3 major central banks are preparing for a busy week of meetings

Central banks worldwide are preparing for a significant week of meetings. The Federal Reserve will announce its interest rate decision on Wednesday, followed by Chair Kevin Warsh’s second FOMC press conference. The Bank of England is scheduled to meet on Thursday, and the Bank of Japan will conclude the week with its meeting on Friday.

The Fed announces its latest policy decision on Wednesday

The U.S. central bank is widely expected to maintain rates at its July meeting. However, rising oil prices and inflationary pressures have increased expectations for a potential rate hike. According to the CME FedWatch Tool, markets currently assign a 36.3% probability that the Federal Reserve will raise interest rates at the July 29 FOMC meeting. Strong inflation data, elevated oil prices, and geopolitical tensions have contributed to this heightened probability. This shift has supported the U.S. Dollar Index (DXY) and boosted real yields, creating challenges for assets without yield.

With the Fed anticipated to keep rates steady in the 3.50% to 3.75% range, marking the fifth consecutive meeting without change, market participants will closely monitor Chair Kevin Warsh’s remarks for insight into future policy direction. Any change in his tone regarding the rate trajectory could have a more significant market impact than the decision itself.

BOE and BOJ Rate Decisions

The Bank of England will convene on Thursday. Despite upward pressure from rising oil prices, the BoE is expected to maintain rates as policymakers balance inflation risks against signs of slowing economic growth. Recent data indicating that UK inflation eased more than anticipated in June offers some relief to decision-makers. 

The Bank of Japan will conclude the central bank meeting on Friday. It is expected to hold rates at 1% during the July 31 meeting but may signal further monetary tightening amid persistent inflationary pressures. This meeting is particularly important for investors following the Fed’s announcement, as the Japanese yen has weakened to its lowest level against the U.S. dollar in four decades. Japan has repeatedly indicated readiness to intervene against excessive currency fluctuations, so any adjustments to guidance or policy could cause significant movements in JPY currency pairs.

 

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