Japan Holds Rates, Fed Hints at June Hike | Weekly Review and Preview

  • Monday, May 2, 2016

Welcome to Prattle’s “Weekly Review and Preview.” Each week, we analyze the most important communications from the previous week and give our thoughts on upcoming releases.

  • Review

Bank of Japan
In brief: Held rates
Analysis: The Bank of Japan shocked the financial world by holding policy steady last week despite all signals pointing toward a rate cut further into negative territory. Given the current trend in BOJ sentiment and despite the obvious outlying score of the meeting statement, we still expect an upcoming rate cut or other stimulative measures.

BOJTestMay2

Federal Reserve
In brief: Held rates
Analysis: The Fed held rates last week as we expected, but signaled that a June hike is still on the table. Recent hawkish speeches from regional Fed presidents lead us to expect a rebound in sentiment from this FOMC statement.

FRCMay2

FRCSpeechMay2

Reserve Bank of New Zealand
In brief: Held rates
Analysis: The bank’s monetary policy meeting last week resulted in a statement announcing a hold on rates along with a suggestion that cuts may be coming soon.

Central Bank of Brazil
In brief: Held rates
Analysis: Due to its current massive political unrest, Brazil held rates last week as we expected. The country displayed surprising stability in key economic indicators.

Bank of Russia
In brief: Held rates
Analysis: Russia held rates last week while citing a possible need for rate cuts in the near future.

Swiss National Bank
In brief: Discussed currency value
Analysis: Last week, SNB Chairman Thomas Jordan gave a speech suggesting that the Swiss Franc is overvalued. This sentiment could be a signal indicating that the SNB might cut rates or otherwise move to devalue its currency.

  • Preview

Federal Reserve
Forecast: Discussion of future rate hikes
Analysis: Several Fed officials will deliver speeches this week indicating their feelings toward a June rate hike. We anticipate Mester will strongly favor a June hike, while Lockhart, Kaplan, and Bullard will emphasize data dependency with some pressure for a June hike. Evans and Kashkari will likely veer dovish by discussing market pricing and regulatory issues.

European Central Bank
Forecast: Observation of market response to current policy
Analysis: The ECB has four speakers and a non-monetary policy this week, from which we anticipate “wait-and-see” messaging aligning with the bank’s recent communications as the market continues to respond to current policy measures.

Bank of England
Forecast: Likely to advise against Brexit
Analysis: Three speeches will be made by BOE officials this week, and we expect all to address the need for stability while including subtle language against Brexit.

Reserve Bank of Australia
Forecast: Likely to cut rates by 25bps
Analysis: The RBA’s sentiment trend has substantially dropped after a rise in February and March. This drop, along with other economic indicators, suggests the bank will implement stimulus soon.

RBAMay3

Bank of Mexico
Forecast: Likely to hold rates
Analysis: Although the Bank of Mexico is trending slightly dovish, we do not expect the bank to cut rates due to the current health of the Mexican economy.

The Prattle Team

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