All Eyes on Federal Reserve, Bank of Japan’s Next Possible Move

All Eyes on Federal Reserve, Bank of Japan's Next Possible Move

Gold Silver Reports — Central banks from Washington to Tokyo will take centre stage next week, although policy makers are likely to remain cautious as they wait for the dust to settle from Britain’s shock vote to leave the EU. As they wait for political reassurances and greater clarity over the likely impact of the move, central banks have mostly avoided action since Brexit, calming jittery markets with verbal assurances but leaving the burden on governments to chart a path.

Policy-makers are likely to remain cautious as they wait for the dust to settle from Britain’s shock vote to leave the European Union

Indeed, the US Federal Reserve is all but certain to keep interest rates on hold on Wednesday, acknowledging improved economic prospects but offering few hints about its next move, keen to avoid repeating its past mistake of stoking rate hike expectations.

The next move is still seen as an increase in rates. But even as concerns over Brexit ease the US election is drawing closer, likely pushing back action towards the end of the year and possibly limiting the Fed to a single hike in 2016, a far cry from its early-year estimate for four moves. BANK OF JAPAN For the Bank of Japan, struggling with low inflation, next Friday’s rate decision will be a close call with markets simmering with speculation that it will have to ease policy. It is likely to cut its inflation forecasts but only slightly, which may allow the bank to justify standing pat for the time being.

Prime Minister Shinzo Abe, fresh off a big election win, is also working on a stimulus package with a headline figure of at least 20 tril lion yen ($189 billion), potentially taking some pressure off the BOJ, which was criticised earlier this year for cutting rates into negative territory. Still, it is uncertain whether the bank can avoid delaying the time frame for meeting its 2% inflation target, suggesting that its rate decision will be a close call. — Neal Bhai Reports


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