Wednesday preview: FOMC and BoJ policy announcements eyed
The Federal Reserve and the Bank of Japan take centre stage on Wednesday as the central banks announce their latest policy decisions.
The US central bank is widely expected to keep interest rates unchanged while BoJ officials have suggested in recent weeks that there is room to cut rates further after taking them into negative territory for the first time earlier this year.
Analysts have also speculated that the BoJ will seek to steepen the yield curve by focusing more on short term bonds.
“While the Federal Open Market Committee is typically the most keenly followed central bank in the world, they risk being overshadowed tomorrow owing to the uncertainty and range of options open to the BoJ,” said Joshua Mahony, market analyst at IG.
“The decreasing liquidity available to the BoJ, coupled with the existence of negative rates means that Kuroda has little room for manoeuvre."
Since the Fed is forecast to hold fire on interest rates, analysts will be closely scrutinising the tone of the policy statement.
Rabobank said a slightly more hawkish tone by the Fed can be expected to fuel expectations of a December rate hike and could influence guidance on policy through 2017.
“Alternatively a dovish outlook can be expected to pressure treasury yields and the USD as expectations of Fed tightening are further delayed.”
Japan’s central bank announces its policy decision ahead of the opening bell in London on Wednesday while the Fed’s statement will be published at 1900 BST.
Wednesday 21 September
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