengthen the Japanese yen and affect the USD/JPY. 

Among the factors that might affect Friday’s decision are this week’s core machinery orders (17 Sept.), tertiary industry index (17 Sept.), balance of trade (18 Sept,), and CPI (19 Sept.).

Conclusion

The week of 16 September 2024 is packed with key central bank meetings from the US, Japan, and England. 

The monetary policy decisions that emerge from these countries will provide traders, analysts, and consumers with helpful insights into the state of the markets and the global economy as we enter September.

Traders will have to wait and see how these meetings affect the markets in general and Forex in particular.