Fed to Hold Rates, Address Drags on Economy

  • Monday, January 28, 2019

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The Most Important Central Bank Releases This Week
central bank communications analytics research

After several days of festivities in Davos, the economic world will be much quieter this week. The only G10 currency central bank policy meeting comes from the Federal Reserve, which will almost certainly hold rates. This rate hold and the accompanying policy statement, which is likely to sound neutral, are unlikely to cause a stir, but Chair Powell’s press conference could move markets. Powell, now delivering press conferences at every Fed policy meeting, will need to be careful not to inadvertently send a hawkish signal, as he did in December.

Aside from the Fed Chair likely erring dovish, the other big market mover this week could be ECB President Draghi, whose optimism about a possible ECB rate hike before his term expires will likely come across as neutral or even slightly hawkish. This hawkishness could sound tone deaf in the face of softening economic conditions. BOE policymakers are largely avoiding the trap of sounding out of touch by simply not speaking at all amid Brexit turmoil having reached a fever pitch; this week’s only scheduled BOE communication is the Asset Purchase Facility Report.

In Japan, BOJ policymakers’ views will be reflected in the Summary of Opinions, which will shed light on the move to lower the inflation forecast yet again. This slightly dovish position is precisely the opposite of the Riksbank’s recent tone. The rate hike cycle is in full swing, and Kerstin af Jochnik will work to explain what that means for Swedish households. In Canada, a more neutral position has taken hold, as the domestic economy remains solid and policymakers look to wait out international trade tensions and U.S. political turmoil.

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