G10 Banks Proceed Cautiously with 2018 Policy Plans

  • Monday, May 7, 2018

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The Most Important Central Bank Releases This Week
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On the heels of market volatility in February, the resurgence in financial conditions through March led many central bankers to begin sounding fairly hawkish concerning 2018 monetary policy. Since then, Q2 has seen central bankers around the world largely backing off on that hawkish rhetoric. Although earnings growth remains strong, sentiment from corporate earnings calls has been a bit soft this quarter, and inflation data continues to disappoint. Nevertheless, Fed policymakers have maintained a neutral posture and continue to signal they intend to hike rates at least twice more in 2018, possibly three more times.

Virtually every other G10 currency central bank sits on the dovish side of the fence this week with the BOE, ECB, BOJ, RBNZ, and Riksbank all likely to provide neutral or dovish signals. The Bank of England is likely to be the biggest market mover as policymakers are likely to hold rates in light of soft inflation data—despite recent expectations of a rate hike. ECB policymaker speeches and the BOJ Summary of Opinions are both likely to reflect recent neutral/dovish policy shifts as both banks delay any moves toward tighter policy. The RBNZ will likely hold steady under new leadership, avoiding an overtly dovish signal so as to maintain inflation expectations while still keeping stimulative policy. The Riksbank minutes are also likely to sound a bit dovish as policymakers look to maintain negative rates longer than previously anticipated.

This is an abbreviated version of the Cyborg Analyst. The full weekly report contains detailed analysis based on Prattle’s central bank data. Subscribe here.

The Prattle Team

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